Firms need to be able to identify which risks are relevant for them, assess their level of exposure to each one, and then put in place the most appropriate measures to reduce their exposure. BDO can help; our experts will work with you to undertake an overall risk assessment, identify any weak points, design and implement cybersecurity and anti-fraud controls, and create a strong risk prevention and mitigation strategy.
Published: February 02, 2022
Updated: November 29, 2023
We are still feeling the effects of what has been coined the "Great Resignation", a trend where workers are quitting at historic rates. At the height of resignations, employers struggled to replace those workers as many had changed careers, revised life priorities, relocated, or simply left the workforce. During that time, according to Statistics Canada, job vacancies across all sectors reached an all-time high in the third quarter of 2021, up over 62% from a year earlier. And while the situation has improved over the last two years—with Statistics Canada reporting that the job vacancy rate fell by 0.3 percentage points to 4.4% in the second quarter of 2023—employers still need to consider strategies to combat labour shortages as part of their overall risk-management planning.
Triggered by the pandemic, factors such as, poor work-life balance, lack of flexibility at work, unstable childcare, created a lasting impression on employees who continue to rethink where—and how—they want to work. While pressures have eased across the labour market, certain sectors are still experiencing incredible challenges with recruiting and retaining talent. According to an analysis on labour challenges in Canada for the second quarter of 2023 by Statistic Canada, businesses in accommodation and food services remained the most likely to expect a shortage in labour for the remainder of the year, followed by businesses in manufacturing, administrative and support, waste management and remediation services, and health care and social assistance.
This global competition for talent is clearly still alive and well and continues to empower workers and give job seekers tremendous opportunities. Attracting and retaining talent still requires employers to find ways to do things differently or risk losing their people and the ability to attract new ones.
The changes businesses continue to make to attract and retain their workforce are innovative and exciting. However, they also come with major organizational risks including, cyber and corporate security, reputational and brand impacts, and demands on corporate governance. Business leaders must continue to re-assess their risk profile and invest in internal frameworks to identify, measure, and respond to the risks.
Below we outline some of the areas that pose the greatest risks to your business stemming from labour shortages and our new way of working.
Hiring new talent? Don't sacrifice security and quality for speed
Given the shortage of talent, getting a new hire to sign on board as quickly as possible is often the priority. However, attempting to expedite the hiring process can be very risky—especially if you're sacrificing security or quality for speed.
Hiring teams may be tempted to cut corners on conducting proper due diligence on potential candidates in order to gain a competitive edge or hire someone who can start work immediately. Assessments of education, technical competencies, practical experience, and even cultural fit may be suspended as teams are desperate to fill vacancies. As employees are onboarded, they may be rushed through the process, not allowing time for review of corporate policies, and corporate awareness training—causing significant risks to your organization.
- Hiring the wrong candidate – What are the risks to the business if we leave the position open vs. hiring the wrong candidate? The risks are costly and can include lost time and productivity, poor customer service, and even a tarnished reputation with your valuable customers. The wrong candidate can also destroy team morale with toxic behaviour. Identifying and assessing your risks can help you make informed decisions about your hiring process. You may not need a full assessment for every candidate in every role, so be thoughtful about the risks that you are prepared to accept.
- Employee fraud and misconduct – Employees who engage in misconduct, including fraud, are typically repeat offenders. By conducting proper due diligence, you can avoid hiring an employee who has committed inappropriate acts or fraud at a previous employer and prevent them from doing it again to your business. Learn how to detect potential red flags in a candidate here.
- Don't cut corners without considering the risks. Conduct proper due diligence and background checks for critical roles, such as employees with access to cash or other valuable assets or those expected to assume leadership positions.
- Ask the tough interview questions. We may be too focused on attracting talent or selling the organization that we aren't asking the right questions that can highlight potential issues with a candidate.
- If timeliness is a concern, consider revising your hiring process. For example, you could initiate background searches earlier in the process on high potential candidates. Ensure that employment offers allow for termination if something is found in the background checks. Outsource procedures to reliable vendors if your internal HR team does not have capacity to expedite hiring processes.
