As medical inflation and rates of chronic conditions soar globally, and benefits decisions carry greater and more variable business implications, multinational employers have increasingly turned to formal risk management models as they enhance the design and delivery of employee benefits. Traditionally, risk management frameworks focus on financial, operational, and regulatory dimensions.

Risk management approaches give employers a structured way to manage uncertainty by systematically identifying, assessing, responding to and monitoring risk over time. While these frameworks have traditionally focused on financial, operational and regulatory issues, some organizations are using the same disciplines to guide employee benefits decisions so that volatile health and benefits costs are managed more like other enterprise risks and strategies are more consistent, cost‑effective and sustainable across countries. And yet, only 14% of Risk and HR professionals believe their risk management capabilities are “fully embedded in their organization’s strategy and culture.”

Methodical, Holistic Approaches to Risk Management

A risk management strategy that is methodical and holistic may make sense for multinationals employers because:

• Global employers operate across different regions, which have varying regulations, economic conditions, political situations, laws, currencies, labor markets, supply chains and health systems. All of these factors can create cost volatility, especially in combination.
• While most employers report considering benefits as an integral part of their workforce strategy, the metrics most global benefits teams track today, such as cost trend, absence rates, employee engagement and EAP usage, may not always be connected to business performance or enterprise risk reporting, the total “universe” of risks (operational, financial, compliance, strategic, etc.).
• Outside the United States, health data transparency is particularly limited for employers, increasing uncertainty.
• Organizations that embed risk awareness into decision-making processes respond more effectively to uncertainty.

Global benefits leaders aiming to improve global benefits consistency and better manage cost volatility using a risk management framework should consider several, more granular issues that can impact both objectives, including:

• Population health and health care access, which may include unequal health outcomes across countries and complexity in benefits design for different regions.
• Workplace psychosocial and people risk, which can include not having enough skilled workers, workforce disruption, employees leaving the organization, and illness and burnout, among other issues.
• Financial, governance and vendor risk, which can include regulatory variations and managing multiple external providers across markets.

There are many models used to organize a risk management strategy, including the Identify-Assess-Act, Define-Assess-Plan-Implement-Monitor, Plan-Do-Study-Act, and Identify-Assess-Act-Monitor approaches. When applied to risk assessment in healthcare, the Identify-Assess-Act -Monitor model can aid global employers in organizing and evaluating metrics, in clarifying their risk appetite, and in ensuring positive, lower-cost outcomes. For example:

• Identify: Frame the biggest benefit related risks, which may include a rising chronic disease burden and gaps in preventive care. Focus on patterns by region or business, not on exhaustive data. Start with available and reliable metrics.
• Assess: Agree on a global “risk appetite” across benefits, to include such factors as costs and standards of coverage. Evaluate new initiatives with already-established guidelines for risk. Rather than gauging benchmarks in isolation, map out each population segment on a simple heat map.
• Act: Translate risk levels into a short list of responses: where to invest to address risk, where to share or transfer risk, where to accept risk and where to step away. Recalibrate where needed, to keep any evaluations of risk current.
• Monitor: Build a global benefits risk dashboard to track metrics over time. Establish a regular cadence with finance and enterprise risk teams so that benefits metrics inform broader corporate risk discussions.

A Note About Artificial Intelligence

It is worth noting that artificial intelligence (AI) has begun to influence traditional risk management approaches As AI systems analyze vast amounts of data, they can uncover potential problems that traditional risk management approaches might miss, provide real-time risk insights and automated alerts, though AI certainly carries risks of its own.

“Across industries, the traditional risk model – periodic reviews, static assumptions and backward-looking analysis – is giving way to systems that operate in real time, powered by data and continuous learning,” Fredrick Redd, a Forbes Council member, wrote. “The gap between these approaches is widening, and in some sectors, it is already creating a measurable advantage.”

Addressing Risk To Gain an Edge

Multinational employers that integrate advanced risk management models into their employee benefits strategies are better positioned to navigate the complexities of global operations. In addition, by leveraging AI and real-time data, these companies can proactively address risks, optimize benefits delivery, improve health outcomes and ultimately gain a competitive edge in the marketplace.