What is Cost-benefit analysis (CBA)?

  CBA is a systematic approach to estimating the strengths and weaknesses of business decisions. CBA method has two types of advantage compare to other methods. The first point is that prudent managers conduct a CBA as a measures of evaluating all the potential costs and revenues that may be generated if the project is completed. In other words, it includes all direct and indirect revenues and intangible benefits, such as increased production from improved employee safety and morale, or increased sales from customer goodwill. The second point is that the outcome of the analysis will determine whether the project is financially feasible or if another project should be pursued.   

  Nevertheless, CBA fails in some circumstances. For very large projects with a long-time horizon, it losses efficiency due to unexpected financial concerns such as inflation, interest rate variation, and financial crisis. In this case, a more appropriate method is reliable such as NPV (net present value) or IRR (internal rate of return).

How it is related to Work, Health and Safety?

  For such long time, business owners are zealless about conducting a safety norms or following safety rules. It is a common assumption that by implementing WHS is expensive and has negative impact on the organisation’s financial report. However, it is not true. The research has shown that by following safety norms can bring profit to any organisation, although it’s not in term of cash.

By conducting a CBA, managers can now see what the mechanism is behind. If an organisation invest fund into WHS program at the beginning, it actually benefit from lower incident rate, increased employee productivity, low cost regards compensations, clean-up fees and other temporary costs. By contrast, a company might gain some economic benefits at the set up stage by not funding WHS program, they would suffer from damage to buildings, equipment or vehicles; damage to product; cost of investigation legal costs; death; permanent disability; and much more.

  Having considered both implicit and explicit benefits from conduct a WHS program. It is recommended to implement a safety program as soon as business has been set up, it brings tremendous benefits such as saving costs, saving time, reducing material damage, improving production, lowering accident rates, improving job satisfaction and much more.

  Apart from this, research has shown that for every $1 invested in an effective workplace safety program, $4 to $6 may be saved as illness, injuries and fatalities decline. 

   So what are you waiting for, invest in WHS program now to be a safe and beneficial organisation.

Reference:
Cost benefit analysis of safety aspects – a case study. 2017. Cost benefit analysis of safety aspects – a case study. [ONLINE] Available at: https://www.slideshare.net/dineshsivarammurugan/cost-benefit-analysis-of-safety-aspects-a-case-study. [Accessed 29 March 2017].

Investopedia. 2017. UK Home | Investopedia. [ONLINE] Available at: http://www.investopedia.com/. [Accessed 29 March 2017].