- BDO's Investigative Due Diligence professionals can help. They provide reputational assessments (including legal, financial, and social media background checks) for the companies and individuals with whom our clients intend to do business.
Employee management: What are the risks to your business?
Vacancies in key positions can be a huge risk to the security and sustainability of an organization. As the number of vacant roles increases, remaining employees are expected to pick up the slack, adding to their workload. This can lead to burnout and exhaustion, which in turn can lead to cutting corners with internal controls—or worse, rationalizing defrauding their employer as compensation for the added stress.
Remember, regulatory bodies and your stakeholders don't care that you're short staffed, you're still accountable for mistakes made and deficiencies in your internal controls.
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Cybersecurity – In rushed, burned-out states of mind, people are less likely to ask questions or thoroughly investigate the legitimacy of phishing e-mails or other attacks. Overworked staff may try their best to gain efficiencies, which often results in circumventing secure process controls (e.g. improperly giving login or approval authority to colleagues). In addition, employees working from home pose a significant cyber risk, such as when they leave their computers unattended, store sensitive data on personal devices, or neglect to secure a workspace that is shared with others.
In addition, advancements in technology such as AI is enabling the perpetrators behind cyber attacks to move faster. To counter this, your security teams need to be up-to-date on the same technologies, but if they are already lean due to talent shortfalls, they may not be able to keep pace.
- The downside of working from home – The lack of direct supervision may make it more difficult to catch employee fraud and theft, as well as other inappropriate behavior. Employees may be tempted to use company time and resources for their own purposes or to perform occasional personal tasks. Additionally, employees who have worked from home for a long period of time may feel less accountable to their coworkers or employer and thus be more likely to commit fraud.
- Tighten controls and protocols around security and provide adequate training. Be certain that individuals have the proper training for any additional tasks they are taking on. Training should not just happen at the onboarding stage. It needs to be on-going throughout a person's time with your organization and commensurate with their evolving responsibilities.
- Are there additional accommodations or operational efficiencies you can make to improve the way people work and ease the burden on your workforce? Consider digital solutions and automation to enable your employees to work more efficiently.
- BDO's team of cross functional experts specialize in cybersecurity, operational and risk advisory, and forensic investigations and can work with you to create tailored solutions for your business.
Employee turnover: What are the risks to your business?
As employees leave their jobs in droves, businesses should be concerned about the risks arising from turnover. A high turnover rate is detrimental to businesses; it is costly to lose productive employees, lose valuable organizational knowledge, and to train new replacements. It can also have a negative impact on reputation in the marketplace. Leaders should be looking for ways to improve employee engagement, retention, and loyalty.
- Intellectual property (IP) theft – When an employee leaves your company, they could take IP with them such as, copying proprietary information on hard drives, client records, or trade secrets. This is a risk to the brand and competitiveness position of the company.
- Brain drain – It can be a huge risk for employers when key employees decide to leave for another opportunity or encourage their teams to leave with them, taking institutional memory and knowledge. This puts pressure on the remaining team members to fulfill customer commitments, not mention the pressure of competing with former colleagues who have complete knowledge of your practices and processes.
- Consider technological solutions such as, software that can detect IP theft (e.g. mass downloads), encrypted USBs, or monitoring programs that can predict employees who may be considering leaving.
- Find out why employees are leaving. Leverage exit interviews and internal employee satisfaction surveys to develop an employee retention and engagement strategy. It's not always about compensation, ensure that employees are motivated, engaged and recognized for their achievements.
- Protect your institutional knowledge. Ensure that key processes are well documented and shared across staff as a back-up should someone leave. Improve your company's succession planning and develop the skills and talents of existing staff.
What are the risks from external threats?
Labour shortages may also increase business risk from external forces, these can include:
- Increased fraud and cyber attacks – Attackers know that busy professionals and overworked staff are less likely to be vigilant against scams, which makes businesses more vulnerable. You should have a cybersecurity strategy that is continuously reinforced with training and enforced through testing.
- Third-party agency or vendor risk – If you're using third parties or agencies for services such as payroll, IT, or cybersecurity, consider how their labour shortage may affect your business. You may need to change the way you work with third parties or renegotiate existing contracts to address likely risks.