Andrej Škulj, vodja SVZD Uspešni delajo varno in zdravo, Brdo pri Kranju, 7.11.2008 The Cost and Benefit Analysis of providing safety and health at work.

Andrej Škulj, vodja SVZD

Uspešni delajo varno in zdravo, Brdo pri Kranju, 7.11.2008

The Cost and Benefit Analysis of providing safety and health at work in the

Krka company, d. d., Novo mesto

Organization scheme of the Krka group

Western Europe and overseas markets

Central Europe

South-Eastern Europe

Eastern Europe

Employees

6777

employees

Number of people employed in the company and Krka group on 31 December

companygroup

Development strategy of Krka group

Development strategy

MISSION

To live a healthy life

VISION

To strengthen the position as one of major pharmaceutical generic companies on the European market

VALUES

Agility and flexibility

Partnership and trust

Creativity and efficiency

Key strategic goals by 2012

• To achieve more than 10-percent of average annual growth rate of the sale.

• To keep at least 40-percent share of new products in the total sale.• To strengthen competitive advantage of product portfolio through a

vertical integration and placing selected products on selected key markets as a first generic drug.

• To improve business indicators.• To use efficiently the means and improve cost effectiveness of the

products.• To improve innovation level.• To preserve independence.

Integrated management system

Permanent improvements

Integrated management system

INTEGRATED QUALITY SYSTEM

RESPONSIBLE BEHAVIOUR

SAFETY HEALTH ENVIRONMENT

INFORMATION MANAGEMENT

QUALITY

COMMON GOAL

Risk management

Risk area Risk description Management method Exposure

Intellectual property Violation of rights from the title of intellectual property of third party

Consistent watch over intellectual property of other entities, monitoring patents, design of reservation

Moderate

Regulatory procedures Changing legislation or its interpretation Consultation with regulatory authorities in the process of developing the product

Moderate

Development process The risk that the developed product will not have appropriate characteristics or will be inappropriate from the view of patent situation

Vertically integrated model of business Moderate

Reliability of suppliers and contracting partners

Possibility of irregular and inappropriate supplies or non competitive prices

To analyse the risk of individual suppliers and accepting suitable measures in the case of inappropriate business operation with the supplier

Moderate

Availability of production capabilities

Unplanned stops, disturbances or faults in production

Regular preventive maintenance and measures Small

Environment protection Danger due to outstanding events with adverse effect on environment

Preventive rehearsals and prescribed internal procedures in the case of outstanding event

Small

Information sources Risk of disturbances in business processes due to disturbances in the field of information sources

Independent security checks and measures, foreseen in advance, for elimination of disturbances

Moderate

employees Risk of losing key employees and lack of professional skilled workers

Systematic work with key employees, awards, development of human resources, constant training, measuring organizational culture and atmosphere

Moderate

Safety and health at work Accidents or injuries at work Verification of technological procedures, computer.-assisted system of risk evaluation

Moderate

Protection of property Risk of alienation of property Plan of protection moderate

Sales of the group and Krka company

781 mio €

100 %

Sales of the company

Annual growth rates of the company sale

Sales of the group

Annual growth rates of the group sale

Sale by regions

Slovenia

SE Europe

Eastern Europe

Central Europe

Western Europe and overseas markets

SHARES OF REGIONS IN THE KRKA GROUP SALES IN 2007

Investments

14,5 %

for investments

INVESTMENTS OF THE KRKA GROUP IN THE PERIOD 2003-2007

investmentsInvestment shares in the sale

Investments – common characteristics

• Most modern technical solutions and guidelines of good production practice are considered

• The highest European standards for safety and protection of people and environment are considered

Integrated safety

Costs of integrated safety

- 781 mio € sales 2007 = 100 %- 113 mio € investments 2007 = 14.5 % of sale

- V.: What is the SHW share in investments?- O.: ~20%

- This is 3% of sale or 23.43 mio €

Costs (PPE, HC, training, inspection of WE, maintenance …)

• Personal protection equipment 0.878 mio € or 0.11 %• SHW Key goals and programmes 0.31 0.040 • Health care 0.26 0.034 • Recreation of employed 0.18 0.024• Training for SHW 0.10 0.013• VSAPZ 0.11 0.013• Risk evaluation 0.04 0.005• Inspection of working equipment 0.04 0.005• Other 0.93 0.120 Total 2.538 mio € 0.324 %

Costs of safety and health at work

• Integrated safety3% from sale or 23.43 mio €

• Costs (PPE, HC, training, inspections of WE, maintenance…) 0.3 % from sale or 2.5 mio €

TOTAL 3.3% from sale or 25.93 mio €

Costs of safety and health at work

STROŠKI VZD V % OD PRIHODKOV PRODAJEVZD PRI NOVIH PROJEKTIH, NALOŽBAH,REKONTRUKCIJAH

OSEBNA VAROVALNA OPREMA

ZDRAVSTVENO VARSTVO

PREVENTIVNA REKREACIJA (Tedenska,PZD 10/ 2-5 let)

USPOSABLJANJE (interno + zunanje)

PREVENTIVNI PREGLEDI DELOVNEOPREME

VSAPZ

OCENE TVEGANJA

OSTALO (P,..)

OSEBNA VAROVALNA OPREMA

ZDRAVSTVENO VARSTVO

PREVENTIVNA REKREACIJA (Tedenska,PZD 10/ 2-5 let)

USPOSABLJANJE (interno + zunanje)

PREVENTIVNI PREGLEDI DELOVNEOPREME

VSAPZ

OCENE TVEGANJA

OSTALO (P,..)

SHW COSTS IN % FROM THE SALES INCOME

SHW in new projects, investments, reconstructions

Personal protection equipment

Health care

Preventive recreation (weekly)

Training

Preventive inspection of working equipment

Risk evaluation

other

Personal protection equipment

Health care

Preventive recreation (weekly)

Training

Preventive inspection of working equipment

Risk evaluation

other

Important

• Costs related directly to the employees are 10-times lower than the costs of integrated – technical safety

• SHW costs depend on investments in the current year

• Every year several million € go to investments, but their share in the sale is every year smaller

• CONCLUSION: share of SHW costs is according to the sale decreasing from year to year

CONCLUSION

• Although the situation of safety and health at work is improving from year to year, the share of SHW costs is according to the sales decreasing yearly.

CONDITION: annual two-cipher sale growth

Benefits from providing SHW

• Less accidents• Less severe accidents• Smaller sick leave

Število nezgod v dvanajstih letih

0

20

40

60

80

100

120

140

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

leto

štev

ilo n

esre

č

SKUPNO ŠTEVILONESREČ

NA DM

NA POTIBolniški stalež zaradi nezgod v zadnjih desetih letih

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

leto

bol.

stalež

Skupnibolniškistaležna DM

na POTI

Number of accidents in 12 years

Sick leave because of accidents in last 10 years

Benefits from providing SHW

• Lower insurance premiums (investment in sprinkler returns in 10 years)

• Less incidents• Greater reliability of process operation (1 hour of

transport system standstill= 20.000 €)

Example: 5 hours of standstill represents the same expense as the expense for correct and safe work training

Benefits from providing SHW – soft part

• Good name of a company• Candidates for job are more skilled• Greater satisfaction and motivation for work

(satisfaction with working conditions in 2007 = 4.1 on the chart from 1 to 5)

• Smaller fluctuation• Less faults – experienced and skilled staff• Satisfied customers• Increase of market share

Importance of regulated SHW for a company

COMPETITIVE ADVANTAGE