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Sponsored by: Mercer & Marsh
May 24, 2023

Understanding and Addressing the Most Critical Elements of People Risk

1. What do you see as the highest risk for organizations and what can organizations do to mitigate them?

A Global People Risk survey of HR and Risk Managers fielded by Mercer Marsh Benefits in March 2022 found that cybersecurity and data privacy ranked as the #1 risk by both groups. “Most people think of cyber risk as a technology-related issue, when in fact 95% of breaches are caused by human error,” according to Steve Toffolon, Managing Director in Marsh’s Hartford office. An increase in digitization driven by the “technology first” approach implemented during the pandemic left many organizations and their employees unprepared. Only 35% of those we surveyed said they had the right resources in place to address cyber issues. According to Toffolon, workforce education is key to mitigating this risk. “In order to protect your employee and customer data and intellectual capital, raise awareness with your employees on best practices to protect sensitive information.”

2. How has traditional health and safety risk evolved since the pandemic?

According to the Mercer Marsh Benefits survey, 87% of executives said they believe health and safety issues are a serious threat to their businesses. “We are seeing a much more holistic view with respect to how employers are managing the total health of their populations,” said Meg Galistinos, Connecticut Leader, Mercer. Workplace well-being is much more than occupational safety. Organizations are making individualized health interventions emphasizing health education and behavior change to address total worker health. According to Galistinos, “we know that mental health issues contribute to absence, disability, and medical claims, and poor engagement, and we are seeing employers focus not just on side effects but also on the underlying causes.” Problems to look out for include; unhealthy working hours, isolation, a toxic blame culture, lack of control, and even bullying and harassment.

3. Organizations are hearing a lot about ESG risk and the need to take action. Can you break that down for us?

ESG stands for Environmental, Social and Governance risk. The Mercer Marsh Benefits survey shows that employers of all sizes continue to grapple with the broad reach of the term. From an environmental or “E” standpoint, there is an increased awareness and focus among the public and legislatures. “This is especially true in the construction, manufacturing, and retail industries,” said Toffolon. “Employers need to look at the sustainability of their supply chains and ask questions such as: Are we sourcing raw materials from places and suppliers with reliable sustainability practices? How can we lessen the impact of our production on the environment, i.e. water usage, packaging, plastics, energy, and toxins? Employers also need to ensure they have adequate coverages in place to mitigate such risks and potential environmental disasters.”

The “S” stands for social risk and can include an organization’s approach to workforce and labor relations, coverage for catastrophic employee events, diversity, equity and inclusion and leadership. Offering benefits designed to bridge social, racial, and economic inequalities in addition to sustainable people practices can help organizations become more responsible employers. “Making the full workforce feel they belong can go a long way toward attracting, retaining, and engaging talent – especially in Connecticut’s tight labor market,” said Galistinos.

“Governance” risk topped our People Risk survey at the second highest priority issue, primarily driven by organizations’ inability to administer benefit and compensation plans accurately, fairly, and in accordance with federal and local legislation. Inappropriate plan design, financing and fee sharing, vendor selection/management, communication and administration decisions due to lack of controls or expertise can lead to a costly breach of fiduciary duties. New regulations such as compensation disclosure requirements expose organizations to internal inequities, unmanageable inflationary risk, and gender pay equity risk or non-competitiveness. A clear governance approach to the design and delivery of benefit and insurance programs, and to financial decision-making, will reduce costs and risk.

Despite the risks identified, there are concrete actions employers can take. Ensuring that proper insurance coverage is in place at the right cost, clearly defining and documenting procedures and governance structures, and having experienced professionals on hand can help to mitigate these risks and get organizations focused on growth.

To read the full Mercer Marsh Benefits People Risk Report go to: https://bit.ly/mercer-marsh_people-risk

For more information contact: Stephen.A.Toffolon@marsh.com Meg.Galistinos@mercer.com