The Enterprise Risk of Employee Mental Health and Wellbeing

The current risk to employee mental health and wellbeing is nothing less than an enterprise risk that can affect a company’s ability to sustainably achieve its business objectives. Learn more about how wellbeing can enhance business performance – but only when there is a clear strategy in place.

In the past year, mental health and wellbeing have emerged as priority risk items to individuals and organizations. The COVID-19 pandemic, combined with a rapidly changing economy and growing uncertainty about the future, exacerbated preexisting mental health challenges. In a recent global survey, more than two in five respondents reported a decline in their mental health since the beginning of the pandemic.^[1] In another survey, nearly one-third of Americans reported experiencing symptoms of anxiety or depression—a three-fold increase compared to 2019.^[2]

At the same time, the crisis has elevated the awareness of mental health and wellbeing in the workplace. A 2021 global wellbeing survey revealed that 82% of global companies believe that wellbeing is important.^[3] While acknowledgement is a step in the right direction, most companies still have a long way to go to adequately address the risks of employee mental health and wellbeing. The latest research investigates the business case for wellbeing, the underlying risks to performance, and what companies can do to build workforce resilience. Here are three things that companies should keep in mind.

Wellbeing Affects Your Bottom Line

The results are conclusive: Wellbeing performance is directly linked to business performance. Stronger employee wellbeing leads to improvements in key business outcomes, including customer satisfaction and retention, customer acquisition, company profit, and Net Promoter Scores (NPS).^[4] In addition, employee health and wellbeing fall squarely within the social component of environmental, social, and governance, (ESG)—which plays a growing role in how an organization is evaluated by investors, stakeholders, employees and customers. This means that employee wellbeing has a direct impact on a company’s access to capital, as well as its ability to attract and retain top talent.

Contrary to popular belief, wellbeing is more than a human resources issue. The current risk to employee mental health and wellbeing is nothing less than an enterprise risk that can affect a company’s ability to sustainably achieve its business objectives.

Wellbeing Can (and Should) Be Measured

Most organizations have a general awareness of their employee health and wellbeing risks, but far fewer understand the true impact of wellbeing programs or the full picture of their risk exposure. When companies were asked about the primary obstacles to starting or expanding wellbeing initiatives, 44% cited the challenge of measuring the returns of these initiatives and 32% pointed to a gap in understanding and demonstrating their value.^[5] As a result, companies have often pursued more limited wellbeing initiatives, such as expanding their existing employee assistance programs or offering more flexible working hours.

When it comes to measuring the risk of employee wellbeing, the good news is that traditional risk assessment methods can be applied. Wellbeing risks can be monitored by a set of leading and lagging indicators, such as employee engagement scores, employee productivity, and employee retention. Companies can then quantify their risk and potential losses using the same scenario-modeling techniques that are applied to any other enterprise risk (see Three Ways to Assess Your Company’s Employee Wellbeing Risk). This creates a clear framework for risk managers and executives to prioritize their resources and make informed, data-driven decisions on where and how much to invest in employee mental health and wellbeing.

Wellbeing Requires a Strategy

Wellbeing can enhance business performance only when there is a clear strategy in place.^[6] A wellbeing strategy is defined as a long-term plan of action to achieve wellbeing solutions and objectives, while an initiative is a stand-alone or ad hoc event, program or activity. In North America, while 89% of companies have at least one wellbeing initiative in place, only 53% have a long-term wellbeing strategy. These results suggest that nearly one in two companies are not reaping the performance benefits of their wellbeing investments. To capture the optimal performance gain, employers must look beyond an app or a workshop and embed wellbeing in their people and performance strategy.