Ethics & Governance
Strategic human capital
BY

Long value preservation and growth have never before depended so fundamentally on effective management of human capital. Rapid technological change and intensifying competition in an increasingly borderless commercial environment are reshaping modern business, requiring new organisational and strategic responses. While effective deployment of people has always been important to business success, a strategic approach to human capital is now critical.

This is because increasingly radical responses are required for businesses to mitigate risks and pursue opportunities associated with accelerating business model innovations, rapid advances in automation, big data, machine learning, and artificial intelligence.

Given the potential for both value destruction and growth arising from such disruption, information about human capital strategy is material, as it is highly relevant to ensuring markets are adequately informed of risks and future prospects. In Regnan's analysis, disclosure practices on human capital management have not kept pace with the changing business landscape. We therefore regard it as incumbent on company directors and managers to ensure markets are informed of organisational and human capital approaches, where these provide material information relevant to business strategy and outlook. Further, we question whether listed companies are fully meeting their obligations to keep markets informed of material human capital issues and risks.

Accelerating business disruption gives greater urgency to communication of human capital responses, especially where business models are vulnerable to lower-cost competition, technology-led structural change or competing business models. The immediate steps which companies can take to improve market transparency of strategic human capital responses are the subject of this paper.

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