How boards can tackle psychosocial hazards

Australian organisations have made significant strides in prioritising physical work health and safety. It’s important for boards to bring the same level of focus and oversight to psychosocial risks.

Risk management is a complex space. When you overlay the aspects of mental health and managing psychosocial hazards in the workplace, it becomes particularly tricky.

Preventing psychological harm is an essential part of creating a healthy and safe workplace following changes to work health and safety (WHS) regulations that were recommended by the 2018 review of the model WHS laws conducted by Marie Boland, now CEO of Safe Work Australia.

The latest report from Safe Work Australia, released in 2024, showed mental health conditions accounted for nine per cent (11,700) of all serious workers' compensation claims and seven per cent of all work-related injuries and illnesses. This represents a 36.9 per cent increase in claims since 2017–18.

Directors have individual legal obligations under WHS laws to exercise due diligence in relation to their organisation’s compliance. This includes taking reasonable steps to understand psychosocial risks in the workplace and confirm that appropriate resources and processes are in place to manage them.

The AICD recently held an event to launch a new resource to help directors to strengthen their oversight of psychosocial risks distinct from the role of management. Governing WHS Psychosocial Risks: A primer for boards was developed by the AICD and King & Wood Mallesons. Some of the key areas it covers include understanding psychosocial hazards, the legal and regulatory landscape and the board’s governance role.

Challenging to identify

Psychosocial incidents are as damaging as physical harm — but they’re harder to spot. Reporting is less mature and incidents can escalate fast if not mitigated early. They might only become apparent after harm has occurred and can vary widely between industries, organisations and roles — meaning there is no one-size-fits-all approach to managing them.

Speaking at the launch event, Helen Rowell MAICD, a director at Mental Health Australia, notes that effectively managing and dealing with psychosocial hazards in all their forms across any organisation is difficult.

“There’s a lot more conversation happening at board level about what the organisation is doing to understand where and how psychosocial hazards are manifesting... and what’s being done about it,” she says.

Processes and frameworks put in place to address them need the right insights into the indicators of where they’re manifesting. How insights are reported to the board is important, as are the metrics and measures being used.

“If you don’t tackle it, then you are likely to have poorer performance across the organisation,” says Rowell.

Rising threat

Reducing risk factors such as bullying in the workplace and job insecurity, as well as increasing job flexibility, have been shown to make a difference, says Prof Samuel Harvey, executive director and chief scientist at the Black Dog Institute.

“Managers play a key role. We did a review with the World Health Organisation about what works in workplaces. The strongest evidence is that if you train your managers with the practical skills to know how to set up a mental health unit and respond when people are struggling, you can reduce rates of sickness absence.”

Peter Burnheim, co-founder and COO of employee wellbeing platform Sonder, says his organisation’s data showed job demands, poor support and workplace relationships were some of the most common concerns. “One of the other factors we see is that if the management engenders a culture of care — as opposed to just doing a tick-box activity — they get better outcomes.”

He notes when thinking about psychosocial hazards, “You probably gravitate to people that seem to be more vulnerable — but high-performing people like executives and chief executives are absolutely not immune to this.”

Creating an environment where everyone can thrive is something that must be led from the top of the organisation — and it is everyone’s responsibility. “Dealing with psychosocial hazards isn’t a nice-to-do, it’s a must-do,” says Cilla Robinson, a partner at King & Wood Mallesons.

Make a plan

In February, the NSW government announced it would establish SafeWork NSW as a standalone regulator and appoint a SafeWork Commissioner.

At the same time, Dr Anna Cody, the Australian Human Rights Commission Sex Discrimination Commissioner, has said the agency is proactively using its investigative enforcement powers to monitor employers’ compliance with the positive duty to eliminate workplace sexual harassment and a broader range of harmful behaviours, rather than waiting for claims to be made.

Robinson says the conversations boards should be having with management need to be more about putting a crisis plan in place, not just addressing a regulatory response. “When there's an authority at the door, people generally want to comply — and that’s not necessarily in the best interest of the organisation. Ensure your management knows what to do in that scenario.”

Measuring progress

There is no single measure that can inform an organisation if it is doing well or poorly in monitoring psychosocial hazard risk.

“It’s actually about trying to make sure you’ve got a good picture of what’s happening across the organisation using a range of statistics — then seeing where that leads you to dig deeper and understand more,” says Rowell.

She stresses the board’s role is to ask lots of questions of management. What support is in place? Are they getting external advice? Are they getting help to deal with issues as they arise?

“The challenge for directors is that it is very easy to lapse into the risk-avoidance liability mode,” says Rowell. “The more important focus is on having the right learning culture and approach to managing this across the organisation — being preventive and proactive about it, rather than knee-jerk reactive.”

This article first appeared under the headline 'Psychosocial hazard risk’ in the May 2025 issue of Company Director magazine.