Thursday, May 30, 2024
Home > Analysis & Opinions > Human Capital Risk Management In The Ever-changing Employment Climate
Analysis & OpinionsInsurance

Human Capital Risk Management In The Ever-changing Employment Climate

The employment environment is constantly evolving, with new technologies, global competition, and changing consumer preferences altering the way companies operate.

As a result, organizations must prioritize Human Capital risk management (HCRM) to ensure they have the necessary talent to compete and succeed in the market. The Society for Human resource Management (SHRM) defines Human capital risk management as the process of identifying, assessing, and mitigating risks associated with an organization’s workforce. These risks can include anything from a shortage of skilled workers to turnover or disengagement of key employees.

The government of Uganda through Vision 2040 identifies human capital development as a key pillar in the strategy of developing potential and enhancing productivity in the workplace setting.

Emerging trends however, shows that  Human capital has  greatly shifted with new developments such as hybrid work, resignations and economic volatility and geo-political risks which is a great challenge to organizations.

With such emerging challenges, HR managers today will have to consider HCRM as a pillar to mitigate such occurrences. According to PWC’s 2022 Human capital report; ‘’organizations must rethink human capital strategies and the overhaul of the role and capabilities of HR.’’  The study further highlights emerging issues such as building trust, workforce for the future, digitization, embedding human capital analytics and redesigning compensation models.

Schmaltz (2013) noted that labor adjustment costs make it optimal to retain hard-to-replace employees in tough times, and thus cause an “implicit liability” to pay their wages. He further castigates that the employees’ human capital thus behaves like a non liquid asset of the firm that is financed with fixed coupon payments.

The World Economic report 2023 noted that, the health and economic aftereffects of the pandemic have quickly spiralled into compounding crises sending inflation soaring to levels not seen in decades, globalizing a cost-of-living crisis and fueling social unrest. This has become a real nightmare for the HR function and a reality check in Uganda too.

The questions we need to ask our Human capital managers today are, “how prepared are organizations when such an eventuality happens?! Do we make provisions in the company financials to cover such? Or mobilize contributions as many other ordinary Ugandans do? and worst, how do we prepare employees before or once they have reached retirement or even after lay-off? Are we ready?

 I am reminded of the case of Mr. Francis Musisi  who got an accident in the line of duty, (a large plantation farm) that disabled him. He was the bread winner with over six children. To fathom what the family when through following this unfortunate incident is incomprehensible for many Ugandan families. Making matters worse, another family just next door had just lost the bread winner due to Covid-19. These families in Kampala were left in despair and indeed, many dreams had been shattered.

The other reflection example is of Mr. Opiyo  who worked for over ten years in a private sector. When he was laid off, there were no terminal benefits or what is commonly referred to as retrenchment packages. Indeed, the stories are endless, and we can go on and on. This is the reality faced by the Human resource managers today hence the focus on HCRM as a cornerstone for organizational success by promoting retention.

We shall categorize the risks mainly into insurable and non- insurable where consultancy services would be needed.

Some of the challenges that HCRM seeks to address include  talent management mapping, organization structure, salary surveys, succession planning, workforce culture, wellness, and emerging trends like Artificial intelligence. These risks can be difficult to manage hence the need to integrate synergy between the risk exposure function and the HR function.

Some of the ways to mitigate the above mentioned risk include the consideration of insurance covers for our employees. Insurance is a mechanism through which risks are passed from the client to the insurance company whereby the client pays a premium consideration while the insurer promises a benefit when the unforeseen eventuality happens. HCRM today also focuses on organizations having a total Employee benefits solution covering health, accidents, life, retirement, workplace flexibility, wellness programs and tuition reimbursement.

According to the Insurance Regulatory Authority of Uganda annual report 2021, the industry paid claims worth UGX.564.79bn making a 27% increase from what had been reported in 2020. This should give comfort to the masses that indeed insurance pays claims and, stands to support clients during their trying moments.

Today’s top talents would want to work with an entity with social values that are aligned to their own.

UAP Old Mutual Life Assurance for example, continues to offer human capital risk mitigators in the areas of corporate business covering mainly Group life, Accidents and Pensions.

The group life policy provides cover for the employees of the organization while still working with the entity. It is also known as death in service benefit implying that benefits are paid once the member has passed away. It is critical to note that the product has additional benefits providing critical illness cover, accidental death, and funeral expenses.

Globally 70% of critical illnesses include heart attack, cancer and stroke. These are emerging diseases that the populace is exposed to where families have had to sell all properties and even struggle to mobilize funds to ensure their loved ones are treated. The funeral benefit extends to provide social support to families following death of their spouses, children and even parents. This implies that the employee today can continue to focus on productivity knowing very well that the employer cares for them when such a tragedy happens. The funeral package can be offered both as a cash benefit but also a service benefit through a partnership with a funeral service provider. As part of  value addition, UAP Old supports the Human Resource function with the management of the funeral program on behalf of the entity in addition to structured servicing program for the management of the organization’s risk management strategy.

UAP Old Mutual Life Assurance Uganda provident fund scheme administration to provide financial security for the member and family upon death, resignation, or retirement which scheme is licensed by the Uganda Retirement Benefits Regulatory Authority.

In addition to the above, financial wellness clinics are organized as an additional benefit at no extra cost and these are crafted to equip employees in the areas of proper financial management, creating and safeguarding generational wealth for the benefit of keeping their individual family legacies alive through the ever-changing economic atmosphere.

HR plays a critical role as the main point of contact for the coordination of the risk management program with the insurer/intermediary for the day-to-day administration. The insurer requires pertinent information to be able to charge appropriate premium namely, estimated annual staff salary costs, number of employees, nature of organization and the entity’s budget. There are bespoke customized pricing designed for various entities depending on their needs.

We re-echo our commitment to settle obligations and walk the paths with employees, employers and their beloved ones when called upon as we have cultivated the ability to respond quickly to changing customer needs and marketplace conditions and opportunities. This is evidenced in the fact that in the year 2021, UAP paid 57Billion Uganda Shillings in cash claims.

The key documents during claims for the corporate covers include death notification, provision of the death certificate, completion of the claim form, medical personnel attendant reports and copy of identification document depending on the nature of the claim.

The role of Human Capital risk management therefore, is critical to the success of every entity. With the increasing risks of death, accidents, poverty at old age and residual covid-19 impacts on the economy, never a time has HR function been very pivotal in an organizations’ success.

UAP Old Mutual Life Assurance Uganda Limited welcomes all Human capital  practitioners to engage then so as to be able to design an appropriate risk management program to ensure businesses thrive and survive in the ever-changing macro-environment.

Joshua Akena is the Head of Operations at UAP Old Mutual Life Assurance Company Limited




One thought on “Human Capital Risk Management In The Ever-changing Employment Climate

  1. I found your article to be well-written and informative, and I look forward to putting some of your ideas into practice in my own marketing efforts. Thank you for sharing your expertise on this important topic!

Leave a Reply

Your email address will not be published. Required fields are marked *