Directors were overwhelmingly concerned about their ability to replace a key person, with 83% of respondents rating this as the biggest internal risk to their organisation.
Concerns over talent attraction and retention also ranked highly, with respondents ranking this as the fifth largest internal risk and the second largest emerging risk.
Despite this concern, nearly a third (32%) of directors said they did not have plans in place to manage their talent attraction and retention risks.
The survey, produced by Marsh and the Institute of Directors, is a barometer of the mood of the boardroom, focusing in on the risks that directors feel that their organisation is facing.
“With a tight labour market and more competition amongst workplaces to attract and retain talent it is unsurprising that people risks are so prominent”, says Marcus Pearson, Country Head for Marsh New Zealand.
“What is surprising is that so many entities don’t have plans in place to deal with it. Directors and boards need to ensure that organisations are focused on meeting the needs of the workforce of tomorrow. This means embracing diversity and inclusion, having flexible working conditions and ensuring that employee benefit programmes are fit for purpose”.
The prominence of people risks in the Directors’ Risk Survey Report is also reflected in the results of the Institute of Directors’ 2017 Director Sentiment Survey, where directors cited labour quality and capability as the biggest risk (28%) facing their organisation.
IoD Chief Executive Kirsten Patterson says, “Directors today are operating in a complex environment, where digital disruption is changing the playing field for established businesses”.
“Many organisations are finding themselves in the midst of what McKinsey called a ‘war for talent’, where the gig economy coupled with shifts in how often workers change jobs is creating pressure to attract and retain workers.”
The Directors’ Risk Survey also revealed succession planning is an area organisations need to pay attention to in their risk management.
“SMEs are particularly vulnerable in the loss of a key person”, says Pearson. “Sadly a number of SMEs fold each year because of the death or injury of an owner or key staff member. Having succession planning in place is vital to ensure that these instances, which often happen unexpectedly, are well managed.”
People risks were not the only key issues given prominence in the survey, with cyber the number one external and emerging risk. Other issues highlighted were brand and reputational risk, IT disruption and the loss of data. Given the array of different risks and the complexity of the current business environment it is little wonder that 53% of directors said that their board’s involvement in insurance and managing risk had increased over the last 12 months.
“It is important that New Zealand directors continue to place risk management as an ongoing priority”, says Patterson. “Negotiating this environment will require directors to have a long view and anticipate how rapid social changes will impact on their business, as well as remaining flexible and responsive to changes within their industry”.
The Directors’ Risk Survey, which is designed to gauge directors’ views on a wide range of risk issues, was completed by 570 members of the Institute of Directors across New Zealand.
A full copy of the report can be downloaded here.