Accident Costs

The total costs of accidents depends very much on:

• your definition of what an accident is
• your recognition about the causes of accidents

If you see accidents only as events resulting in injury, your scope is limited and the costs to those events are therefore limited. If you have a broader view you will also include material damage events, production delays, errors, mistakes, oversights, rework etc. The costs of the total of those events will be larger - and sometimes much larger - than the costs of the relatively rare injury type events.

Unfortunately "safety" is called "safety" because of historical and legislative reasons and it was, but largely still is, in a context of human suffering, rules and regulations and legislative requirements. But in essence, safety is control of loss. In principle any loss: human, physical, business, administrative etc. To make safety an important issue and a platform from which to increase and maintain profitability you would want to include as many "unwanted events" as possible in the "safety - loss control - system". If this will be done, it will be much easier to get management's attention for safety which then will be profit optimization. It will then be easier to work at and obtain a culture that is not just safety oriented but will be focussed on cost control in general.

The following two tables try to illustrate my point.

Recognize cost related effects of accident causes

• accident causes are also causes of other costs.

Do you know the costs from these "universal causes"

• do you know these costs?

 Accident Costs and the Profit Margin

As we have seen from the Accident Costs Iceberg, unsafely costs a lot more than what was recognized during the time that only injury type accidents were considered part of the safety movement. Application of safety techniques and principles in all areas of business - consider "loss control" as "control of loss" provides much better opportunities to ongoing profitability.

Peter Drucker

In case of keen competition and low profit margins, learning from accidents can contribute more to profits than an organization’s best salesperson. The table below shows the amount of sales required for different amounts of costs resulting from accidents i.e., if an organization's profit margin is 5%, it would be required to make a sales of € 500.000 to pay for € 25.000 worth of incidents; with a 1% margin, € 10.000.000 of sales would be necessary to pay for € 100.000 of the costs involved with downgrading incidents. 

http://www.osha.gov/SLTC/etools/safetyhealth/mod1_estimating_costs.html   

Louis A. Allen

The Building Industry in The Netherlands