Making a Business Case for Safety

Safety managers might run into difficulty if they go to capital expenditures with a plan for "risk avoidance." Make that a "productivity" plan instead, and the dollars will come flowing in. But what those cost managers might not realize is that there's a direct link between safety and total cost of risk, according to Cal Beyer, vice president and head of manufacturing for Zurich North America Commercial. Safety insurance and risk management can provide a sustainable competitive advantage for manufacturing companies. Within just a few minutes, asking just a few questions, Beyer said, "I can compel a CFO that we should spend time talking with his safety team."

Beyer is one of seven industry heads for Zurich, which provides commercial business insurance and risk management solutions. As the keynote speaker Tuesday morning at Rockwell Automation's Safety Automation Forum in Philadelphia, Beyer noted that his vertical industry—manufacturing—is the most dynamic and the most complex.

It's also inherently hazardous. Though manufacturing has made considerable progress toward safer operations—on a global basis, the frequency rate of injuries has been steadily declining for years—the inherent dangers remain very real. In 2011, there were 324 fatalities in the United States alone.

"We have to make this a safe industry," Beyer said. "There are many challenges. Many are human-based. The opportunity for automation to make an impact is enormous."

Risk 'Leaders' Needed

Beyer's job is to find which customers fit Zurich's profile for risk and how the insurance company should price them accordingly. "What I look for are companies that are committed to building a sustainable competitive advantage," he said. "There are many risk managers, but not enough risk leaders. There are very few individuals telling organizations how to embrace risk; how to leverage risk to build competitive advantage."

To evaluate whether safety is a competitive advantage for your company, Beyer points to a few key indicators:

• How does your company measure safety performance? "Is it the absence of injuries or reduction of risk?" Beyer asks. "Some people think they're safe because they haven't had accidents. Nothing could be further from the truth. Are you practicing risk management or luck management?"
• Are you integrating safety into productivity, quality, risk and sustainability initiatives?
• How do you know if safety is ingrained in the hearts and minds of your employees, and if it is embedded in your culture?

Zurich teamed up recently with Rockwell Automation for a study of supply chains. In an analysis of Zurich's supply chain loss event database of more than 2500 supply chain disruptions from the past 12 years, industrial accidents were the leading source. "The opportunity to leverage safety and industrial automation to make an impact on our industry is significant," Beyer said.

Zurich also reviewed 17,000 workers' compensation claims over a five-year period, and found that the top five causes accounted for 85% of the frequency and 89% of the severity. Top among those claims were sprains and strains. Beyer suggested evaluating material handling in production, looking at human-factors engineering along with factory automation.

Safety Culture Needed

Making number five on the list was "foreign objects in eyes," an easily preventable injury that Beyer served up as a clear indication that more needs to be done. "We have a long way to go. It's the easiest to prevent; it's the easiest to control," he said. "It shows me that we have not driven that culture for safety deep enough into companies."

Safety should be a cultural imperative, Beyer said, but there's typically a safety performance gap between what is expected and what is accepted by the company's leadership, supervisors and employees. "It percolates up and it permeates down," he says. "If we don't have a method for detecting and changing those at-risk behaviors, we're prone or vulnerable to safety issues."

Every 15 seconds somewhere in the world, an employee dies, and 160 others sustain a disabling injury. In the hour it took to write this article, about 240 more workers lost their lives. But if that's not compelling enough to make safety improvements, consider the risk to brand image and profitability.

A business case for change involves aligning a safety focus with productivity and profitability results. Manufacturers should shift to leading (as opposed to lagging) indicators to focus on prevention-based activities. Consider the total cost of accidents and total cost of risk. "An area still emerging despite being talked about in my world for 25 years is that total cost of risk," Beyer said. "It's a fascinating area, and it's a way for you to demonstrate the ROI impact that safety has in your organizations."