The consequence of getting it wrong can potentially be crippling for any business and when one considers the penalty scale in the new legislation, it brings tears to the eyes.

When the HSE Act first came into being in 1992 many business took the option to take out an insurance policy to cover the risk of doing nothing. The legislators immediately saw the anomaly and amended the Act so that a business could not take out insurance to protect them against H&S incidents and accidents. This is still embodied in the new 2015 legislation.As a consequence and to counter this, the insurance industry developed business policies that permitted a business to purchase insurance cover for,   1. Reparation cost that was paid to the victim’s family and,   2. Statutory liability cover to pay for any legal costsAlthough this is an acceptable commercial option for any business has it not watered down the responsibility of the business operators to take Health and Safety seriously?Apart from ACC protection, is this another reasons why Health and safety in NZ has not been taken seriously and now resulted in the situation of now having new laws being introduced and implemented?

For example,Following a private prosecution launched by the CTU, a Whakatane-based forestry - company, was prosecuted and fined by Judge Robert Wolff in the Tauranga District Court a total of $100,000 for the death of an employee when working for the company.The company was sentenced to pay $75,000 in reparation to the employee’s family, along with a $25,000 fine,Sources: Stuff and NZ Herald News

The fine only represented 25% of the total cost, does this then mean that the victim’s life was only worth $25 000?If this is the case, what determent is there to improve the health and safety performance of a business when insurance cover comes to the rescue of the business to pay for the reparation cost?I have been following many of the prosecutions over the past 5 years and a trend has been to take this approach, less cost to the business and higher reparation cost. It’s my opinion that to start to make headway with safety in NZ, this trend has to be reversed. If this does happen I am sure there will be businesses that go to the wall, but what’s the value of a life or an employee spending the rest of their life in a wheelchair.What’s the true and final cost?Is the cost of the fine the final cost to the business?   The answer is no.When you consider all the peripheral or hidden costs, then the true cost really hits home. If you are a business owner, a partner, a shareholder, the following principles may well provide you with a very good reason to treat health and safety as one of the most important driving wheels of your business.

NoteThe following principles have been around for the past 35 years and are even more relevant today as business is tough and margins are low and decreasing.

The 5 to 1 principleThe 5 represents an additional $5 00 cost for every $1 00 of the prosecution cost. These are what is known as the peripheral costs that you have wasted in

• Time.
• Loss of production
• Repairs
• Meetings
• Re employment and training
• Travel and a myriad of other costs associated with the issue.

This does not take into account all those sleepless nights or humiliation and bad press to the business.

Consider the $25 000 cost of the prosecution cost from the sample above. If this principle is applied, the cost then becomes far greater, $25 00 x 5 = $125 000 the true cost to the business.This is pure financial leakage to the business and also applies to any other waste, scrap, rework, and loss of clients, damage, reject and many other non-conforming events in the business.

The 30 to 1 principleCost recoveryCan the $125 000 be recovered and how can you recover this cost? This is where the 30 to 1 principle applies and states that for every one dollar lost, now a total of $125 000 x 30 = $3,750 000This now equals to $3,750 000 of additional and future work to just recover the total cost of the accident.  The reality is that you will never recover the loss.This example is even more poignant if you consider the profit margins of the business. The lower the profit margin, the higher the cost.

Even if the 30-1 was 10/15 or 20 to 1, it would still have a huge financial impact on the business. Do the maths.

So what’s a possible solution?

• Develop a documented business plan with responsibilities and accountabilities
• Don’t think you are an island GSI it, get someone in to help you., a professional business advisor
• Take time to work on your business, plan and execute those plans.
• Hold yourself responsible and accountable.
• If you are not comfortable with IT and software, get over it and learn it, it’s the future.
• Surround yourself with people you can trust and be prepared to listen and to act on their recommendations or ideas.
• Develop and implement sound, solid and robust documented policies and management systems.
• Implement a system to trap, record and tap into all internal non-conformances and establish the cost of financial leakage and become a plumber to fix the leaks. ( = increased profit)
• Implement and communicate them to your employees.
• Plan and train your employees
• Monitor the effectiveness of those plans, correct as required.
• Repeat the cycle

If you require any further information contact me @.www.Hasmate.co.nz for a proven and smart software solution to protect your business and to reduce your business costs.