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New York Maintains Rank as Lowest-Risk City for Business Worldwide
 

By Roy Maurer  4/1/2013
 
 

For the second straight year, New York ranked as the lowest-risk city in the world for recruiting, employing and relocating employees, according to results released by Aon Hewitt, a global human resources solutions provider.

“New York retained its title as the world’s lowest-risk city due to its world-class educational institutions, training facilities and availability of a large pool of qualified and experienced talent,” Aon Hewitt said in a news release.

Aon Hewitt’s 2013 People Risk Index measures the risks that organizations face with recruitment, employment and relocation in 138 cities worldwide by analyzing factors such as demographics, access to education, talent development, employment practices and government regulations.

According to the index, New York, Singapore, Toronto, London and Montreal retained their ranks as the top five lowest-risk cities in the world. Conversely, Luanda, Angola; Port Moresby, Papua New Guinea; Addis Ababa, Ethiopia; Sana’a, Yemen; and Damascus, Syria, represent the highest-risk locations for employers out of the 138 cities ranked. The 138 cities were selected based on population size, rate of population growth, level of business investment and geographic spread.

The rankings were released March 25, 2013.

“The way businesses now recognize and manage people risk has changed significantly over the last few years,” said Richard Payne, Talent and Rewards practice leader for Aon Hewitt in Asia-Pacific, in the release. “Driven by a need to do more with less, business leaders have to be more innovative around how they invest. This has had an impact on how they think about talent sourcing and workforce planning.”

The 10 Lowest-Risk Cities

The 2013 rankings showed little difference from the 2012 rankings among the top five cities. Singapore remained the only city outside of Europe and North America that is ranked among the top five, while Hong Kong made the top 10.

Of note, two European cities—Copenhagen, Denmark, and Zurich—moved up the ranks to be among the top 10 in 2013. This can be attributed to the many pro-business employment policies in these cities, their open-door policy toward talent and their continued focus on developing and improving education and talent development infrastructures, according to the index. Furthermore, the increased risk in eurozone cities that has been exacerbated by the ongoing debt crisis has reduced the relative risk in European cities outside of this economic and monetary union.

“Pro-business employment policies have a significant impact on people risk,” Payne added. “Where government policies support a more flexible approach to talent immigration, employment practices and the provision of social welfare, these cities are able to attract and retain a talent supply critical for businesses.”

Trends from the Highest-Risk Cities

Along with the cities mentioned above, the remaining top 10 highest-risk cities to employers in 2013 are: Lagos, Nigeria; Dhaka, Bangladesh; Tripoli, Libya; Karachi, Pakistan; and Baghdad, Iraq.

The lack of a stable and transparent government continues to be an obstacle to business-friendly employment practices in these cities, the index found. Furthermore, the lack of government investment in developing and improving the education and talent development infrastructure increases an employer’s risk in finding skilled talent, as the current infrastructure is unable to support employers’ workforce demands.

“There is a silver lining for these high-risk cities,” said Payne. “They will continue to experience population growth in the next decade, which will increase the size of the labor pool. However, if the education and talent development infrastructure do not improve, these cities will face a surplus of low-skilled workers and a shortage of highly educated professional talent.”

The index noted that despite the challenging business and people environment of high-risk cities, organizations are still expressing interest in these locations because of the abundant natural resources and high economic-growth potential. “Africa presents many opportunities if employers are able to identify and mitigate the people risk in these cities effectively,” said Payne.

Risk Varies Widely in Asia-Pacific

According to the index, Asia-Pacific has the widest variance in risk of any region worldwide. The developed economies of the Pacific (Australia and New Zealand) and the four Asian tigers (Hong Kong, Singapore, South Korea and Taiwan) all scored relatively low on risk, while many cities in the fast-developing economies in South and Central Asia were assessed as having among the highest risk in the world.

“For companies that are thinking of shifting locations into Asia-Pacific or shifting within the region, HR must ensure that their business leaders are not shifting just on lower costs alone,” said Tabitha Lim, research consultant at Aon Hewitt’s regional Talent & Rewards Analytics Center based in Singapore. “It is important for HR to ensure that business leaders are aware of the different talent risks in that location, as they may eventually contribute to costs, specifically learning and development and higher rates of turnover,” she told SHRM Online.

The developed economies in Asia-Pacific are low risk because of strong government support and transparency, she explained. The high income levels have allowed these cities to invest in education infrastructure and talent development facilities. This has increased the availability of qualified talent.

Chinese cities are ranked medium risk, with first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen having lower risks compared with second-tier cities such as Chengdu, Chongqing and Dalian. According to the index, the past year has seen much relocation to second-tier cities—especially for manufacturing research-and-development units—because of the high costs in first-tier cities.

“Although reducing operating costs will continue to be an imperative for organizations, it is important to mitigate the inherent people risks in those second-tier cities, which include risk related to employment practices, the capacity of the education system and the lack of transparent government support,” the index stated. Also, the quality of talent in second-tier cities may not be at the level found in the first-tier cities of Beijing and Shanghai, and organizations may find themselves having to invest more in training and development, according to the index. “With the increased business competition in the second-tier cities, organizations can expect greater risks in recruiting talent due to an increased talent war, which will in turn lead to higher talent costs and attrition rates.”
Indian cities are at a risk level similar to 2012. High immigration rates into cities such as Ahmedabad, Bangalore, Chennai, Hyderabad and Pune have resulted in the availability of a large young workforce, many of whom are well-educated, Aon found. High levels of corruption, violence and crime remain, however, affecting India’s overall risk rating, as do high staff turnover rates.

Trends Indicate Rising Risk for Top-Ranked Cities

North American and European cities were among eight of the top 10 lowest-risk cities in the world for recruiting, employing and relocating employees.

Still, low risk doesn’t mean no risk, cautioned Sally Evans, research manager at Aon Hewitt’s regional Talent & Rewards Analytics Center, also in Singapore.

“Unless education and talent development are aligned to future business requirements, companies will continue to need to invest heavily in training and development for their new hires as the current skill gap grows,” she told SHRM Online.

Evans said that recent trends across the developed world indicate that people risks are rising and companies will need to address trends that will increase uncertainty in human resource management.

Trends that could raise the risk of doing business in the U.S. include immigration policies that turn away high-skilled foreign labor and America’s growing debt and increased spending on medical care and pensions for its aging population. “In the long term this will impact access to an educated and skilled workforce,” said Evans.

To sustain current low-risk ratings, increased access to a high-quality educational curriculum and pro-business policies—especially those that support the immigration of highly skilled workers—are needed, she said.

Europe is in a far worse predicament, Evans observed.

Rankings in Europe reflect the ongoing concerns over the stability of the eurozone. “Europe is a clear example of a region where too many educated people lack employable skills in a world that currently has too few skilled workers,” she said. “This paradox, combined with many stagnating economies either in or on the verge of recession, presents a dangerous situation for governments.”

Roy Maurer is an online editor/manager for SHRM.

Follow him at @SHRMRoy

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