Psychosocial Risk Primer AICD

Australian Institute of Company Directors (AICD) and King & Wood Mallesons (KWM) just released their Psychosocial Hazards Primer. The full publication is available HERE. Below we unpack the key takeaways, along with a practical example to help you avoid what they identify as one of the biggest governance red flags.

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“Psychosocial incidents are as damaging as physical harm – but they’re harder to spot… and they escalate fast if not mitigated early.”– Diane Smith-Gander AO, former Chair of Safe Work Australia

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Key takeaways

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• Directors have legal duties to ensure their organisation is managing psychosocial risks. This means verifying, not just trusting, that appropriate processes and controls are in place.
• No board reporting on psychosocial risks is a major red flag. If psychosocial risks aren’t showing up in board reports, it signals a major governance gap and a possible compliance failure. Boards must demand visibility across all key hazards.
• The focus must be on a system of prevention, not just mental health support (e.g. EAP is an individual support when the risk has manifested into harm). It’s about fixing job design, management practices and culture as required, before harm occurs.
• Regulatory pressure is rising: Personal prosecution of officers is on the table. Regulators like SafeWork NSW are deploying specialist inspectors.

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How do you understand your risk profile?

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How do we understand psychosocial hazards, i.e. what information do we rely on to determine the risk profile? AICD's report states:

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• "Frequent, prolonged, or severe exposure to these hazards increases risk"

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This means directors must seek to understand how long the risk has been present, how prevalent it is and how much of an impact it is having on staff.

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Questions for you to consider:

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1. Do you have targeted data to understand your psychosocial risk profile?
2. How are you gathering this information across the hazards?

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Verifying your processes:

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Without clear reporting on the above, we are unable to "verify that effective control measures are in place"

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What failing to verify looks like

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These are the red flags that suggest a board is not meeting its duty:

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• No board papers or reporting on psychosocial hazards.
• No visibility into high-risk areas (e.g. bullying, workloads, remote work stress).
• No review mechanisms for controls (i.e. not checking if risk controls are working).
• No documented consultation with workers.
• Risk is lumped under “HR” or legal, with no board scrutiny.

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RADAR GRAPH

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The video below goes through Skodel's Radar Risk Report that enables you to verify your processes.

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Legal and regulatory landscape

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Key cases and news shaping regulatory landscape

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Skodel has covered the following cases in detail:

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• $3.5m prosecution of Department of Justice
• PCBU charged with Organisational Justice
• Changes to workers compensation for Psych Claims
• $1m enforceable undertaking of Cobar Minerals (2 worker complaints relating to job demands and other hazards)
• $1.47m enforceable undertaking of Fortescue Metals

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For more, view Skodel's blog HERE

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Directors due diligence

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A summary of the key questions from AICD's report and their area of due diligence are below:

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We hope you found this useful and as always, thank you for reading!