What is global risk management?

Thanks to advances in telecommunications technology and more open attitudes toward remote work, companies are increasingly hiring globalized teams. There's no need for companies to limit their hiring to their immediate geographical area anymore.

While sourcing talent from a wider group of people than ever before offers many benefits, there are also potential risks. Global risk management refers to the steps companies take and the policies they implement to reduce the potential risks that may arise when setting up and managing a worldwide workforce.

Employers and human resources leaders should develop a cohesive global risk management strategy before hiring abroad. Discover the potential drawbacks of international hiring and how to establish a global risk management strategy below.

Challenges of international hiring and elements of a global risk management solution 

International hiring adds complexity to the entire HR process, from recruitment to management, payroll, and beyond. Any corporate global risk management solution should account for these potential challenges.

Incorrect work classification

Employers must correctly identify workers as employees versus self-employed individuals. If an individual is self-employed, they are responsible for their own taxes, social security, pension, and more. However, if an individual is an employee, the employer may be legally obligated to deal with these administrative issues. Misclassification of workers is a punishable offense in many countries.

Regulatory compliance issues

Different countries have their own rules regarding things like vacation time, overtime pay, sick leave, and more. It's up to companies to research the relevant labor laws and make sure they are in compliance. Otherwise, they could face issues like fines.

Contract details

Most countries require employer-employee relationships to be firmed up in a formal contract. However, countries have varying legislation around what those contracts should include. For example, some countries don't allow a "trial period" for workers. Laws regarding termination notices also vary by country.

Insurance requirements

Depending on the type of role and job title, employers may be responsible for providing insurance for their workers. This could include health insurance, plus extras like vision and dental, as well as worker's compensation or similar liability insurance.

Intellectual property (IP) problems

IP can be a hot topic for many companies. However, IP laws aren't globalized. Companies that don't have a legal entity in a given country may struggle to adhere to IP laws or may find that their existing protections don't hold up in other marketplaces. If employees in those countries are handling delicate, IP-sensitive information, this can get tricky.

With all these points in mind, a basic global risk management solution might seem limited. Additional factors may be relevant, depending on the company developing the strategy. 

Developing a global risk management strategy

Global employment has opened many doors for companies looking to source talented workers from all over the world. However, globalization and risk management go hand in hand. Companies must develop global risk management solutions to minimize their legal liability and mitigate risk.

In addition to researching the above points, global risk managers can also benefit from modern technologies to address common hurdles. For example, a global payroll and benefits system can help ensure that employees are properly compensated, wherever they’re located.

While global risk management solutions take time to develop, it's well worth the effort. Companies don't want to run the risk of getting into legal trouble or experiencing reputation damage due to a lack of forethought. For savvy companies operating on the global stage, a global risk management strategy is a must.