05 Jun Creating a Business Case For Safety
Presenting a business case for safety is an important step towards your business achieving high safety standards for its employees and other stakeholders. An effective business case for safety can convince upper management of the benefits of the proposed program, and it should be designed such that it emphasizes a return on investment.
This article will explore the process of creating an effective business case for safety, the challenges involved and the overall benefits for your business.
Why is a Business Case for Safety Necessary?
A business case for safety is necessary because it outlines the importance of the safety initiative in financial terms. Often, the risks involved with neglecting safety in the workplace can be costly. These risks include the costs incurred due to worker compensation, business interruption, and loss of productivity among employees. A business case helps to clearly describe and quantify these costs, in addition to the indirect costs that can be incurred from the above-mentioned risks (such as lawsuits and new employee hiring costs).
Your business case should be aimed at promoting the well-being of employees, a safe working environment and maintaining business continuity. As such, management would want to ensure that no one gets injured while at work and that they are complying with all the regulatory requirements that have been put in place. A business case allows you to effectively address these safety concerns.
Benefits and Importance of a Business Case for Safety
Having established why it is necessary to have a business case for safety, this section will highlight some of the benefits of preparing such a business case, and why it is important.
Positive Customer Image
In today’s customer-driven marketplace, how customers view your business is imperative to your bottom line. When your business prides itself in high safety standards, customers view your products & services in a positive light and they value your brand. Therefore, a safe workplace can directly lead to increased customer outreach and increased sales.
The quality of your Products & Services
Adhering to high safety standards also ensures that your products are of the highest quality. Rules and regulations will be properly followed, both in maintaining safe operations and in the process of producing your products. These two processes often go hand in hand.
People want to be valued and appreciated. Your workers value a safe working environment where their well-being is taken as a top priority. This, in turn, boosts their morale and makes them more productive in the workplace.
Saving on Legal Expenses
Lawsuits can be very costly for a business. If workplace safety is not properly adhered to, employees could be injured while working and seek compensation for those injuries. A business that emphasizes workplace safety decreases the chances of getting caught up in such situations and values the safety of its employees.
When preparing a business case for safety, there are many challenges that should be anticipated. One of them is resistance from upper management. With limited resources and competing programs that pose a more direct return on investment, the management team responsible for operating a tight budget may not give priority to safety campaigns.
You should, therefore, strive for the business case to be viewed not as an expense, but rather an investment that will save on costs and stabilize the budget of the business in the long run. It should be prepared in a manner that quantifies risk factors and the potential benefits of the safety campaign. In other words, it should assess the risks involved, the proposed benefits and the implementation of the initiative in financial terms that can be quantified in a businesses’ financial statements.
Another challenge that arises when preparing a business case for safety is the cost-benefit analysis (CBA). The cost benefit analysis should aim at comparing the costs of implementing the initiative against the anticipated benefits. Many CBAs already have the disadvantage of exaggerated costs and underestimated benefits. This challenge is amplified in the case of business safety because it can be difficult to identify the potential costs and benefits of a safety campaign.
In this article, some of these CBA strategies will be proposed to help you when preparing your business case (these will be outlined under the section titled “the process of creating a business case for safety”). Having a quantifiable CBA is much better than simply presenting a case for management to act in good faith.
Factors to Consider when Creating a Successful Business Case for Safety
There are several important factors that can influence the preparation of a strong business case for safety. Understanding the circumstances under which the business is operating and the pressures that the management team is undergoing, can help you to design a business case that takes these factors into consideration and offers a realistic framework for its implementation. Consider the following factors when preparing your business case.
How you communicate matters. When presenting a case for safety, it is important to choose the right tone that will resonate with the decision makers in your business. Are they more likely to react to the potential negative effects of a poor safety campaign (such as injuries to workers, downtimes and compensation claims) or are they more likely to respond to the potential benefits (such as increased morale and a better image to customers)?
It is important to understand the management team and make the most appropriate decision on what tone to use in order to spark a positive reaction to your business case.
Organize the business case
How you present your business case can determine if management will be receptive to your proposal. Your case should be organized in a manner that addresses the concerns of management, starting from the most important factor: Return on Investment. Many management teams often prioritize ROI beginning with productivity, then direct cost savings, reducing financial risk, getting better at compliance and finally aligning with corporate values. You can prioritize your business case to emphasize those factors in that order so as to present a compelling case to management.
