For item 1, write at least 500 words. For item 2, your comment/reply to a classmate will be separate, write at least 50 words total to one or more classmates (remember to be thoughtful, positive, and constructive). Note: Do NOT copy and paste. It is considered plagiarism. Use your own words. Cite your sources.1. Provide a detailed analysis of Chapter 7 pt.2 (PPT file) included in Week 12 Lecture Materials. Why is it important for safety professionals to learn business language and justify safety improvements in financial terms. 2. Peer review. Comment to at least one classmate’s post. With professional courtesy, provide additional analysis, constructive criticism, and additional facts and solutions. I want to see a paragraph of 50 words or more. The attached PPT file is a selected section from the Risk Treatment chapter – Risk Management Tools for Safety Professionals manual to be published by ASSP in 2018. Please do not copy and distribute. It is provided to you at no cost.
risk_treatment_part_2.pptx

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Risk Treatment Part 2
Developed by Dr. Georgi Popov, CSP, QEP, SMS, ARM, CMC
Financial Analysis
• In order to address long term investments and SH&E interventions, a
more complex financial analysis is needed. Such analysis should
include Cash Flow, Net Present Value (NPV), Internal Rate of Return
(IRR) and Payback Period (PBP).
• Financial values in future state may be estimated.
• OSH professionals have to be careful not to automatically assume that
risk reduction percentage (RR%) means the same monetary amount
reduction in future state.
Financial Analysis process
Excel tool Demo
CBA & ROI
Compare three (3)
different control
options –
sensitivity analysis
ROI – Option 1 Annual Loss $ % Risk reduction Cost of Control $
170000
0.3
250000
-95000
ROI #1
Warning or Admin
ROI=
Enter % RR as a decimal.
E.g. 50% = 0.5
Annual Loss*%Risk Reduction-Cost of Control
ROI – Option 2 Annual Loss $ % Risk reduction Cost of Control $
100000
0.1
250000
-75000
ROI #2
PPE
ROI – Option 3 Annual Loss $ % Risk reduction Cost of Control $
288000
0.7
544000
92800
ROI #3
Multiple Eng.
Non-financial benefits are…
• Positive business impacts
What is Nonthat cannot be directly or
financial benefit? easily quantified
The greatest danger is
the ’concrete’ and
’measurable’ driving the
significant out of the
analysis.
• Also known as soft benefits
~Eric K Clemons
http://www.investopedia.com/articles/03/010603.asp
http://opim.wharton.upenn.edu/~clemons/bio.html
Why include NFB?
• Sustainability reports have always included direct
corporate and operational information.
• New methodologies are looking beyond a corporation’s
fence line
• Now reports include: Supply chain performance, product
life-cycle metrics, H&S, pollution emissions, etc.
https://www.globalreporting.org/Pages/default.aspx
http://www.centershs.org/ourwork.php
Why Non-financial benefits?
• Evaluation of non-financial benefits provides the missing link
for non-profitable projects that add to a business’s
sustainability
• Even though these benefits are difficult to quantify and
explain, they remain very important to EHS professionals
Non-financial benefits
Are related to…
•
•
•
•
•
•
•
•
•
•
•
•
Corporate Image
Legal Issues
Ethical Issues
Increase
Employee morale/turnover
market
share
Employee performance
Confidence in the H&S program
Company reputation
Support
Supplier relations
product
Overall Labor Effectiveness stewardship
Innovation
Community relations
Environment performance
Business
sustainability
Excellence
in EHS
Business
Objectives
HR: Retain
talented
employees
Growth:
increase
profits
Example of NFB
Corporate Image
• “It takes 20 years to build a reputation and five minutes to ruin it. If you think
about that, you’ll do things differently.“ – Warren Buffet
Source: https://www.forbes.com/sites/jamesberman/2014/04/20/the-three-essential-warren-buffett-quotes-to-live-by/#2110a85e6543
Example of NFB
Corporate Image
Wal-Mart announced that it would
be terminating its contract with a
Canadian-based blue jeans
supplier Fame Jeans a few hours
after documents surfaced
showing the company had at one
point ordered pants from a factory
inside Rana Plaza. The eightstory building in the Bangladesh
capital collapsed on 24 April
2013, killing more than 1,100
garment workers.
Source: http://abcnews.go.com/Blotter/wal-mart-fires-supplier-bangladeshrevelation/story?id=19188673
Example of NFB – Corporate Image
The building’s collapse also
exposed defects in the corporate
social-responsibility machinery
of Loblaw, Canada’s largest
grocer. One of the several
factories inside had supplied a
“small number” of its Joe Fresh
apparel items, the company
confirmed.
Loblaw has established considerable corporate
social-responsibility (CSR) machinery addressing
a wide variety of environmental, labour and social
issues. But it proved wholly insufficient to protect
its brand from this disaster
Source: http://www.canadianbusiness.com/global-report/global-reportloblaw-and-the-uncomfortable-truth-about-bangladesh/
Importance of NFB
Ethical Sourcing – or the Low Price?
September 2012, a fire
erupted at an apparel factory
complex in Karachi,
Pakistan, killing more than
300 workers there. Many of
them died because exit doors
from the shop floor were not
available, or were padlocked
and windows barred,
blocking escape routes.
The story grew even more tragic when information
came to light that in August, that factory complex had
received the prestigious SA8000 certification from
inspectors working for Social Accountability
International. To receive that certification, facilities
must meet international standards in nine areas,
including health and safety, child labor and minimum
wages.
