2 What are the risks to a service business of strong reliance on its ‘people’ resource?

Employees as assets of a service business The following extracts are taken from the annual reports of two companies that rely heavily on a skilled workforce.
Although the workforce is not recognised in the statement of financial position (balance sheet) it is clearly a valuable but risky resource which is costly to maintain.
Apple Inc.
Extract from Annual report, 2009.
The Company’s success depends largely on the continued service and availability of key personnel.
Much of the Company’s future success depends on the continued availability and service of key personnel, including its CEO, its executive team and highly skilled employees in technical, marketing and staff positions. Experienced personnel in the technology industry are in high demand and competition for their talents is intense, especially in the Silicon Valley, where most of the Company’s key personnel are located. There can be no assurance that the Company will continue to attract and retain key personnel.

Hewlett Packard Extract from Annual report, 2008.
In order to be successful, we must attract, retain and motivate key employees, and failure to do so could seriously harm us.
In order to be successful, we must attract, retain and motivate executives and other key employees, including those in managerial, technical, sales, marketing and IT support positions. Hiring and retaining qualified executives, engineers, skilled solutions providers in the IT support business and qualified sales representatives are critical to our future, and competition for experienced employees in the IT industry can be intense. The failure to hire executives and key employees or the loss of executives and key employees could have a significant impact on our operations.