HUMAN RESOURCES MANAGEMENT RISKS, ASSESSMENT, AND MITIGATION IN 2023

HR Risks, Assessment, and Mitigation in 2023

“The unemployment rate will increase to 37 percent and the poverty headcount will amplify to 45 percent due to weak performance in the job-related sectors, low labour absorption of the service sectors that will drive growth, and population growth estimated at 3.2 percent will lead to a decline in real per capita income.” NESG 2023 Macroeconomic Outlook, Nigeria in Transition: Recipes for Shared Prosperity”

Should organizations be concerned about the grim economic outlook made by the Nigerian Economic Summit Group for the year 2023? What does this portend for the labour market and employment in general? What are the risk factors? And, what should human resource management and labour relations experts take as priorities in order to manage the fallout of a low real gross domestic product (GDP) that is projected to moderate at 2.98 percent in 2023?

 What consideration should HR professionals give to the first quarter of the year 2023 going by the fact that elections will hold during this period in Nigeria? It is expected that disruption that would likely be associated with the February 2023 election will affect some businesses and slow down policymaking primarily as they affect the economy.

According to Fitch in its national forecast for 2023, it predicted that the economy will be weaker at an average of 1.1 percent, just the same as in 2015 and during the 2019 general election. Holiday extension especially if there is a run-off. Election-related violence, litigations, and protest are possible factors that may affect HR processes in 2023.

In his submission, Bismarck Rewane emphasized that “global economic recession will trigger layoffs, fall in income, and a decline in consumption, investment demand and spending.”  Careful consideration of Rewane’s prediction point to the dire implication of recession on employment in general and investment in the real sectors in particular. Investment is needed for economic activities to thrive and a decline in economic activities will strain disposable income and the likelihood of layoffs in 2023.

WHAT ARE THE CRITICAL RISKS FACTORS FOR HUMAN RESOURCES MANAGEMENT IN 2023?

 At the heart of HR is human capital- the skills, competence, time, and labour committed to the realization of the organization’s corporate objectives. Human resources will continue to remain the most important asset of the organization. Where its availability, sourcing, and “peace of mind” is threatened, the business objective is also threatened.

This year inflation is expected to average 20.5 percent and this could be attributed to the high cost of food, the impact of the 2022 flooding, high production cost due to the high cost of credit / low access to credit facilities by businesses, insecurity, and election-related panic are compounded factors that will likely threaten labour peace of minds in 2023.

The critical risk factors are:

  • Shortage of skilled manpower ( White and Blue Collar)

The Nigerian Labour market over time has presented a disequilibrium curve where labour demand in terms of hours worked and the number available for hire has been in low supply. This has suddenly been worsened due to the unattractiveness of pay for some categories of employees and the skill shortage that is needed to meet the available jobs in the market.

The greatest fear for employers of labour is the “unemployability” of some new entrants into the labour market and the high cost of investment in them.

While some are willing to train, the fear of sudden and unplanned resignation is another challenge that must be grappled with.

  • The exodus of human resources from the critical sector such as IT, manufacturing /Production, healthcare, Finance et cetera, et cetera.

Skilled labour flight and brain drain from the country is a critical risk that employers of labour must make adequate provision for in 2023 so as to guide against sudden disruption in their operations. I know of an organization where eight people “left” a critical department for Canada and the UK just within a span of two weeks. I intentionally put the word left in an inverted coma to stress the fact that they exited the organization without giving any notice of resignation.

While the employment relationships recognize free entry and free exit we must, however, take seriously the high incidence of human capital flight which is likely to increase in the year 2023.

  • Corporate mortality

A citation from a report by PricewaterhouseCoopers gives credence to why we should be concerned about the risk of business failure and corporate mortality in Nigeria in 2023.

It read “SMEs account for 48 percent of the national Gross Domestic Product, 96 percent of businesses, and 84 percent of employment in the country” The report went further to state that “Since 2017, at least 1.9 million SMEs have been lost.”

Would this trend stop in 2023 my research findings do not support any positive change in direction? The high cost of doing business, high-interest rate, high rate of labour turnover, unstable and multiple exchange rates, and so on, are potential risk factors that could lead to higher business mortality in 2023. 

  • Non-performing staff loans.

We have seen employees resign without notice, we have seen those who traveled out of the country without any trace and we have equally been faced with employees who simply move houses without informing their employer. Advancing loan facilities to employees is good but an unchecked and improperly documented one could constitute a huge loss to the business.

