Far from just another cost, occupational health and safety is now considered “sexy” by investors, a research analyst will tell The Safety Conference in October.
“From an investors’ perspective, we actively consider OH&S performance in our investment decisions, as we believe it is a good measure of management quality in many high-risk industries,” says Dr Ian Woods.
A senior research analyst for AMP Capital Investors, Dr Woods says investors cannot afford to ignore the cost of workplace injury carried by Australian employers – an average 6 per cent of profit.
“High workers’ compensation and medical costs as a result of poor OH&S performance can reduce a company’s ability to compete. Investors should be aware of the financial risks OH&S issues carry for profit-making companies.”
Karen Wolfe, NSW president of the Safety Institute of Australia (SIA), which will present The Safety Conference on October 27, says the added interest in risk management aroused by the global financial crisis offers a turning point for occupational health and safety.
“Occupational health and safety is no longer an ugly duckling tangled in red tape, procedures and compliance costs, Ms Wolfe says.
“A good OHS strategy is now recognised as smart risk management of those most valuable and vulnerable assets: people and reputations.”
The SIA has asked Dr Woods to address The Safety Conference so occupational health and safety professionals can learn to ‘sing off the same page’ as investors.
Dr Woods signals three occupational health and safety costs of concern to investors – workers’ compensation premiums, indirect costs, and the costs of alleviating workplace incidents.
“The indirect and unbillable costs associated with workplace injuries are like an iceberg,” he says. “They represent a huge percentage of the total cost that’s impossible to assess until you run into trouble.
“The disruption to production caused by workplace injuries cost Australian businesses an estimated $490 million in 2000-01. The extra administration cost another $360 million. Incidents can also trigger loss of goodwill, strikes, recruitment issues and dozens of other immeasurable costs. The United Kingdom’s Health and Safety Executive indicated that the cost of uninsured losses is 10 times the business cost of insurance premiums paid for the same period.
“An injury with $1,000 in direct claims costs will also bring about $5,000 of indirect costs. Assuming a 5% profit margin, that equates to $100,000 of turnover. This simple return on investment (ROI) illustrates how valuable preventive measures are to financial bottom lines.
“Still, there is more to investing than just the economic case for improving OH&S performance. As well as the economic costs, inequality of benefits, costs and suffering are key issues. People have the right to return home from work safe and sound.”
Dr Woods will join the chair of Safe Work Australia, the general manager of WorkCover NSW, Comcare’s Matt Goldrick and Professor Ron McCallum of the University of Sydney to tackle the theme of “OHS – Singing off the Same Page” at The Safety Conference.
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