Issue link: http://read.dmtmag.com/i/141668
Liability the citations were based on exposures that are commonly associated with this industry. As for the severity of fines, machine guarding violations were the most costly ($14,000). In the past year, the inspection game has changed. Planned OSHA inspections are increasingly being replaced by "whistleblower" inspections in response to complaints and referrals. Although this year's OSHA budget virtually maintains the status quo, we can expect more inspectors to be assigned to whistleblower activities in the coming months. (More on OSHA's new whistleblower focus coming to Executive Forum Sept. 12, www.aednet.org/forum) Financial Impacts of Incidents and Injuries Both direct and indirect costs associated with work-related incidents, injuries and other types of losses have negative consequences. Risks include loss of manpower, property and equipment, failure to win contracts, increased liability, and even the possibility of becoming uninsurable, putting the entire operation at risk. Interestingly, while organizations recognize that incidents and injuries impact the bottom line, many can't explain exactly how and why. In the workplace, leadership seems to be perpetually perplexed about how to demonstrate the return on their investment associated with their safety and health programs. Is it possible to accurately quantify the reasons why safety and health programs contribute to stellar safety records? Absolutely not! Are good safety and health programs part of the reason that an organization can remain strong and competitive? Yes, absolutely! Yet, when organizations are making a list of "expendable" activities to cut from the budget, safety and health are often at the top. BLS statistics and OSHA data on the cost of injuries using a 20 percent profit margin show that an investment in health and safety is a wise one. Depending on the type of workers' compensation insurance coverage your company has, direct costs can vary. However, indirect costs are not insurable, and 100 percent of this cost is absorbed by the organization. What is really impactful is the amount of additional sales needed to recover from a $29,898 indirect cost. Who can deny that injuries have deleterious effects on profitability? How would your company generate these additional sales required to "make it whole"? Workers' Compensation Experience Modification Rating Workers' compensation experience mods, known in the industry as "ex-mods," drive the amount an organization pays for workers' compensation insurance premiums. It is important to understand how the ex-mod can positively or adversely affect insurance premiums. An experience modification is the multiplier applied to the premium of a qualifying insurance policy. The intent is to provide an incentive for loss prevention, which equates to the effectiveness of a company's risk management, safety and health programs. The ex-mod might not be a term that is familiar to some safety professionals, but it certainly is to operations managers, human resource professionals, chief financial officers and business owners. Although determining the ex-mod factor requires some relatively complex calculations, the final result and how it is used is pretty simple. Impacts vary. For instance, with a 1.25 ex-mod, a heavy equipment company can expect to pay $62,500 dollars more for their insurance coverage. However, organizations with a lower rating, such as .75, can expect to pay $62,500 less for insurance coverage. Organizations with low experience mods typically are more profitable than companies with higher ratings. When you look at world-class safety organizations, there is a direct connection between their safety performance and experience modification. The illustration below shows how the ex-mod influences overall profitability and long-term business success. Given that ex-mods are closely related to the performance of health and safety programs, the pressure on organizations to keep ratings at or below industry averages is considerable. In essence, a desire to improve the experience modification factor is a key reason why management supports safety and health programs. In addition, a strong safety record helps win business. The people you do business with also want to know how you do business. If your service personnel are out on lost time because of a work-related injury, delays in service and repairs are inevitable. In an optimal scenario, you want to assure your customers that your: n Employees are trained to work in a safe manner n Organizational culture supports a commitment to safety and health n Work practices comply with regulations n Team will be healthy and present to meet tight service (continued on page 71) July 2013 | Construction Equipment Distribution | www.cedmag.com | 59 58_Risk_Mgmt_Feature_KP.indd 59 6/27/13 2:30 PM