A Closer Look...

Risk comes in many forms

Risk management should be an integrated effort, with executive level support, that enhances the strategic goals and growth of the organization. Risk management is broader than just financial risk and responding to regulatory requirements. From the HR perspective there are the “people” risks that include staffing, personnel policies, and insurance policies such as workers’ compensation, unemployment compensation, long and short-term disability, health-care management, etc...

Using insurance to mitigate human resource risk

Carrying additional types of insurance at sufficient levels is an important factor in limiting organizational risk. Claims under Employer Practices Liability Insurance (EPLI) are on the rise. Organizations typically carry general insurance policies, but those policies do not provide the comprehensive coverage needed for employment claims. EPLI provides employers with protection against claims of discrimination, wrongful termination, sexual harassment, or other employment-related issues made by employees, former employees, or potential employees.

Various types of risk insurance

1. Professional Liability Insurance should be considered or, if purchased, periodically reviewed for appropriate coverage. This is available for directors, officers, employees, and the organization to protect against claims of negligence in the performance of professional services.
2. Errors and Omissions (E&O) Insurance should be considered. It is a specific form of professional liability coverage to protect against employment claims. These policies usually relate to economic and emotional damage; not tangible damages such as bodily injury or property damage.
3. Directors' and Officers' (D&O) liability Insurance should also be considered. This protects directors, officers, and the corporation from claims such as shareholder class actions and SEC violations for fraud and mismanagement and other inaccurate or improper accounting practices. D&O insurance covers both the legal corporate entity as well as the individuals directing the organization.

Fiduciary risk

Another concern should be the fiduciary status of an individual within the organization. Individuals who are fiduciaries of an employee benefit plan subject to ERISA have personal liability if they breach fiduciary duties or knowingly allow another plan fiduciary to breach their duties.

Corporate governance considerations

Corporate governance protection should also be considered. The board of directors needs to be aware of enterprise risk management concerns and receive appropriate training. Sarbanes-Oxley (SOX) requirements focus on corporate responsibilities of the board of directors. The board needs to be concerned with financial reporting, accuracy, maintaining an ethical code of business conduct, and several HR-related issues such as: general compensation and benefits, payroll, executive compensation, personal loans, protection of whistle blowers, etc...

Our specific services

We can:

• Review personnel policies for potential gaps or unacceptable statute deviation
• Review the types of "people" insurance in place or being considered
• Review the specifics of policies to determine if unwanted risks are minimized appropriately
• Assist in educating the Board of Directors in HR related SOX requirements