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The Business case for costing accidents

The business case for investing effective health and safety management

Consider the following:

  • Successful companies, such as those that are recognised in RoSPA's prestigious Health and Safety Award Scheme share the view that good health and safety really is good business
  • Investing in health and safety promotes business excellence, including: improved productivity and efficiency; less staff absence; lower staff turnover; improved quality of work; and improved culture and communications
  • Investors, suppliers and customers are taking an increasing interest in companies' health and safety performance
  • There are strong links to better company environmental performance and safer driving
  • Investigations tend to show that most accidents and incidents are easily preventable by taking relatively simple and inexpensive measures
  • Putting control measures, training and monitoring in place may cost time and money but these are a business-critical investment as valuable as any other investment in your company
  • The business case for preventing accidents, incidents and ill health caused through work is actually stronger in recession. (This is because when increased contribution through additional sales and turnover is no longer an option, cutting waste due to avoidable losses becomes even more important in defending your company's bottom line.)

Why cost accidents, incidents and ill health?

Knowing how much health and safety failures are costing your company can be important for several reasons:

  • To make the case to colleagues for investing to upgrade control measures, procedures, training or monitoring
  • To understand the impact of specific events such as major accidents or incidents
  • To identify performance trends within the organisation
  • To benchmark within and between organisations
  • To help prioritise preventive effort, for example, by identifying areas where additional investment in prevention is likely to be most cost effective
  • To be able to measure the benefits of campaigns or specific interventions.

The HSE/IoD guidance for directors (INDG417) suggests that, as part of their overall monitoring role, boards should be tracking accident and ill health costs. Indeed, it could be construed that this should form a key part of their response to the monitoring duties of employers in the Management of Health and Safety at Work Regulations.

What are some of the barriers?

  • A general belief that health and safety is a burden on business
  • Lack of awareness due to long intervals between serious events happening
  • Lack of reporting and monitoring of minor, including non-injury, incidents
  • Management information may not be good enough to track all the below-the-water-line costs associated with accidents and work-related ill health (including simply tracking data on basic things like staff attendance and absenteeism)
  • Lack of internal requirements for structured investigation of accidents and incidents
  • There can be scepticism about the reality of below-the-water-line costs
  • Short term restrictions on cash can make uncertain longer-term savings less attractive, especially when health and safety is competing with other investment options that will show earlier returns
  • Expenditure on one budget may well produce savings in another for which the first budget holder is not responsible.

And there can often be fatalism and a belief that "accidents are bound to happen" (and the best thing to do is to move on as quickly as possible).

The majority of organisations do not have the faintest idea:

  • How much they are actually losing due to safety failures
  • How much could be lost if their controls fail
  • How much to spend to demonstrate reasonably practicable (strategic or operational) compliance.

Strategic gap

This is a major management failure.

  • How can boards manage their strategic risks without knowing their liability each year, and therefore how can they allocate adequate resources and subsequently demonstrate reasonably practicable standards?
  • Many organisations will have a statement in their policy to the effect that "safety ranks in importance with other business objectives" and "adequate resources will be provided" yet they often lack suitable cost analysis to enable them to assess their achievement of these objectives
  • How do managers, risk assessors and accident investigators make acceptable and prudent recommendations if they have no idea of the cost of the event they are trying to prevent?

Safety professionals need to be prepared to marshal arguments and data, seek allies and identify opportunities to tackle these issues.

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