Strategic risk - Risk arising from the misalignment of reward strategy to the organisation’s goals. This risk can lead to the inability to attract and retain the employees needed for success.
“there is little awareness or understanding of reward concepts throughout the business. This is impacting on the ability to introduce new ways or rewarding to help deliver a changing business strategy.”
Behavioural risk - Risk arising from the misalignment of reward strategy to the required employee behaviours. This risk can lead to the rewarding of inappropriate or unproductive organisational activity and behaviour.
“We have the operational risks under control. The focus has to be on the behavioural risks arising from our reward work. The risk that our reward structures do not promote and support the right behaviour is paramount”
Financial risk - Risk arising from inadequate reward cost management. This risk can lead to poor value for money and, where relevant, lower profitability or even loss.
“The key concerns are the ability of the company to sustain the payroll bill. With the rise in cost of providing benefits such as Health Care and a tight labour market “
Operational risk - Risk arising from the poor execution or failure of reward systems and reward processes. This risk can lead to inefficiency or inaccuracy of the systems or fraud in their operation.
“HR and Payroll system capability continues to be a high impact risk with high likelihood. Investment in place for 2010 but risks continue to increase during the period.”
Implementation and change management risk - Risk arising from poor implementation or change to the reward strategy and / or processes. This risk can mean that the reward strategy is managed ineffectively and therefore does not have the required impact.
“The danger is that we will rest on our laurels and fail to move policy forward in the window of opportunity which the economic downturn is providing”.
Legal and ethical risk - Risk arising from non compliance with organisational and societal values and legal and regulatory reward requirements. This risk can lead to employee claims or regulatory action which can have financial and reputational effects on the organisation.
“Too much poorly drafted and ill-thought out government legislation.”
Governance risk - Risk arising from inadequate oversight and challenge to organisational reward strategy. This risk can lead to inappropriate reward polices being pursued.
“There is a real risk of over-regulation in top executive remuneration (baby and bathwater syndrome) which makes the remuneration committees role even more difficult”