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Spending Risks Shift as the Pandemic Continues

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When Twitter offered permanent work-from-home status to all of its 4,600 employees in response to the COVID-19 pandemic, it did so with a $1,000 stipend per employee to furnish and set up functional home office spaces.

For many organizations, such a sweeping move would carry higher risk as more employees, especially those not trained in company spending policy, would be expensing items. During COVID-19, enterprises of all sizes contend with the changing financial implications of adjusting business practices.

Data scientists at Oversight—a global leader in spending management technology—saw out-of-pocket spending increase 17% from April to May and expected this number to rise further in June as more employees without a corporate card make COVID-related expenses. These findings are published in the company’s Spend Insights Report, which analyzed information derived from customer interviews, market observations and Oversight data.  

Several Oversight clients reported finding big-screen TVs and soundbars on expense reports for work-from-home setups. Any of these could ultimately be for personal use or resold for personal gain. One client found that one of its employees spent $7,000 in corporate funds to set up a new home office space.

The months since COVID-19 forced employers everywhere to pivot their office strategies and open expensing capabilities to a broader subset of the employee base. As a result, the fundamental assumptions about spending and risk management in finance operations no longer apply.

New patterns of risk are emerging from these new transactions. However, finance operations teams that take the time to analyze these patterns can develop best practices.

Five key lessons enterprises should understand about spending risk in the 2020 business environment are:

1. Good and Bad Spending Have Reversed Roles

When the rapid shutdown of normal business operations forced the global workforce to shelter in place, travel discontinued abruptly. Airline and transportation activity plummeted in both March and April, as did hotel spending. But purchasing activity was higher than expected in the high-risk categories of mail/phone orders and miscellaneous stores (including merchants such as Amazon, Best Buy and Apple), while out-of-pocket expenditures in the name of business continuity increased dramatically. The result was a business scenario in which much of the historically “good” spending, like travel expenses, was suddenly deemed wasteful to the organization. In contrast, much of the traditionally categorized “bad spending” was now necessary.

2. The Pattern of Risk is Shifting, As is Mitigation Collaboration

Because the risk looks significantly different than it did before the pandemic, finance operations teams are applying more scrutiny to employee spending, and collaborating more. Operations teams are engaging more than ever with counterparts in forecasting, tax and audit to navigate the nuances of risk during the crisis, creating a new best practice that makes identifying and mitigating spending risk easier.

3. Rising Miscellaneous and Out-of-Pocket Costs Cause Payment Platform Risk

Third-party payments increased 40% year-over-year in April according to the Spend Insights Report, as the pandemic drove a significant increase in online shopping activity. That shift to online—as reflected in rising miscellaneous and out-of-pocket spending—was often processed using third-party payment platforms like PayPal and Stripe. When employees spend using these platforms, organizations are exposed to greater risk due to limited visibility into transaction and vendor data.

4. New People Spending is New Risk

Regardless of COVID-19’s impact on an organization, one good rule is that risk is a function of people. According to Oversight data, 70% of employees are good stewards of corporate funds. An additional 25% may make errors or act out-of-policy in certain circumstances, but these individuals are not intentionally involved in waste or fraud. The remaining 5% of employees could use opportunities like COVID-19 to spend maliciously or otherwise act outside of corporate compliance guidelines. Every organization’s goal should be to engender visibility into the 5% of bad actors, while simultaneously seeking to better inform the remaining 25% about the steps they can take to adhere to policy. 

5. Align your Teams and Tools to Ensure Visibility into Spending

By quickly understanding as an organization what employees are spending on today, and at what frequency, leaders will be better suited to manage and mitigate risk. While the profile may be different than before the pandemic, the same tools that guided visibility into spending and risk are available to help organizations understand and analyze spend in the new business climate.

The situation at most organizations is fluid. The essential take-away is to develop a framework and process for near-real-time awareness of employee spending and the associated risks. By recalibrating your sense of the necessary expenditures now, organizations can ultimately ensure continuous control over risks as they emerge.

