What are the risks of DEI noncompliance?
But let’s look at the flip side of the benefits argument. Culture change costs money; are there significant risks and costs if an enterprise decides to not invest in DEI compliance and training? There absolutely are.
This is obvious: Regulators have, for years, been look for companies to demonstrate they’re investing in equality of hiring and opportunity as part of promoting a fair and equitable workplace. So it won’t be surprising to see even more regulation or enforcement.
Employee attrition, falling productivity, and sliding morale
Employees who endure harassment or discrimination, or are aware it’s going on, are likely to leave. That can cost a company a significant amount of money, both in terms of replacing them any legal challenges that may arise. Just as Fox News about the costs of a toxic workplace culture. Even if employees don’t walk, there’s damage to productivity and engagement.
Management and governance continuity risk
See Fox News again, or any number of other firms where officers and executives have been forced to depart due to violations of DEI policies or legal and regulatory challenges. Losing leadership and experience at all levels of an organization can be harmful to business success.
Reputation and brand risk
Your stakeholders, the media, and regulators all expect a company to prevent harassment, and make improvements around DEI. But failing to do so creates the risk of permanent or at least lasting damage to your reputation and brand equity in the marketplace. It’s why Aunt Jemima was retired, after all.
Market share erosion
If you lose brand standing, you’re going to lose sales, period. It’s why no company can afford to stand pat on DEI, because the expectations of the market and stakeholders have swung: they expect, even demand, action.
Legal departments are driving DEI in the legal industry by insisting on supplier/partner compliance with DEI initiatives. If you’re not on board with that, you’re going to lose that client, and this will probably become more prevalent across more sectors of the corporate world, not just the legal ecosystem.
Vendor network risk
It’s not only about your own policies and culture; the market or regulators may hold you accountable for the failures of your suppliers. Or key suppliers may even have a hard time countenancing you as a customer if you’re guilty of infractions that might drag them down, too.
Not dealing with DEI matters and allowing harassment to continue can drive up your insurance costs.