A guide for Boards: ESG governance and reporting

Psychosocial health in the workplace

by Sam Betzian and Fiona Austin ·  26 March 2024

Managing psychosocial risks

Psychosocial risk management refers to the field of work health and safety (WHS) management in which hazards affecting psychological health are identified and addressed.

These hazards can arise from workplace factors such as:

  • the design or management of work;
  • the work environment; and
  • workplace interactions and behaviours that may cause psychological harm.

Psychosocial health has been a focus for many organisations over the past few years, as a result of rapidly developing legislative reform. Boards and directors have a central role in not only ensuring that compliance with the reforms is achieved but also in taking advantage of the opportunities that good management in this area offer. Read our Insight for more details.

How is the board overseeing psychosocial risk in the business?

Boards must firstly ensure that psychosocial risks are being managed as part of the organisation's WHS strategy. This is a significant shift in approach as, historically, factors leading to psychosocial risk (such as work design and workplace conduct issues) tended to be dealt with as human resources issues (and often in a reactive rather than proactive way). 

At a board level, this requires:

  • the approval of organisational objectives and measurable performance criteria for psychosocial risk;
  • ensuring the company's strategic WHS plan addresses psychosocial risk improvements;
  • ensuring sufficient resources are allocated to deliver these plans for the short and long term; and
  • supporting the development of additional leadership capability and competency for psychosocial risk management.

Boards will also need to closely monitor performance and assurance for psychosocial risk management, and to continuously oversee adjustment of objectives and plans as appropriate. This is likely to include:

  • the development of specific indicators for psychosocial risk performance; and
  • systems that are built in consultation with workers and specialists to ensure effectiveness and utility.

Boards and directors play a critical role in overseeing suitable worker and stakeholder involvement in psychosocial risk interventions. While many organisational risk management systems already (at least in theory) apply to psychosocial risk management, typically there is a need to update systems and tools to ensure appropriate collection of data in relation to psychosocial risks and hazards, and to design meaningful controls.

Directors can expect the following to be reviewed:
  • health programs: including pre-employment, periodic health assessment and injury management programs for psychological risk management.
  • work design and work planning: to address risks associated with high and low job demands (including cognitive, workload, physical, time and emotional demands) as well as job clarity, control and support needs.
  • business improvement: including business process, systems and resourcing to address risks in work roles and interfaces, as well as improvements in managing change.
  • workplace amenity and facilities: including physical work environments that provide appropriate measures for natural surveillance, privacy and security, and retreat.
  • flexible work: including a good balance between work at home and work in office to enable peer support and collaboration.
  • skills development: including worker competency programs to support management of high-risk hazards (such as conflict skills, emotional competencies, communication, difficult conversations, dealing with high work demands, positive behaviour expectations).
  • cultural programs: including a focus on a 'speak up' culture.
  • career development: including reward and recognition.
  • organisational justice: including HR policies, grievance, complaints and disciplinary processes that are comprehensive, fair and human centred.
  • violence and aggression: including security review and personal support tools.
  • bullying and harassment: including interventions to address underlying factors and response, such as diversity programs.
  • hazardous work review: including a fresh look at controls associated with high-risk work activities.
  • contractor management: to ensure management of contracted psychosocial risk.

Many organisations are establishing specific indicators encompassing psychosocial risk management data and including benchmarking programs to demonstrate industry leadership in this field. Indicators might previously have focused on the incidence and cost of incidents and claims, but should now also consider developing additional criteria such as psychosocial risk control effectiveness, employee engagement and team performance as against industry peers.

What is next for boards?

Boards that focus on the value that psychosocial risk management brings will find that the benefits balance (or even outweigh) the costs involved in effecting change. Interventions will bring associated business performance improvements, as they focus on deep organisational barriers and roadblocks.

Minimising harm, making improvements to the experience and wellbeing of workers, and consequentially improving familial experiences and other worker contributions to the communities in which a company operates—all of this has flow-on social effects that are at the heart of the 'S' in 'ESG'.

Boards that oversee effective psychosocial risk management programs can champion and promote these benefits.

What are the risks to be aware of?

  • There is a legal risk of regulatory enforcement action where companies have not established effective compliance programs to meet the requirements of the WHS laws.
  • There is a legal risk associated with psychological harm and the contributions of psychosocial risk to other physical risk events. Read our Insight for more details.
  • Directors also have personal responsibilities as 'officers' under WHS laws—which also require them to take reasonable steps to personally verify the true position and the adequacy of decisions made.

Boards should ensure they have adequate literacy in psychosocial safety risk management skills. Also, once systems are in place, they should consider seeking independent assurance to demonstrate compliance.