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Calculating and Communicating Your Safety ROI

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Construction Risks and Safety

According to OSHA, businesses spend $170 billion a year on costs associated with occupational injuries and illnesses – expenditures that come straight out of company profits. But workplaces that establish safety and health management systems can reduce their injury and illness costs by 20 to 40 percent. In today’s business environment, these costs can be the difference between operating in the black and running in the red.

Measuring the Cost of Safety

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?

There are many different approaches to measuring the cost of safety, and the way you do so also depends on your goal. Defining your goal determines 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 services, or 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. For measuring data, safety costs can be divided into two categories:

1.   Direct (hard) costs

  • Safety wages
  • Operational costs
  • Insurance premiums and/or attorney’s fees
  • Accidents and incidents
  • Fines and/or penalties

2.   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 incident 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

Indirect costs can be hard to measure. Utilize our quick “Indirect Costs Calculator” to get a better gauge of your total cost of risk.

How to Show ROI

OSHA studies indicate for every $1 invested in effective safety programs, you can save $4 to $6 as illnesses, injuries and fatalities decline. With a good safety program in place, your costs will naturally decrease. It’s important to determine what costs to measure to establish benchmarks, which can then be used to demonstrate the value of safety over time. 

Safety as a Core Business Strategy

Industry studies report that companies who focus on safety as a core business strategy come out ahead. For example, the American Society of Safety Engineers reports that a fall protection program implementation by a U.S. construction company reduced their accident costs by 96 percent – from $4.25 to $0.18 per person-hour.

Considering the statistics, safety experts believe there’s direct correlation between safety and a company’s profit. We’re committed to helping you establish a strong safety, health and environmental program that protects both your workers and bottom line.

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ABOUT THE AUTHOR


Michael Alberico

Michael Alberico is a Senior Vice President and Construction Practice Leader at Assurance, as well as the Practice Leader of Assurance’s Alternative Risk program. With over 35 years of experience, Michael’s primary responsibility is to provide comprehensive and integrated risk management programs that fully address risk needs while maintaining price sensitivity. Michael graduated from the University of Illinois at Champaign-Urbana with a Bachelor of Arts degree in History.