The fourth and final component of the SWOT analysis is threats. Like opportunities, threats are external factors that pose as a problem in the future for a company, but are not completely limited to external factors. Since threats are mainly external, only some can be in the control of the company and the remaining may naturally occur and cannot be changed with a company intervening. By using the SWOT analysis, companies can try to avoid threats and take the necessary actions to reduce any risk of threats against the company. Companies need to realize threats can leave the company in a very vulnerable state, which can affect the company’s overall performance. When developing the threats portion of a SWOT analysis, companies should consider the following questions (JRC European Commission, 2005-7):
- What obstacles do you [the company] face?
- What is your competition doing?
- Are the required specifications for your job, products or services changing?
- Is changing technology threatening your position?
- Do you have bad debt or cash-flow problems?
- Could any of your weaknesses seriously threaten your business?
By using the questions listed above, the human resource department can compile a list of possible threats towards the company. The next step would be to develop a plan to minimize the potential risk from any threats towards the company. The human resource department needs to act quickly in order to eliminate risk and avoid the company facing losses. HR may need to deal with threats such as (Travelers, 2013):
The human resource department should work with the risk management department to develop a plan of action to deal with each of the types of threats listed above. The more thought put into place for these plans will comfort employees and clients because they will know the company can bounce back quickly from them and they can continue to provide its products or services. Many of the threats above can have less exposure to risk if there are plans ready to be taken into account. HR should make sure their employees are trained to deal with scenarios dealing with each type of threat. Also, HR can use innovation to respond to threats, making them into opportunities for the company (Farazmand, 2004).
HR should also acknowledge the company’s employees can play a large factor in threats against the company. The intentions of employees can change depending on out of work factors, causing an employee to take action such as misconduct or robbery. Human resource should train employees about how to take proper reporting actions and make employees aware of the company’s policies and consequences with no tolerance behavior. The loyalty employees’ feel towards the company can impact their attitude about work and the overall company (Aghazadeh, 1999). This will help decrease any threats the employee may use against the company. If employees feel the company is loyal towards them they will return the loyalty and work hard and try to make the company better (Aghazadeh, 1999). As a way to decrease threats involving employees, HR can use benefits and welcoming working environments to make employees more comfortable and loyal towards the company (see blog post “SWOT: Opportunities” for more employee benefit ideas).
A huge threat, especially for smaller or local businesses, is globalization. As more and more companies are expanding globally it poses as a threat to companies that do not have the resources or finances to bring their company to that level. For companies whom have chosen to take on globalization, threats such as resistance to change need to be addressed. If employees resist the change, it will reflect in their work and become a threat to the company. HR needs to develop smooth plans and heavily assist employees as they learn, change, and adapt to the new cultural changes (Farazmand, 2004). New government regulations can threaten the way a company conducts business. HR should create educational modules or training sessions to teach employees about changes and provide guidance on how to change business practices (Farazmand, 2004).
Take away points:
While threats can increase the risk towards a company, human resource management can take the threats and transform them into opportunities for the company in some instances. On the other hand, many threats, such as natural disasters, are out of the control of HR, but can have minimal risk towards the company if a proper plan is established and implemented. It would be beneficial for HR to interview or survey employees regarding threats towards the company, as a way to find threats that need to be addressed or see if employees have techniques that can help minimize risk on threats for the company. By including the employees, they will feel the importance in company wide decision making and a sense of security the company is creating for them. HR should also use the questions mentioned above annually to reevaluate the company’s threats and see how threats are changing. They may be able to predict threats that have not happened or are farther in the future. The more planning established by HR and with the help of a risk management team, the better off the company would be if the threat is to take place. This could eliminate disruption to the business, and the safety of the company’s workforce will become less of a concern.
Aghazadeh, Seyed-Mahmoud (1999). Human resource management: Issues and
challenges in the new millennium. Management Research News, 22(12), 19
Farazmand, Ali (2004). Innovation in strategic human resource management:
Building capacity in the age of globalization. Public Organization Review,
JRC European Commission (2005-7).