Risk Management or Performance Improvement ?

Risk Management or Performance Improvement ?

Sonny BlackwellVice President

The least expensive claim… is the one that never happens

Safety 1st

Qua

lity

Productivity

Safety

Approaches

Compliance

Reactive

Risk-Based

Performance

What are the minimum requirements?OSHA? DHS? DOE? DOT?

Keep “that “ from happening again

Achieving “tolerable” riskVaries with individuals

Allocating finite resources to achieve the mission Public Sector : Cost / Benefit (Total Cost of Risk) Private sector: Return on Investment (ROI)

Hindsight

Foreseeable

“Safety programs” under perform because

• Perceived as a cost• Perceived as corporate overhead• Based in tradition • Quick fixes• No line accountability• Focus on “things”• Inconsistent implementation• Punitive orientation• “Activity” based

• Don’t communicate in business terms.

Traditional Metrics

• Inspections• Accidents• Incident / Accident Rates• Investigations• Meetings• Training sessions

Do these activities really affect the cost of risk?

What is the point of diminishing return?

Are there other interventions that would produce more significant business results?

If you continue to do what you’ve always done, You’ll continue to get the same results !

Cost of Risk Sales required to pay for loss costs

Profit Margin

$100,000

$10,000

$1,000

10,000,000 3,333,000 2,000,000

1,000,000 333,000 200,000

100,000 33,000 20,000 1% 3% 5%

Cos

t of R

isk

Lean = A systematic approach to identifying and eliminating waste

1. Defects

2. Overproduction

3. Waiting

4. Non-value added processing

5. Transportation

6. Inventory

7. Motion

8. Employees who are

underutilized

Value added5%

Other95%

9. Accident costs

Performance Approach

• Integrated with and supports operations system – Line responsibility– Not a separate function or a staff responsibility

• Culture• Improve bottom line and ROI to result

in a competitive advantage• Increase options for risk finance

Emerging trends

• More proactive planning 50%

• More involved with strategic issues 47%

• Improved ability to measure RM ROI 36%

• Demonstrated value of enterprise RM 29%

Source: Preliminary findings from the risk managers surveyThe National Alliance Research Academy

Errors Causes Countermeasures

1. Rushing

2. Frustration

3. Fatigue

4. Complacency

5. Impairment

6. Ignorance

1. Eyes not on task

2. Mind not on task

3. In-the-line of fire

4. Balance, traction & grip

Accident Causation

1. Eliminate the hazard2. Substitute a less

hazardous substance or process

3. Engineering controls

4. Administrative controls

5. Personal protective equipment

6. Training

1. What’s the problem? – Who is generating claims?

– Where?

– When?

– What?

– Why?

