Identifying
and Controlling Hazards
Course 101
Safety Certified Supervisor Series
MODULE SEVEN: EFFECTIVE RECOMMENDATIONS
To develop effective recommendations, perform the following key steps
Estimate the "investment" required for corrective action and SMS improvements.
Expressing the "cost" to take corrective action and improvements is better expressed as an "investment" because it helps to communicate the notion that the employer will realize a financial return.
The decision-maker may ask you about the return on investment or "ROI". If the investment to correct a hazard is $1,000, and it's likely the potential direct and indirect accident costs to the company may total $29,000 sometime in the foreseeable future (let's say five years), you can find the ROI by dividing the $29,000 by $1,000 to get 29. Next, multiply that result by 100 to arrive at 2,900 percent. Now that's a healthy five-year return!
Next, merely divide that total by 5 to arrive at an estimated annual ROI of over 500 percent! Whoah!
Management may want to know how quickly the investment will be paid back: what the Payback Period is. Just divide $29,000 by 60 months and you come up with $483 per month in potential accident costs. Since the investment is $1,000, the investment will be paid back in a little over two months. 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!
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