4. Describe the consequences.
- Describe the type of accident that might result from inaction. To help educate decision-makers it's important to describe the type of accident that might result if corrective actions are not taken. The accident designations below are useful in describing the types of accidents that might result if hazards are not corrected. You can see a list of accident types in Course 702, Accident Investigation, Module 1.
- Describe other natural consequences of management's decision. The natural consequences are those that occur automatically. Inaction might increase the cost of doing business (CODB) due to increased injuries or illness, and lower morale, productivity, quality, and profits. Management action will likely reduce the CODB because employees aren't getting hurt or sick, and morale, productivity, quality and profits remain high.
- Describe the estimated insured and uninsured costs if corrective action not taken. According to the National Safety Council, the economic costs of work-related deaths and injuries amounted to $167 billion in 2021. The average costs per injury was $1,080 and per death was $1,340,000. The cost of medically consulted injuries amounted to $42,000.
- Describe the system consequences of inaction. System consequences usually originate outside the organization. Inaction might result in OSHA penalties, increased workers compensation, loss of contracts. Action is likely to result in lower penalties, workers compensation, and a higher probability of winning contracts.
Estimate the "return on investment" (ROI). To help the decision-maker see that the "cost" of taking corrective action and making system improvements will lead to eventual savings, expressed as an "investment." Taking this approach implies that the employer will realize a financial return if the recommendation is approved.
Don't wait for the employer to ask what the return will be; determine the ROI proactively and include it in the report. Let's see how to do that.
Let's say the investment needed to correct a hazardous condition is $4,000. Let's also assume that the potential direct and indirect accident costs to the company may total $36,000 if the employer takes no action. You can calculate the ROI by dividing the $36,000 in accident costs by the $4,000 investment to get the ratio of 9/1. To determine the ROI as a percentage, multiply that result by 100 to arrive at an ROI of 900%.
(COST ÷ INVESTMENT) X 100 = % ROI
($36,000 ÷ $4,000) X 100 = 900% ROI
- Estimate the payback period. Management may also want to know how quickly the investment will pay for itself: what the "payback period" is. Just divide $36,000 by
12 months and you come up with $3,000 per month in potential accident costs. Since the investment is $4,000, the investment will be paid back in a little more than five weeks. After that, we may assume that the corrective actions and improvements are actually saving the company a substantial amount of money. Now that's talking the
bottom line!
INVESTMENT ÷ (COST ÷ MONTHS) = # MONTHS
$4,000 ÷ ($36,000 ÷ 12 MONTHS) = 1.33 MONTHS
Knowledge Check Choose the best answer for the question.
7-5. To help the decision-maker see that the cost of corrective action and improvements will lead to eventual savings, express the cost as _____.
You forgot to answer the question!