Most people recognize that it is critical for a business to have a Diversity, Equity and Inclusion (DEI) policy in place, for the simple fact it’s the right thing to do.  If that were not enough, there are many other compelling points that support the adoption of a DEI policy at the workplace. 

The subject of risk management may appear somewhat simplistic on the surface, however, a variety of important ideas fall under this umbrella.  Organizations that fail to adopt an effective DEI policy create a number of significant risks to the bottom line, including:

Reputation damage – When minorities express negative outcomes in regards to hiring, promotions, performance evaluations or the workplace environment in general, people are less likely to purchase goods and/or services from the business

Recruitment and retention – Once there is negative information surrounding the lack of a DEI policy or ineffectiveness of a DEI policy at a business, attracting future leaders and retaining high-value employees becomes much more difficult

Innovation shortfalls – Companies with higher levels of diversity on the management team report stronger revenues as a result of innovation, with a recent study showing nearly a 20 percent edge over businesses with more homogeneity

Competitive advantage – Organizations with a sound DEI policy in place create a point of differentiation from their competitors; it’s also worth noting that, when people feel their opinions, efforts and beliefs are going to be respected and valued, they are much more likely to work together toward a common goal

Attorney (s) fees – Even with a DEI policy in place, if it is not effective or the workplace environment is toxic, an employee may bring a claim and, whether valid or not, the costs associated with facing that claim can quickly spiral

Similarly, if a business retaliates because an employee raised a complaint and/or initiated a claim, whether valid or not, the employee could potentially sue for wrongful termination.  Retaliatory firing represents one of the most common claims brought against businesses.

Despite organizations making their best efforts to promote diversity, equity, and inclusion in the workplace, discrimination still occurs.  In fiscal year 2021, the Equal Employment Opportunity Commission resolved 67,448 charges of workplace discrimination related to different factors, including race (32.7 percent), sex (31.7 percent), age (21 percent), color (5.3 percent), and religion (3.6 percent).

Dealing with these charges can represent a significant financial burden.  To be proactive, most business leaders will want to have counsel present for employee interviews and/or settlement proceedings, and this can get expensive. 

It’s also worth pointing out that managing the reputational damage created by the lack of a DEI policy can be expensive, because of the necessity of hiring a PR firm and the negative impact to recruitment and retention.  Establishing a policy before a crisis occurs is the best way to minimize risk.