It has been noticed that more and more workers are facing financial pressure due to the high cost of living and in most cases ran back to the company for support. While organizations are expected to serve as cushions they must exercise a lot of precautions in 2023.

  • Strained and over-burdened workforce

The unemployment rate in the country in 2022 was about 33 percent, the number of those living in poverty rose to 35 million in the same year, and the country’s inflation rate climbed to 21 percent in 2022. Without mincing words, these statistics would definitely put much burden and strain on the workforce that has to cater to high dependents thereby creating a huge hole in their disposable income.

This is a big risk that often causes some workers to compromise their integrity and in some cases work against the interest of their organization.

  • High turnover rate

Labour turnover is likely to be on the upward in the year 2023 except if the new government is ready to address pertinent questions that address the minimum wage, cost of living expenses, transportation cost, and the cost of doing business in the country.

  • Disruption in business operations due to the “Japa” syndrome.

Japa is a new word that has unofficially entered the Nigerian lexicon. This is a situation where skilled, semi-skilled, and sometimes unskilled workers leave to seek citizenship and a career in other countries at the slightest opportunity without sometimes giving attention to their employment contract.

“Japaism” will increase in 2023 given the window of opportunity created in Europe and especially Canada and the UK. The implication for this will be the continued depletion of the Nigerian labour force, especially for skilled and semi-skilled workers.

WHAT ARE THE SOLUTIONS AT SIGHT AND WHAT SHOULD HR DO TO MITIGATE HUMAN RESOURCES MANAGEMENT RISK IN 2023?

Having highlighted some of the likely human resource management risks in 2023; an attempt will be made to proffer solutions to prevent their occurrences. It is important to state that the scope of this article covers HRM risks and their implications on the organization and not employee risk assessment as it relates to workplace hazards which I had written about previously.

WHAT TO DO

  • CONDUCT AN ORGANIZATIONAL-WIDE RISK ASSESSMENT AND SITUATE THEIR LIKELY IMPACT SHOULD THEY HAPPEN.

An organization is a structured system of human and material interaction for the production or rendering of services. The departmentalization of human activities will help promote easy tracking and assessment of employees’ performances and their likely impact on the overall well-being of the organization.

When properly constructed along the five human resources risks assessment module the business is more likely to notice the risks and their impact

  1. Look out for the risk ( See preceding pages)
  2. Assess the likely harm that the risk might cause
  3. Evaluate the risk in terms of its impact whether high, medium or low
  4. Document your finding
  5. Act and review your action
  • PUT IN PLACE A PROACTIVE HUMAN RESOURCE MANAGEMENT PLAN

In a similar vein, when the human resources requirement is well planned and structured it will create room for a proper evaluation thereby guiding against over and understaffing as the case may be. I have written an extensive article on Human management planning, please click on the link to access the report.

  • CREATE A SYSTEM OF INTERNAL LEARNING THAT PROMOTE MULTI-TASKING

An internal learning system such as attaching junior personnel to work with a much more experienced person in the same organization could provide a buffer when there is sudden resignation of a staff. Such experience will become handy when a replacement or promotion is made into the vacant role.

  • BE COMMITTED TO CREATING AN ORGANIZATION THAT EMPLOYEES ARE PROUD TO WORK IN

A toxic work environment, a careless boss or supervisor, or a less compassionate workplace would experience more human flight and exit without proper documentation or notices. It is in the care of the management and especially HR to set such a framework for a peaceful work environment.

  • HAVE A LABOUR TRANSITION PROGRAMME IN PLACE

The employment contract permits free entry and free exit, so it is a given fact that at one point or the other the employment relationship would be severed it, therefore, become pertinent that as part of the HR planning, we must also have in place a transition programme to ensure that vacuum is closed when they occurred.

  • BE PREPARE

In summary, 2023 does not look exceptional from the last ten years which witnessed high human resources management risks. This is an election year that will usher in a new government and likely policy changes that may affect businesses in general.

While the identified risks are noted I will also say that the right controls must be put in place to guard against the hazardous consequences of the risks to businesses and especially as they may affect the human assets of the organization.

Like the motto of the Boys Scouts, I say “Be Prepared”

Thank you for reading.

You may want to contact me for your staff training services or HR planning, please connect via my email: kayodemicah@darachassociate.com or call (+234) 8033356911, (+234)7088172236.

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