Supreme Court Affirms LGBTQ+ Workplace Rights

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In a 6-3 decision this week, the U.S. Supreme Court ruled that federal anti-discrimination laws cover LGBTQ+ people and that they cannot be legally fired for their sexual orientation and gender identity, ensuring protection under Title VII of the Civil Rights Act of 1964. Justice Neil Gorsuch wrote in the majority opinion that, “An employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex. Sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.”

The decision was based on two separate cases brought before the Court. In 2013, Aimee Stephens was fired from her job as a funeral home director when she revealed her gender identity to her colleagues. Her former boss testified that he had fired Stephens based on the fact that she was “no longer going to represent himself as a man.” The case was the first before the Supreme Court regarding transgender rights. The second case was that of Gerald Bostock and Donald Zarda, who claimed that they were fired from their jobs as a child welfare services coordinator and a skydiving instructor, respectively, for being gay. Both Stephens and Zarda passed away before seeing their cases decided by the Supreme Court.

According to an April 2020 report from UCLA School of Law’s Williams Institute, 8.1 million LGBT workers age 16 and older live in the United States, and before the Court’s ruling, 3.9 million lived in the 28 states where it was legal to fire someone based on their sexual orientation or gender identity. In 2019, the U.S. Equal Employment Opportunity Commission (EEOC) brought more than 1,800 charges of LGBT-based workplace sex discrimination. Additionally, a 2017 survey showed that 20% of LGBTQ Americans reported facing discrimination when applying for a job, and 22% were not paid equally or promoted at the same rate as their colleagues who were heterosexual and cisgender. Advocacy organization Out Leadership also reported that, in 2020, “less than 0.3% of Fortune 500 board directors” were openly LGBTQ+.

These factors contribute to workplaces where LGBTQ+ workers do not feel comfortable being themselves, and are more likely to leave, according to Human Rights Campaign (HRC). A 2019 HRC report noted that 46% of LGBTQ+ workers had hidden their sexual preference and/or gender identity at work, and 10% had left jobs because their workplace did not accept LGBTQ+ people.

In the article “The Benefits of Diversity & Inclusion Initiatives,” Risk Management reported that encouraging diversity and inclusion helps all workers and their organizations. Allowing employees to bring their whole selves to the task can be beneficial. As the articled noted, “Often, the outsider believes he or she must bend to the norms of this dominant culture. When this occurs, it mutes creative friction—or creative abrasion, as it is also called—wherein ideas can be challenged productively.” D&I initiatives can encourage employees to more freely innovate and collaborate, can help boost worker retention, and may help minimize the risk of discrimination lawsuits.

But these programs may not be enough to create a working environment that is free of bias and discrimination. Even when companies “fostered an inclusive workplace,” 64% of employees in a 2019 Deloitte survey said that they had experienced or witnessed workplace bias in the past year, and over 50% of LGBT respondents experienced bias at least once a month. Employers can work to address the specific concerns of their LGBT+ workers, including allowing transgender employees to use bathrooms that correspond to their gender identity, regularly updating and reassessing company policies and requiring all employees to review them, and making clear that any form of workplace discrimination is unacceptable and will incur consequences.

Some legal experts worry that workplace discrimination will still take place under the guise of other factors like performance, noting that discrimination based on sexual preference and gender identity is very difficult to prove. The Supreme Court’s decision also left open the possibility that employers could still use a religious exemption to discriminate against LGBTQ+ workers. However, the decision is a critical step forward for LGBTQ+ civil rights and an important moment for workplace diversity and inclusion.

