Citation

Veltri A. J. Saf. Res. 1990; 21(2): 67-73.

Copyright

(Copyright © 1990, U.S. National Safety Council, Publisher Elsevier Publishing)

DOI

unavailable

PMID

unavailable

Abstract

Organizations are becoming increasingly aware of the impact of the direct costs of accidents on financial performance. The current annual cost of accidents incurred by industrial enterprises is more than $44.5 billion (National Safety Council, 1989). Increasingly, organizations are discovering that the degree of operating leverage (i.e. the ratio of percentage change in operating income to the percentage change in operating costs and/or sales or units sold) is adversely affected. Reducing the cost of accidents will lower the degree of operating leverage.I describe here an accident cost impact model that a variety of enterprises can use to disclose the direct costs of accidents and the economic impact on cost-volume-profit performance standards and profitability potential. The indirect costs of accidents are not calculated into this model formula, chiefly because no suitable model for verifying them with any reasonable accuracy has been developed. A pilot study to verify the efficiency of the direct cost accident model was performed on cost-volume-profit data supplied by a self-insured marine operation on the west coast.Every effort has been made to keep this accident cost impact model compatible with the loss-report accounting systems in use in today's organizations. The model is designed to be simple to understand and implement, to provide timely feedback for improved analysis and decision-making, and to cost little to operate.