If you could save your company money, improve productivity and increase employee morale, would you? Demonstrating the value of safety to management is often a challenge because the return on investment (ROI) can be cumbersome to measure. Your goal in measuring safety is to balance your investment vs. the return expected. Where do you begin?
Measuring Safety Costs
There are many different approaches to measuring the cost of safety, and the way you do so depends on your goal. Defining your goal helps you to determine what costs to track and how complex your tracking will be.
For example, you may want to capture certain data simply to determine what costs to build into the price of your service, or you may want to track your company’s total cost of safety to show increased profitability, which would include more specific data collection like safety wages and benefits, operational costs and insurance costs.
Since measuring can be time consuming, general cost formulas are available. If it is important for your organisation to measure safety as it relates to profitability, more accurate tracking should be done. For measuring data, safety costs can be divided into two categories:
- Direct (hard) costs, which include:
- Safety wages
- Operational costs
- Insurance premiums and/or legal fees
- Accidents and incidents
- Fines and/or penalties
- Indirect (soft) costs, which go beyond those recorded on paper, such as:
- Accident investigation
- Repairing damaged property
- Administrative expenses
- Worker stress in the aftermath of an accident resulting in lost productivity, low employee morale and increased absenteeism
- Training and compensating replacement workers
- Poor reputation, which translates to difficulty attracting skilled workers and lost business share
When calculating soft costs, minor accidents costs are about four times greater than direct costs, and serious accidents are about 10 to 15 times greater. According to the International Risk Management Institute, just the act of measuring costs will drive improvement. In theory, those providing the data become more aware of the costs and begin managing them. This supports the common business belief that what gets measured gets managed. And, as costs go down, what gets rewarded gets repeated.
The Value of Safety
Studies indicate that for every £1 invested in effective safety programmes, you can save £4 to £6 as illnesses, injuries and fatalities decline. With a good safety programme in place, your costs will naturally decrease. It is important to determine what costs to measure to establish benchmarks, which can then be used to demonstrate the value of safety over time.
Also, keep in mind that your total cost of safety is just one part of managing your total cost of risk. When safety is managed and monitored, it can also help drive down your total cost of risk.
Considering the statistics, safety experts believe that there is direct correlation between safety and a company’s profit. We are committed to helping you establish a strong health and safety programme that protects both your workers and your bottom line.
Contact the insurance professionals at RHA Insurance Services to learn more about our value added services. Call us on 0203 960 2944 or email us at enquiries@rhainsuranceservices.uk.net or alternatively, visit www.rhainsuranceservices.uk.net to learn more about our tailored insurance schemes.