Twist and Shout: Avoiding Workplace Injuries with Risktech

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This week’s inaugural RIMS Risktech Forum highlighted many of the ways technology is changing how risk professionals approach their work, and the advantages of embracing new innovations. During the “What Can Risktech Do for Me?” panel, Mike Poulos of Marsh LLC, Jen Thorson of data analytics firm Modjoul, and Susan Shemanski, vice president of risk management for Adecco Employment Services discussed one of the practical applications of risktech—wearable workplace technology—to prevent injuries and unsafe behavior, protect workers, and mitigate liability for employers. In the course of normal business for many companies, employees in physically demanding jobs can twist, reach and otherwise strain their bodies in different ways that can lead to both immediate and long-term injuries.

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New technology offers a way to mitigate these risks.

After an overview of the general field of wearable risktech devices and their benefits, the panel discussed a real case of how a company implemented a program using belts that would track and collect data on employees’ movements, including twisting and reaching. The result, they said, was discovering multiple literal pain points for their employees and their company, and it may change how risk managers can root out and address risks like healthcare and insurance costs, employee health, morale and attrition, and even equipment costs.

For example, the panelists noted, one employee experienced pain when reaching bins on a bottom shelf as part of her work and even repurposed one of the bins as a stool for more comfort.

Another, whose job consisted of labeling packages, had to stretch to reach the label printer, aggravating their back in the process.

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The belts provided data showing these strains, and the company adjusted the employees’ work spaces to alleviate them. After gathering and analyzing the data from the belts, the company hired an ergonomist and conducted employee training to reduce unsafe conduct, even using the data to produce a new training video for incoming employees.

The panelists stressed communication as an essential part of the adoption process, and noted the importance of addressing employee concerns—including whether the belts would collect blood alcohol level or heart rate (no to both)—before implementing the program.

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To preempt privacy concerns and protect employees’ personal information, the company also anonymized the data the belts produced.

The benefits for companies from using this type of risktech are tangible and significant. Making work less dangerous for employees in physical jobs and reducing accidents and injuries can mean happier and healthier workers. This, in turn, can also positively affect productivity and attrition. Additionally, preventing workplace injuries can reduce healthcare costs, and companies can even sometimes use the data from wearable risktech devices to secure lower rates from their insurers.

As the panelists noted, in a tight hiring market, businesses may have to hire less experienced workers for physically demanding jobs, and monitoring physical movements can also help identify which employees may be doing dangerous things and need additional training. For example, ensuring that a relatively inexperienced forklift operator is not performing unsafe physical movements can prevent potentially catastrophic accidents that hurt the employee, the equipment, the company’s bottom line, and even its reputation.

Similarly, other panels at the forum showed how risk managers can use technology to address the risks their companies face, including utilizing artificial intelligence and machine learning, blockchain technology, and other innovative ways to harness data. For more information on how insurers and risk managers are using blockchain to change how they approach risk, check out the recent Risk Management articles “Can Blockchain Improve Insurance?” and “Strengthening the Links: How Blockchain Can Help Manage Supply Chain Risk.”

Beyond Pride: Building Strong Diversity and Inclusion Programs

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Today, June 28, marks the 50th anniversary of the Stonewall riots, demonstrations widely considered the most formative event to formally start the fight for LGBTQ rights in New York City and the United States as a whole. As June comes to a close and the city begins celebrating World Pride this weekend, enterprises should be thinking about how to extend the spirit of Pride month and embrace the importance of diversity and inclusion. Long after companies have retired their rainbow logos, they still face increasing need to build and maintain meaningful policies and programs in practice.

Whether looking to start a formal diversity and inclusion initiative, review existing policies, or audit the efficacy of D&I programs, here are some key resources companies can use to build better workplaces for LGBTQ employees and the workforce at large:

RIMS has also been increasingly focused on diversity and inclusion initiatives for both members and the organization itself with Risk Management Magazine content, webinars and conference networking events. Special thanks to Joshua Lamangan, senior membership manager at RIMS, for sharing many of the resources above from his work leading the RIMS Diversity and Inclusion Task Force and Diversity and Inclusion Advisory Council.