by Chris Freitas
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13 June 2025
8 Reasons to Invest in HR Risk Management HR risk management used to be something companies thought about only when something went wrong—an employee dispute, a compliance fine, a lawsuit. But that reactive approach no longer works in today’s business environment. With workplace laws evolving rapidly and employee expectations rising just as fast, the smartest companies are thinking about HR risk as a core part of their business strategy. They have good reason. According to the Society for Human Resource Management (SHRM), more than 50% of organizations have faced an HR-related compliance violation in the past two years . That number doesn’t even account for other forms of risk—like turnover caused by poor culture, burnout due to lack of support, or costly mistakes made because HR systems aren’t up to date. The bottom line? HR risk management is no longer just a back-office function. It’s a front-line defense for your business—and a smart way to build trust, save money, and stay ahead. Here’s what HR risk management really requires, and how your business can put a stronger strategy in place. 1. Compliance: The Foundation of HR Risk Management At the heart of any HR risk management plan is compliance. This includes staying on top of local, state, and federal labor laws related to hiring, wages, leave policies, benefits, employee classifications, workplace safety, and more. It might sound simple on paper. But in reality, compliance is one of the most complex and time-sensitive parts of HR. From the Affordable Care Act (ACA) to the Family and Medical Leave Act (FMLA), and from anti-discrimination laws to state-specific paid leave mandates, the rulebook is long—and it’s constantly being updated. What’s at risk if you get it wrong? Fines and penalties Lawsuits from current or former employees Damaged reputation and loss of employee trust Disruption from audits or investigations A strong compliance strategy should include: An annual review of your HR policies and employee handbook Regular training for managers on relevant laws and procedures Clear documentation for hiring, onboarding, performance, and terminations Support from a knowledgeable HR consultant or legal expert when needed If you’re a growing company without a full legal team, the key is to stay proactive —not reactive. Don’t wait until a complaint or audit happens to realize your handbook is out of date. 2. Onboarding and Offboarding: Where Risk Begins and Ends The start and end of an employee’s time with your company are critical moments—not just for the employee, but for your HR risk profile. When onboarding isn’t handled properly, you risk missing key documentation like I-9 forms, wage notices, or benefits enrollment disclosures. When offboarding is rushed or incomplete, you could forget to issue final pay correctly, revoke access to systems, or provide required COBRA notices. These aren’t just clerical mistakes—they’re legal exposures. Risk-managed onboarding includes: A documented checklist for every new hire Standardized offer letters and classification reviews Digital systems that automate enrollment and form collection A clear welcome packet outlining workplace policies and reporting procedures Safe offboarding includes: Final pay and PTO calculations in line with state laws An exit checklist for IT, access, and asset recovery A termination letter with clear information on benefits and COBRA Optional exit interviews to capture feedback and mitigate future risk When these transitions are smooth and well-documented, your business looks more professional—and avoids the most common employee complaints that lead to disputes. 3. Documentation and Recordkeeping: Your Best Defense When a dispute arises—whether it’s a harassment claim, a wrongful termination suit, or a wage complaint—the side with the strongest documentation usually wins. Unfortunately, many businesses don’t realize how important consistent documentation is until it’s too late. Strong documentation includes: Signed employee handbooks and policy acknowledgments Written records of performance reviews, warnings, and disciplinary action Time-off requests, accommodation discussions, and investigation findings Emails and memos summarizing key decisions or employee concerns You don’t need a mountain of paperwork. You just need a consistent, organized system —ideally digital—that allows you to pull up any record quickly if needed. Bonus tip: If you’re still relying on spreadsheets or physical files, it’s time to upgrade to a secure HR platform with cloud-based storage and audit trails.
