05/05/2015

By Driving for Better Business, featured in Co-Pilot, Volvo


The actual costs associated with work related road crashes can be as much as 30 times the immediate costs, many organisations do not realise these hidden costs nor do they capture or measure them.

The first step in capturing the business benefits is to quantify your collision losses i.e. how much does a crash actually costs the employer. This means identifying all the costs and not just the immediate ones. This is known as the iceberg effect.

Many collisions involve third parties, therefore there are also third party costs and potential recoveries that should be considered, which can also have financial implications on a business and can stretch well beyond reported costs. These involve third party vehicles and personal damages, property damage, personal injury compensation, inconvenience, legal fees or fines. Other types of cost could be redelivery, no/late delivery penalties, customer service intervention, missed sales, damaged/lost stock, own property damage, investigation time, management and administration time and, last but not least, image, reputation and public relations considerations.

Two of the best documents on safety costs are by the UK Health and Safety Executive (HSE 1993 The cost of accidents) and the National Highway Traffic Safety Administration in the USA.

Managing road safety provides an opportunity to reduce an organisations costs in several ways:

• Reduced running costs such as fuel consumption and vehicle maintenance through better driving standards;
• Fewer working days lost due to injury;
• Reduced risk of work-related ill health;
• Reduced stress and improved morale/job satisfaction;
• Less need for investigation and paperwork;
• Less time lost to work rescheduling;
• Fewer vehicles off the road for repair;
• Fewer missed orders and business opportunities, reduced risk of losing the goodwill of customers;
• Less chance of key employees being banned from driving.

Once all costs are understood and quantified, they can be used to identify and focus on the high cost areas and issues, and to set standards and targets. Cost data is also helpful for targeting effort. A typical mixed car and van fleet, slow-speed collisions (such as hitting a parked car) may appear to be the most important claim type, accounting for a higher percentage of claims. However, collisions at speed (such as rear-end shunts) may account for a much higher proportion of costs, despite occurring less frequently.

This approach allows organisations to develop a long term sustained driver safety program, which can include, for example, driver coaching targeted at both defensive driving and slow speed manoeuvring, on the basis of risk. Such cost and claims analysis is a key element of successful driver safety programs.

Develop your cost model further and show how cost savings made through preventative strategies translate into the profit margin. In the table below if return on sales (ROS) is 5%, saving £50,000 on road safety costs would be the same as generating £1m in new turnover.

Or conversely you will need to generate £1m of turnover to cover £50k of losses through poor road safety management.

Nestlé showed this dramatically in its recent Prince Michael International Road Safety Awards submission by stating that that in 2004 in Europe it needed to sell 235 million KitKats to finance its motor fleet risks.

(Content from ETSC The business case for managing road risk at work – May 2014)


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