In July 2018, Uber announced that it would begin conducting continuous background checks on their drivers. Although the company has had a difficult history when it comes to culture issues and passenger safety, this particular decision moved Uber ahead of the curve. It showed they understood that whether caused by executives, employees, or contractors, enterprise risk stems from individuals whose behaviors can change over time—and that after years of negative press and internal shocks, they were finally doing something about it.
Like Uber, many companies today are starting to recognize the limits of traditional background checks and looking to recurring, real-time screening solutions to manage employee risk. Nearly half of employers today are scrambling for ways to identify high risk employee behaviors, but according to the Society for Human Resource Management, only 11 percent of companies formally screen past the initial hire. This means that nearly 9 in 10 companies are depending on pre-hire checks to keep their organizations out of the headlines.
As continuous screening moves beyond the high-security industries and into the mainstream, businesses across industries are seeking solutions that simplify and complete their risk management process. In this blog, we’ll discuss how enterprise risk has changed in the last decade and highlight why companies today must extend their screening practices beyond the initial hire.
What’s changed about screening and enterprise risk
Just a decade ago, companies had a relatively manageable landscape of risk. With fewer products to choose from and fewer channels of communication, customers stayed happy so long as a company’s product or service did what it was supposed to do. As a result, pre-hire screening allowed companies to filter out the majority of employee-based risk. When an issue did occur, it often had more to do with product or service deliverability—meaning that a manager could correct an instance of behavior without creating huge problems for the business. The chances that an individual would trigger a lasting issue or scandal was relatively small.
Today, every person in the organization can become a source of risk. As consumers think beyond deliverability and start to look for brand authenticity, they are now considering what businesses represent as a whole when making a purchase. With this shift in mindset, enterprise risk is no longer just a PR, customer success, or executive issue. Rather, every person in the corporation now has the potential to turn off customers. If your company is hit with press about a toxic work environment or an unethical business practice, be prepared. Consumers today expect more, and companies who ignore them are risking a lot more than their reputation.
Over the last few years, negligent approaches to risk management have led companies to lose market cap, market share, and even market entry. In the last 18 months alone, we saw four companies in various industries lose a collective $7 billion in market cap over news about alleged executive misconduct. This was not only damaging for each company internally, but also sent shockwaves throughout the brand. We’re seeing big name brands having their lowest sales in decades, losing their ability to attract top talent, and forced to leave entire metropolitan markets all because their culture and background checks were deemed unsafe.
Each of these incidents eventually cost millions of dollars and could have been prevented with a simple, proactive approach to risk. Why is pre-hire clearance still the status quo?
Times have changed, and companies who ignore the growing power of consumers are missing the reality that all it takes is one major event for the rockstars you hired to become a risk to your organization. As enterprise risk becomes more complex, an ounce of preventative intelligence beyond the initial check is worth far more than your best new PR campaign.
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December 31, 2020
December 10, 2019