Getting a clear and candid picture of the cost of underperforming in workplace safety, has always been a hard and often nebulous ‘science’. Generally models consist of worst case scenario’s, politically charged or easily manipulated speculation and statistics drowned in footnotes. In short: it’s hard to get a clear look into the cost and return on safety.
In the end it’s a lot of ultimately debatable effort, to economically justify investments in workplace safety. That’s where lately Expected Monetary Value evaluation is making a real difference.
An Expected Monetary Value evaluation trims most of the speculation down to substantiated figures, supported by an exhaustive understanding of workplace safety.
The no-frills, oftentimes sobering insights, generated by this evaluation, are being embraced by a growing number of organizations. Generally for multiple and diverse reasons.
Simply put: it offers a clear answer to the question “Is this investment in workplace safety worth it?”
Because it shows that answer almost always to be: “Yes, actually you cannot afford not to!”
EMV evaluation in a nutshell
EMV evaluation aims to provide companies with a monetary value of a mitigation solution – on an annual basis – by assigning a monetary value to risks before and after said mitigation. Also: often other benefits of the mitigation – likewise converted to their monetary value – are added.
Monetary values can include:
- Direct costs related to incidents: damages and personal damages claims.
- Direct costs related tot incidents: worker compensation claims (US)
- Direct costs related to incidents: executive and company liability claims.
- Indirect costs related tot incidents: production, logistics, shutdown
- Indirect costs related to incidents: working days lost
- indirect costs related to incidents: increase in yearly insurance premiums covering the domains above.
Conditional to the actual nature of the risk and the (safety) method(s) of mitigation, several relevant results are derived:
- First and foremost: a cumulative value of annual recurring benefits
- A cumulative value over the product lifecycle
- A cumulative value over equipment lifecycle
A closer, clearer look
Let’s take collision avoidance as a use case.
The EMV-Evaluation will factor in a multitude of specific risks. For instance: a forklift hitting a worker at slow speed, a loader hitting a worker at moderate speed, damage to assets from vehicle to material collision, … .
It will then assign to (and calculate for) this kind of incident:
- a severity-score,
- a likelihood,
- a probability (how many incidents per year),
- a yearly cost impact,
- an Expected Monetary Value over the period of a year,
- the cumulative probability (incidents over asset life),
- a cost impact and
- an EMV over a period of 10 years.
(These assignments and calculations are derived from industry proven, objective and transparent risk and consequence matrices)
In this use case, extra benefits/side-effects of the mitigation are discovered, given an annual monetary value and factored in the general evaluation. For example:
- improved vehicle efficiency (fuel savings)
- improved vehicle handling (maintenance savings)
- improved vehicle utilization (asset savings)
- insurance benefits (people, vehicle, assets)
All these factors are calculated for a status before and after mitigation. ‘As is and as would be’.
The end result:
A clear-cut, unambiguous insight in the costs and benefits of implementing a specific safety policy/measure/technology. Hence: an insightful look into the cost and return on safety.
This makes Expected Monetary Value Evaluation a stand-out ‘tool to …
- … a solid economic/financial argument for a specific investment in workplace safety.
And oftentimes just as relevant to …
- … gather support for such an investment from peers an higher-ups.
Do you want to discuss this further? Don’t hesitate to contact us! We can look at how to help you increase the safety at your workplace.