Involve all Relevant Stakeholders
Safety transcends across multiple departments and they should be brought on board during the preparation of the business case. Business cases for safety often face the challenge of stakeholders feeling that safety does not concern them. They also have a hard time visualizing the risks and benefits of a safety campaign.
When preparing a safety case, all stakeholders should be involved in the process.
For example, the human resource team can be affected by poor safety procedures that can harm the employees they represent. Finance can also be affected by downtime and additional costs related to poor standards of safety.
Awareness of Business Priorities
You should be aware of what the management team is prioritizing and try to use that to your advantage. For example, if the business is seeking to save on long-term costs, this would be a perfect opportunity to present how your safety campaign can save money down the road.
If the business is attempting to keep up with industry trends, you could present an argument about how competitors in the industry are implementing safety campaigns. And if the company is seeking an improved image among its customers, your business case could serve as a great opportunity for that to be achieved, based on its benefits.
Choose the Right time
Timing is everything. It would be unwise to present your business case after the budget for the fiscal year has already been finalized. You should correspond presenting your case at around the time when the planning cycle for the next fiscal year is in full swing. This makes the case for a safety initiative more compelling and feasible to implement, based on the timing.
The Process of Creating a Business Case for Safety
Now that you are aware of why a business case for safety is necessary, its benefits, and factors surrounding its successful preparation, this section will give you a step-by-step outline on how to create a business case for safety.
1. Identify the risk or exposure to be addressed by the Safety Program
It is important to be specific. Identify specific risks factors that the business is facing and quantify those risks in financial terms. Provide evidence for the problem using pictures, numbers and other interactive media, and use straightforward language that is easy to understand.
Emphasize why it is important to address the risk factor and what consequences can occur when the risk is neglected. The cost savings that can arise from adequately addressing the risk should also be outlined.
2. Calculate the Cost of the risk/exposure
Quantify the risk in financial terms and use numbers when possible. For example, you may have identified that the employees working in your warehouse are at a high risk of falling due to inferior standards of safety. This risk factor can be quantified by expressing the cost of employee injury as a percentage of payroll, lost productivity or higher insurance premiums paid. For example, a quantified assessment could present employee injury costs as representing 20% of the payroll, or a production loss of $5,000/day due to the time missed from work by injured employees.
Depending on the priorities of the management team, present the risk factors in terms of the most relevant part of the business. If customer service is at the forefront of their concern, you could express, for example, that 100 fewer customers will have their orders fulfilled in a day as a result of an employee falling and missing time from work.
3. Calculate the Anticipated Savings in the Reduction of the Risk
As part of the Cost Benefit Analysis that was previously discussed, the value of each benefit should be quantified and calculated. The potential benefits of increased employee productivity, higher quality products, and an improved customer image should be presented numerically.
For example, a $10,000 investment in safety equipment today can result in a saving of $2500 in lost productivity per year for the next 4 years due to employees’ not missing work as a result of the injury.
4. Carry out a Comparative Analysis
Benchmarking should be done where the safety initiatives of competitors are analyzed and their costs estimated. This should be compared to your program costs and areas of improvement should be identified.
5. Outline the Consequences of Non-compliance
The consequences of maintaining the status quo, or remaining non-compliant on required safety standards, should be clearly outlined. For example, non-compliance can be costly and lead to expensive payouts or even the business getting shut down for a period of time.
6. Present specific ideas for implementation of the program
Propose all the necessary steps that will need to be taken as well as an outline for its implementation.
7. Calculate the Program Implementation Costs
The next step is to calculate both the direct and indirect costs associated with the program. The direct costs include the money that will be incurred to implement the safety program, such as the purchase of safety equipment and implementing training programs. A comprehensive budget should be prepared that outlines these costs and how they will be incurred.
To sum it all up, maintaining high safety standards in the workplace is of utmost concern to any safety practitioner. In order for such standards to be met, a strong business case needs to be presented that will outline the risk factors, solutions, and benefits of the proposed safety program in a quantifiable manner. The business case should be prepared with all the stakeholders in mind and present a compelling case to the decision makers. The insights presented in this article will enable you to achieve exactly that.