2. What’s the most cost-effective countermeasure?

3. How do we implement it?

4. Is the countermeasure producing results?

Background Investigations

Drug testing

ADA

Inventory

Ergonomics

Boiler & MachineryFire Protection

SecurityNew EE orientation

Supervisor development

DOTProducts liability

DiscriminationHarassment

Crisis ManagementReporting Return-to-Work

1st Aid Case Management

Fitness forDutyOSHA/Safety

Investigation

MVR’sSelection & Placement

Training

PerformanceManagement

Quality Control

Design

Human Resources

Environment

Recruiting

Onboarding

Engineering

Business continuity planning

Organization

RiskManagement

Wellness

Countermeasures

6 Levels of Evaluation

• 6. Intangibles Not quantifiable

• 5. ROI Financial Performance

• 4. Results Costs & Benefits

• 3. Behavior Application

• 2. Learning Testing

• 1. Reaction Feedback

0. Activities IBNR

Individual

Organization

Level 4 Risk Management Metrics

• Experience Modifier

• Total Cost of Risk – Cost of insurance + indirect costs

• Cost of risk per employee

• Cost of risk - % of payroll

• Cost of risk per unit of production

Case studyROI of an ergonomics intervention

1. Problem analysis

2. Management buy-in

3. Ergonomic hazard recognition

4. Facilitated problem solving

5. Forecasting

6. Implementation

7. Isolation

8. Evaluation

9. Communication

National Furniture Pareto Chart

OSHA Lost or Restricted Workdays by Job 2006 - YTD 2009

458

155

97 95 94

68 59 50 4124

10

15933.8%

45.5%

56.9%

64.0%71.0%

78.0%83.0%

87.3%91.0%

94.0% 95.8% 96.5%

0

50

100

150

200

250

300

350

400

450

500

upholster frame bldr sewer blow fill saw op. frameroller

loader driver helper springer roller pillowsewer

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

Lost + restricted days Cumulative percentage

National Furniture Pareto Chart

OSHA Lost or Restricted Workdays by Job 2006 - YTD 2009

458

155

97 95 94

68 59 50 4124

10

15933.8%

45.5%

56.9%

64.0%71.0%

78.0%83.0%

87.3%91.0%

94.0% 95.8% 96.5%

0

50

100

150

200

250

300

350

400

450

500

upholster frame bldr sewer blow fill saw op. frameroller

loader driver helper springer roller pillowsewer

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

Lost + restricted days Cumulative percentage

National FurniturePieces Produces / WC Claim Count

January 2008 - June 2011Mean production = 60,600/month

0.00

10,000.00

20,000.00

30,000.00

40,000.00

50,000.00

60,000.00

70,000.00

80,000.00

90,000.00

100,000.00

Jan

-08

Fe

b-0

8

Ma

r-0

8

Ap

r-0

8

Ma

y-0

8

Jun

-08

Jul-

08

Au

g-0

8

Se

p-0

8

Oct

-08

No

v-0

8

De

c-0

8

Jan

-09

Fe

b-0

9

Ma

r-0

9

Ap

r-0

9

Ma

y-0

9

Jun

-09

Jul-

09

Au

g-0

9

Se

p-0

9

Oct

-09

No

v-0

9

De

c-0

9

Jan

-10

Fe

b-1

0

Ma

r-1

0

Ap

r-1

0

Ma

y-1

0

Jun

-10

Jul-

10

Au

g-1

0

Se

p-1

0

Oct

-10

No

v-1

0

De

c-1

0

Jan

-11

Fe

b-1

1

Ma

r-1

1

Ap

r-1

1

Ma

y-1

1

Jun

-11

0

5

10

15

20

25

30

35

Pcs produced WC Claim Count

National FurniturePieces Produces / WC Claim Count

January 2008 - June 2011Mean production = 60,600/month

0.00

10,000.00

20,000.00

30,000.00

40,000.00

50,000.00

60,000.00

70,000.00

80,000.00

90,000.00

100,000.00

Jan

-08

Fe

b-0

8

Ma

r-0

8

Ap

r-0

8

Ma

y-0

8

Jun

-08

Jul-

08

Au

g-0

8

Se

p-0

8

Oct

-08

No

v-0

8

De

c-0

8

Jan

-09

Fe

b-0

9

Ma

r-0

9

Ap

r-0

9

Ma

y-0

9

Jun

-09

Jul-

09

Au

g-0

9

Se

p-0

9

Oct

-09

No

v-0

9

De

c-0

9

Jan

-10

Fe

b-1

0

Ma

r-1

0

Ap

r-1

0

Ma

y-1

0

Jun

-10

Jul-

10

Au

g-1

0

Se

p-1

0

Oct

-10

No

v-1

0

De

c-1

0

Jan

-11

Fe

b-1

1

Ma

r-1

1

Ap

r-1

1

Ma

y-1

1

Jun

-11

0

5

10

15

20

25

30

35

Pcs produced WC Claim Count

National Furniture Company Comparison of Total Incurred Workers Compensation Claims

$672,726$621,709

$694,442

$360,559$251,351Actual

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

2006 2007 2008 2009 2010

Expected losses $662,959

$411,608

Program Costs

Engineering modifications $ 58,438Consulting, training and evaluation expenses $ 16,125Total costs $ 74,563

ROI Calculation

Expected annual claim cost w/o intervention $662,959Actual claim cost -$251,351First year post-intervention improvements $411,608Total costs - $74,563 Net benefit =$337,045

ROI = $337,045 / $74,563 X 100 = 452%net benefit total costs

ROI Forecasting

Estimated total costs $250,000 $551,470-$250,000 ($301,470)$250,000

x 100 = 120.58%

Estimated Confidence Adjusted Participant Value Basis Level Value

1 $80,000 lost time acidents 90% $72,0002 $91,200 OSHA recordables 80% $72,9603 $55,000 Accident reduction 70% $38,5004 $10,000 Doctor visits 60% $6,0005 $150,000 Injury costs 95% $142,5006 Millions Total accident costs 100%7 $74,800 Workers Comp 70% $52,3608 $7,500 OSHA fine reduction 90% $6,7509 $0 not present $010 $50,000 Accident reduction 50% $25,00011 $36,000 Workers Comp 90% $32,40012 $150,000 lost time acidents 60% $90,00013 Unlimited Accident reduction14 $65,000 Injury costs 20% $13,000

$769,500 $551,470

Documented high-ROI risk management opportunities

• Recruiting, selection & placement

• New employee orientation

• Line supervisor development

• Leadership development

• Driver improvement

• Ergonomics

• Wellness programs

• First aid training

• Training for high severity potential operations.

Cost

ActivityValue Performance

[email protected] - 228-697-1200

Sonny BlackwellVice President