Employee-Related Risk

An Employee-Related Risk is an organizational risk that involves employees.

• Context:
  • It can include risks related to Employee Misconduct, such as Fraud, Theft, and Rogue Trading.
  • It can arise from Employee Negligence or Incompetence, leading to Operational Disruptions or Financial Losses.
  • It can involve Legal and Regulatory Risks associated with Non-Compliance by employees.
  • It can be mitigated through effective Internal Controls, Employee Training, and robust HR Policies.
  • It can range from risks due to individual actions to systemic issues within the organization.
  • It can affect the organization's Reputation, Financial Health, and Operational Efficiency.
  • It can include risks related to Employee Turnover, Talent Management, and Labor Disputes.
  • It can involve Cybersecurity Risks due to employee mishandling of sensitive information or Insider Threats.
  • ...
• Example(s):
  • Employee-Related Fraud Risk/Staff Fraud Risk, for Staff Fraud Events.
  • Business Organization Employee-Related Risks, such as:
    • Rogue Trading, by a Rogue Trader.
  • a Company suffering from significant Financial Losses due to Embezzlement by a trusted Employee.
  • an Organization facing Reputational Damage because of a Data Breach caused by an Employee's Negligence.
  • a Business experiencing Operational Disruptions due to a high rate of Employee Turnover.
  • ...
• Counter-Example(s):
  • Supplier-Related Risk, which involves risks associated with third-party suppliers rather than internal employees.
  • Customer-Related Risk, which deals with risks arising from customer actions or interactions.
• See: Business Insurance, Internal Business Controls, Employee Fidelity, Rogue Trader, Embezzlement, Data Breach, Employee Turnover

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References

2020

• https://www.trisura.com/the-types-of-employee-risk-you-cannot-afford-to-overlook/
  • QUOTE: ... As companies develop their risk management plans, there are certain types of employee risk that should never be overlooked. Every company knows that people are its greatest assets. It’s true. Your people possess the ideas, skills and enthusiasm that will make your company successful. Employing people and managing teams also introduces employee risk to the company’s overall operations. It’s not pleasant to think that your own employees could threaten the company’s interests, but it’s the reality of the modern business environment and it must be part of a sound risk management plan. Specifically, there are two types of business employee risk that need to be considered.
  • Fidelity: In the workplace, fidelity refers to losses caused by fraudulent acts perpetrated by individuals. (Yes, we’re talking about crimes). …

2019

• https://treasurytoday.com/funding-and-investing/alternative-funding/employee-risk
  • QUOTE: Rogue traders. Data theft. Disgruntled employees. There are many ways in which an individual’s behaviour can threaten a company’s operations and damage its reputation. We discuss the different types of employee risk that a company may face and consider how these risks can be managed. ... Put simply, the term employee risk covers all the things that a company employee can do, whether intended or not, which can damage the employer’s business in some way. ...

    ... Staff fraud comes in many forms, from straightforward theft, for example through submission of inflated expense claims, to opportunistic crimes where a procedural loophole or a weakness in the company’s systems is exploited for personal gain.

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