MITIGATING HUMAN RESOURCES RISKS

Human Assets Can Make Your Business Fly – Or Sink

The “human factor” is the common element in most risk and crisis scenarios

9 out of 10 risks or security problems are caused by people inside your organisation

Business Risks on HR Side Fraud Distribution scams Legal disputes Industrial espionage Intellectual property

theft Workplace theft Harassment &

discrimination claims

Corruption Backlash vs. workouts Sabotage Kidnapping Extortion Unsecure data &

communications Workplace violence

(including violence against executives and facilities)

Organised crime Confidentiality

breaches Accidents Mismanagement Service

deterioration Contractual risk

Asian Labor Environment Asia is a growth area representing a major source of new

professionals…

…Yet it is also a major center of labour ethics violations

Unethical sources include: child labour, sweatshop labour, forced labour, prison labour

Cultural differences – “us vs. them” – make multinational corporations vulnerable

HR-related Crime Scenarios Fraud, industrial espionage, intellectual property

theft and piracy, corruption, sabotage: staff are often involved

Data & communications are at risk from employees, not just from external enemies

Organised crime may recruit your staff, or plant stooges

HR-related Crime Scenarios

Workouts & downsizings can spark backlashes, violence, asset stripping, hostage taking

Product tampering extortionists are often insiders

Kidnappers rely on insider information

Common Traits of Companies That Get Into Trouble

Frequently rotating managers Poor public and corporate records Migration of cliques – “tribal loyalty” Corporate culture not instilled Neglect of due diligence practices Internal controls not firmly enforced No corporate HQ connection with key staff

Ongoing HR Risk Mitigation

Employee Integrity Program (EIP)

Employee Integrity Program(EIP) – Why Have One?

Your organisation needs: Honest employees Effective internal controls Strong & visible deterrents

Employee Integrity Program(EIP) — Why Have One?

An effective EIP will help you: Reduce risks to your reputation Protect your resources Improve your bottom line Build your company’s value

Employee Integrity Program(EIP) — Why Have One?

An effective EIP will also help minimise losses relating to:

Internal fraud & theft

Negligent hiring

Workplace violence

Workers’ compensation claims

Non-performance of duties

Non-compliance

What Goes Into An Employee Integrity Program (EIP)

Background checks on senior or sensitive employees

Professional pre-employment screening

Monitoring and surveillance

Spot checks on ethics compliance

Substance abuse testing (USA)

What Goes Into An Employee Integrity Program (EIP)

Risk analysis of your organisation

Whistle-blowing & complaint mechanisms

Structured exit interviews

Strict standard operational procedures to maintain control over your organisation

Pre-Employment Risk Mitigation

What is the most common type of fraud in the world?

Answer: Résumé fraud

Pre-Employment Screening

LEVEL 1: Light Screening LEVEL 2: Medium Screening LEVEL 3: Full Screening

All companies should conduct thorough background checks before hiring. Three different levels of pre-employment screening are available to fit your needs.

Pre-Employment Screening

When considering pre-employment screening, consider the following:

Find out not just where and when, but why the candidate left the previous job.

Explanations of employers and copies of resignation letters should not be taken at face value

Pre-Employment Screening— Three Levels of Scrutiny

LEVEL 1: LIGHT SCREENING

Level 1 checks include: Criminality check Verification of ID number

(many forgeries)

Verification of last job Verification of highest degree

obtained Verification of address

Employment Screening —Three Levels of Scrutiny

LEVEL 2: MEDIUM SCREENING

Level 2 checks include all of the checks in Level 1, plus: Verification of past 5 years employment Research into past financial behaviour

Pre-Employment Screening — Three Levels of Scrutiny

LEVEL 3: FULL SCREENING

Level 3 checks include all checks in Levels 1 & 2, plus: Verification of 10 years of employment Discreet in-depth reputational interviews Litigation checks

Pre-Employment Screening — Three Levels of Scrutiny

LEVEL 3: FULL SCREENING

Firms owned, licences held, discipline actions Media research Property asset research Research into liens, bankruptcy records

Mitigating HR Risks in Downsizing Scenarios

“Getting Even”

Downsizing, restructuring, liquidation, exit time, firings, non-payment of bonuses, and similar actions often lead to:

The “Getting Even” syndrome

“Tribal loyalties” that outweigh corporate loyalty

Hidden liabilities, pensions, redundancy pay, other issues

“Getting Even”

Additional threats include: Asset stripping, sabotage, theft, embezzlement Poison letters, dirty tricks Theft of trade secrets, intellectual property theft Attacks on computer systems Pre-departure “gifts” – including computer viruses Physical violence, hostage taking

Mitigating HR Risks in Downsizing Scenarios

Have effective business controls in place Control systems must be able to deter, detect &

respond to internal threats Have early warning systems to spot risks Carry out risk & threat assessments before

downsizings, firings or “bad news announcements”

Mitigating HR Risks in Downsizing Scenarios

Other tactics to mitigate risks:

Enhance management-staff communications

Enhance crisis management planning

Have contingency plans to deal with hostile employees or ex-employees

Mitigating HR Risks in Downsizing Scenarios

Enhance security to protect people & premises

Prevent unauthorised electronic access

Protect & backup all operating, financial, and data processing systems & crucial assets

Mitigating HR Risks in Downsizing Scenarios

Monitor departing staff on the way out

Who are the staff most likely to stir trouble?

Check employee computers for hostile plans

Check ex-employees’ computers for erased files

And Upsizing Scenarios —They Also Pose HR Risks

Growth requires reviews of security & HR risks

The “feel good” environment of expansion & high turnover growth can blind a company toward its risks

Businesses outgrow existing controls — that’s when security gaps appear

And Upsizing Scenarios —They Also Pose HR Risks

Traditional organisational, financial & security controls may be inadequate protection against disaster

Business processes can break down, and organisational mismanagement ensues

Case StudiesBackground checks reveal alarming discrepancies.

The following are based on true cases.

Case Studies

CASE 1: Forgeries and Fakes The applicant claimed to hold a university degree

The university named by the candidate reported that the applicant’s degree was ‘fake and forged’

A reference letter, apparently signed by the university’s Deputy Controller of Examination, was also ‘fake and forged’

A second degree (BBA) claimed by the applicant was never conferred, and the claim was false

Case Studies

CASE 2: False Employment Record A post-employment verification is conducted on a current

employee

One of the employee’s previous employment records is revealed as fake — she had never been employed by the company, as claimed

For the rest of her employment details, there were conflicts in claimed job titles, duties and salaries

Case Studies

CASE 3: Fraud Alleged by Former Employer When contacted, an applicant’s previous employers

reported that the applicant had been terminated due to cash embezzlement, harassment and workplace violence

A second employment verification revealed this termination, and the fact that the employee caused a financial loss to his employer

Case Studies

CASE 4: Fake Reference Letter Applicant provided a reference letter from her previous

employer

This employer was contacted and shown the reference letter

The organization revealed that the applicant had never been employed by them, and the letter she had provided was a fake