Using total process costing to measure self-insurance safety costs

摘要

Safety is one of the strategic cost drivers that affect the long term cost competitiveness of a firm, but the information available from conventional cost and information systems is insufficient for managing an effective safety strategy. This paper proposes a model designed to capture and display the cost of all the activities that a firm incurs as a result of a safety failure, across units and in time. The list of activities, drawn from investigation reports of actual injuries and vetted by plant managers, uses mind-map format for displays and Microsoft Excel for data handling. In several parallel tests on real life events, the model identified safety costs much larger than conventionally recognized. The difference represents large preventable self-insurance costs. Generalizing the observations requires more testing, but access to data is restricted by secrecy reasons and doubt. The scale of safety self-insurance cost should help persuade doubtful management to adopt safety as a strategic cost driver.