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The new risks — and rewards — of transformed work

Risk & Analytics|Future of Work|Talent
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By Adam Garrard and Julie Gebauer | March 1, 2022

New work models will reshape your organization’s approach to risk. If you get it right, you’ll gain a sustainable advantage.

Three converging workplace trends — automation, open talent pools and increased flexibility — are creating a once-in-a-generation opportunity to transform how work gets done. New work models present an appealing possibility of an energizing employee experience, increased output and reduced cost. Yet this combination of results could remain just a possibility if you don’t recognize that, alongside the understandable appeal, comes less obvious risk that must be managed.

Many of the benefits of reimagining how, when and where work gets done have been discussed extensively: lower real estate costs for companies, less need for travel, greater schedule and location flexibility for individuals. Much less has been debated about how new work models will also reshape an organization’s risk profile and demand a different approach to risk management. Most notably, it will require a partnership of your business and functional leaders to monitor new intertwined vulnerabilities, assess risk tolerance and ensure the company and employees are adequately protected from unforeseen and interconnected consequences.

Much less has been debated about how new work models will also reshape an organization’s risk profile and demand a different approach to risk management.

We believe that if you get this right your organization will gain a sustainable advantage.

A changing risk profile

In addition to potential impact on company culture and innovation, which many leaders have considered, there are other important areas that shouldn’t be overlooked:

  • Cyber risk has skyrocketed with the rapid shift to remote work during the pandemic and increasing automation of business processes. While it may have been evident that home working environments wouldn’t necessarily replicate the more sophisticated security of an office environment, it wasn’t clear that more individuals would be susceptible to phishing attacks while working away from offices. Nor did many predict the level of increase in cybercriminal activity.
  • New work models both increase and moderate the risk of business disruption. For example, with technology that allows employees to work remotely, weather events that prevented individuals from getting to an office no longer limit work to the same extent. On the other hand, Wi-Fi outages and labor shortages impacting transportation hubs and supply chains add to the risk.
  • You may see an increase in errors and omissions and product liabilities cases if you don’t adapt quality control and management processes to be effective with dispersed teams.
  • An employer’s responsibility related to remote and flexible working conditions is less clear than for fixed hours, in-office work. Even with standards for remote working environments, employers will have less control over the myriad different set-ups, creating a higher likelihood for more injuries “arising out of” or “in the course of” employment and greater workers compensation claims.
  • With flexibility of working anywhere come the risks of non-compliance with labor and tax laws and gaps in insurance and benefits coverage for both employers and employees, particularly without well-defined protocols, controls and manager resources.
  • There are more opportunities for previously untapped or excluded talent — retirees, employees with disabilities and talent located far from headquarters — as automation helps companies expand their reach for skilled workers by taking jobs to people instead of bringing people to jobs. On the other hand, flexible work also creates a risk of eroding inclusion and diversity if managers’ biases lead to remote workers being “out of sight, out of mind.”

Societal considerations and reputational risks

Beyond direct business impact, decisions about new work models will affect the communities in which they operate. A stark example of this is how remote work dramatically changed the complexion of central business districts. Streets that had bustled with commuters and office workers emptied and with that an array of service providers — coffee shops, food vendors, florists, messengers and more — were left without business.

With the increasing likelihood of future disruptive events — more global health crises, extreme weather events and geopolitical tensions — comes impact on how and where work is performed. This will have lasting effects for economies, including micro-economies around major cities, and communities.

It is possible that the role companies play in defining the effect will become an area of reputational risk and could also factor into environmental, social and governance (ESG) considerations of employees and among investors.

The way forward

These risks should not dissuade leaders from capitalizing on this extraordinary opportunity to reimagine the future of work. Rather, leaders should factor their new risk profiles into how they change so they unlock the full potential of the opportunity. It will simply take a careful balance and systematic approach to:

  • Identifying the specific opportunities to generate higher work output, lower cost of work and differentiated employee experiences.
  • Modeling the most significant risks of work transformation, redesigning risk management, risk financing and capital allocation frameworks, and setting up early warning systems to catch the unforeseen risks.
  • Building organizational as well as leaders’ and managers’ capabilities to recalibrate, redesign and continually evolve work models as the values and preferences of the next generation of customers and talent evolve, and technology and innovation continue to shape how people work and new risks emerge.

Underscoring this transformation is the employee experience (EX). It demands special attention because the ways of work will continue to change how your employees engage with your organization and connect with each other.

Our 2021 Global Employee Experience Survey reflects this point: 92% of organizations plan to enhance their EX over the next three years. In an upcoming article, we will put EX in the spotlight.

In a series of articles — starting with the spotlight on EX — that follows, WTW will set out a clear case about the importance of planning, clarifying the best way for you to capture value, managing downstream risks and ultimately creating an enduring competitive advantage.

Authors

Global Head, Risk & Broking

Global Head, Health, Wealth & Career

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