Risky employees are among the most significant liability for a company but are among the hardest risks for a firm to identify and manage.

Indeed, risky staff members can be found almost anywhere in an organisation and in some cases are the ones who appear to be ‘model’ employees. The upshot for firms that fail to take action to minimise the risk can be millions of dollars in losses, says Yaneek Page, managing director of Future Services International Limited (FSIL), a legal funding and enterprise risk management company.

“Good employees are the number one asset of a company. They are key drivers of a company’s success. Yet, on the flip side, bad ‘risky’ employees can cause a company’s demise,” Page said.

FSIL offers training for HR managers in human resource risk management, staff risk assessments and enterprise risk management. Page noted that it is important that a company’s HR manager — who tyically conducts the first series of interviews with a job applicant — look for things such as poor attitude, conflicting ethics, poor training, personality-position mismatch, and lack of knowledge and skills for the job as some signs that an employee could be a risky hire.

“The worst thing a company could do is hire the wrong HR manager,” argued Page.

“An effective HR department can prevent hiring ‘risky’ employees who are wrong for the job and they also see to the orientation and training process which is critical in terms of educating new recruits about the procedures and policies of the company,” she said, adding “In our experience, good HR personnel are key to the financial success of a company as well as loss prevention, yet they often face the least scrutiny in terms of whether they are best suited for the job of managing the company’s most important asset – it’s people.”

Although human resource risk varies from industry to industry, Page said some such as factories, financial institutions, Information Technology (IT), construction and transportation companies are at high risk.

In the financial sector, for instance, Page noted that a single rogue trader can cause a large established financial institution to collapse. She cited the case of Nicholas Leeson — the former derivatives broker’s fraudulent, unauthorised trading caused the collapse of Barings Bank, the United Kingdom’s oldest investment bank. Losses were close to £827 million (US$1.4 billion), twice the bank’s available trading capital. After a failed bailout attempt, Barings was declared insolvent on February 26, 1995.

Similarly, a disgruntled or inept employee at a factory can sabotage or compromise a production batch, Page said.

“One of the most serious risks for a manufacturer of food for example is a product recall due to food safety issues. It may result in a massive decline in sales, widespread negative publicity, increased scrutiny from the bureau of standards, loss of trust of consumers, and significant damage to the brand,” she noted.

FSIL, as a litigant funding company, has dealt with many examples of risky employees costing companies millions of dollars in Jamaica. These include medical malpractice, which cost a hospital “double digit millions in legal settlement and legal fees”, or a misguided security guard who severely beat a customer resulting in a multi million dollar settlement.

“Here is a special warning to companies. We continue to learn of incidents where security guards assault or unlawfully detain persons, usually customers, even in parking lots. If a security guard is interfacing or interacting directly with your customers, you have risk exposure that you need to manage,” Page said.

Work accidents, which are also common, lead to settlements upwards of $5 million in cases of serious injury, Page added.

“Everybody loses when there is an accident at work: The employee who has suffered serious injury and the company which is faced with huge legal costs, work stoppage, distressed staff and having to make a formal report to the Ministry of Labour and review safety procedures,” Page outlined.

Among the tools, Page said that a company can use to determine whether an employee is a good fit for anorganisation is Psychometric testing, reference checks, assessment centres, police reports and in the case of highly sensitive positions, lie detector testing.

“In our experience, just mentioning the words police report will make the wrong employee squirm,” Page said, adding “The good news is that the cost is minimal; anyone can get one and bad hires usually decline the job offer if it’s contingent upon a clean police record.”