A recent Willis Towers Watson study, published in April 2016 in cooperation with the CII-Suresh Neotea Centre for Excellence for Leadership, queried 100 CEOs, CHROs, and other senior executives in India to determine the top human capital risks (HCR) and provide recommendations for C-Suite and Boards going forward.

The study, entitled The State of Human Capital Risk in India, based its queries on two determining factors: the potential impact and probability of occurrence of HCR in the workplace.

The study revealed that India’s corporate heads are only now realizing the importance of dealing with HCR: 67 percent of companies admit that HCR is an urgent concern, citing “Limited understanding of the issue as well as a lack of subject matter specialists, and insufficient dialogue between HR and Risk Management” as barriers to mitigating HCR. The study ranked the following top 12 risk categories:

1. Human capital factors (high attrition, attraction & retention, skills inadequacy, etc.) 84%
2. Market risk factors (competition, reputation, brand image etc.) 70%
3. Macro-economic factors (inflation, unemployment, price fluctuations, exchange rate volatility etc.) 55%
4. Financial risk (volatile financial markets, inadequate access to credit etc.) 52%
5. Technological factors (technological obsolescence, insufficient R&D investments, etc.) 41%
6. Legal/regulatory uncertainty (corruption, bribery, redundancy of laws etc.) 40%
7. Consumer market factors (changing tastes, cultural factors, population changes etc.) 38%
8. Infrastructure (physical and energy) 35%
9. Foreign trade and relations (import/export duties, troubled relations with other countries, 30%
10. Political uncertainty (mistrust in policymaking, communal violence, protection of rights etc.) 29%
11. Security risks (cyber insecurity, terrorism etc.) 16%
12. Natural and workplace hazards (floods, earthquakes, accidents, fire etc.) 10%

The resulting recommendations are that India’s organizations must prioritize HCR management in order to deal with rising HR challenges such as workforce planning, retention, succession planning, and skill gaps.

The most troubling statistic revealed that only one in three respondents have a formally-defined risk mitigation or control strategy in place and that the main barriers to success, ranked by importance, are:

1. Poor Bench Strength: Top executives lack the ability to step in if there is a change in leadership. 74 percent of respondents felt that this was a “significant” problem and 38 percent indicated that top-level weakness is an ongoing concern from the past.
2. Retention of Talent: 77% of the respondents felt that loss of talent was a risk that could have a “major” or “catastrophic” impact on business performance and 31 % indicated that they have faced retention issues in the past two years.
3. Capability Gaps: 74% of the respondents believe skill gaps significantly hurt business performance and 28% say their company has struggled with this risk.
4. Low Workforce Productivity ranks fourth, with 64% indicating this could have a big impact on business performance, while 28% have faced in-house productivity challenges.
5. Attracting Talent and a lack of programs to encourage new talent: 65 percent of respondents indicated that this is also an ongoing issue.

While respondents cited other barriers such as a lack of understanding on the part of senior leaders and the audit community, a lack of HC risk specialists, insufficient dialogue between HR and risk management functions, and limited resources to invest in HCR mitigation, the study indicates that India’s corporate leaders are ready to take on the challenge of addressing HCRs.