Source: http://www.scdigest.com/ontarget/13-01-09-1.php?cid=6598
Importance of NFB
Employee morale/turnover
• One Reason Wal-Mart Is Raising Pay: Turnover
• “Stemming turnover, in particular, can save companies a lot of money.
Turnover is a special scourge of retail and service companies where
wages are low and hourly workers are often viewed as disposable and
interchangeable. Turnover in retail averaged around 66% for part-time
hourly sales associates in 2014”
• “CEO Doug McMillon explained how the company will measure whether
its $1 billion investment in employee wages was worth it.”
http://thinkprogress.org/economy/2015/02/19/3624818/walmart-minimum-wage-sales/
Use non-financial benefits when…
• You need to “sell” the EHS business case
• You want to emphasize drivers of value such as…
•
•
•
•
•
•
Corporate Image – Reputation
Ethical and Legal Concerns
Customer and employee satisfaction
Innovation
Business Sustainability
Lower attrition rates (Turnover Rate)
• Traditional financially oriented benefits are no longer the
only deciding factor
• You want to support a financial analysis and make a
stronger business case
Source: http://www.cogniview.com/blog/what-is-your-eco-score/
NFB Challenges
• A clear understanding of corporate objectives and how managers
value their importance is needed prior to crafting effective
arguments on the importance and weight of NFBs
• NFBs are measured in many ways and there is no single
common evaluation system
• There is generally a lack of common statistical methods
application
I wish it was
that easy!!!
Business Objectives
Paired Comparison
5. Innovative quality products
6. Increase market share
TOTAL
1. Business sustainability
4. Financial success
(Paired comparison method*)
3. Retain talented employees
Business Value
Prioritization
2. Excellence in SH&E
1. Business sustainability
BioFuel Pr oj ect
5
5
3
5
5
23
5
1
5
3
15
1
5
3
11
5
5
23
1
5
13
2. Excellence in SH&E
1
3. Retain talented employees
1
1
4. Financial success
3
5
5
5. Innovative quality products
6. Increase market share
1
1
1
1
1
3
3
1
X
5
NFB V1
BioFuel Pr oj ect
Non-Financial SH&E Benefits
SH&E base case
QAP BC PPE
Business Objective
1. Business sustainability
2. Excellence in SH&E
3. Retain talented employees
4. Financial success
5. Innovative quality products
6. Increase market share
Weight
23
15
11
23
5
13
SH&E environment with new control
Dry PC -Eliminate Solvents
Business Objective
1. Business sustainability
2. Excellence in SH&E
3. Retain talented employees
4. Financial success
5. Innovative quality products
6. Increase market share
Weight
23
15
11
23
5
13
Main Menu
Benefit 1
Benefit 2
Benefit 3
Benefit 4
Benefit 5
Corporate image
Legal Issues
Ethical Issues
Risk Reduction
TBD
Score
1
1
1
3
1
1
Total:
Wt Score
23
15
11
69
5
13
136
Benefit 1
Corporate image
Score
4
4
2
2
4
3
Total:
Wt Score
92
60
22
46
20
39
279
Score
0
0
1
2
2
2
Total:
Wt Score
0
0
11
46
10
26
93
Benefit 2
Legal Issues
Score
3
3
2
3
2
3
Total:
Wt Score
69
45
22
69
10
39
254
Score
2
1
0
2
2
2
Total:
Wt Score
46
15
0
46
10
26
143
Benefit 3
Ethical Issues
Score
3
3
4
1
1
4
Total:
Wt Score
69
45
44
23
5
52
238
Score
1
1
0
1
0
1
Total:
Wt Score
23
15
0
23
0
13
74
Benefit 4
Score
Total:
Benefit 5
Risk Reduction
Score
4
4
3
4
3
3
Total:
Wt Score
92
60
33
92
15
39
331
Wt Score
0
0
0
0
0
0
0
6. Increase market share
Total Score
5. Innovative quality
products
4. Financial success
92
45
22
184
25
78
3. Retain talented
employees
BO Score
2. Excellence in SH&E
1. Business sustainability
0
Total Score
50
100
150
200
Chart above shows project impact on business objectives.
TBD
Score
Total:
Wt Score
0
0
0
0
0
0
0
322
210
121
230
50
169
6
5
4
NFB CS
NFB FS
3
2
NFB CS
NFB FS
Difference
%Difference
%Improvement
48.75%
51.25%
136
279
143
0.49
0.51
36.61%
63.39%
93
254
161
0.37
0.63
60.08%
39.92%
143
238
95
$0.60
$0.40
22.36%
77.64%
74
331
257
0.22
0.78
1
0
100
200
300
400
Chart above shows project impact on benefits.
500
NFB V2
Workshop #6
BioFuel Project
Contribution to Meeting Business Objectives
Project Name:
Date:
Prepared by:
Benefits
Risk Reduction
Corporate Image
Employee Performance
S&H Program Confidence
Describe how the intervention is contributing to the Non-Financial Benefits (NFB)
Selected Non-Financial Benefit (NFB)
Risk Reduction
Business
Objective #
1
2
3
4
5
6
Business Objective
1. Business sustainability
2. Excellence in SH&E
3. Retain talented employees
4. Financial success
5. Innovative quality products
6. Increase market share
Number of NFB
Contributing to
Business Objectives
0
0
0
0
0
0
Number of Business Objectives Impacted by each NFB
Corporate Image
Employee
Performance
S&H Program
Confidence
Enter “X” if the Non-Financial Benefit contributes to the Business
Objective
0
0
0
0

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