Risk Management or Performance Improvement ?

1. Risk Management or Performance Improvement ? Sonny Blackwell Vice President

4. The least expensive claim… is the one that never happens

5. Safety 1st

6. Quality Safety Productivity

7. Approaches Performance Allocating finite resources to achieve the mission Public Sector : Cost / Benefit (Total Cost of Risk) Private sector: Return on Investment (ROI) Risk-Based Achieving “tolerable” risk Varies with individuals Compliance What are the minimum requirements? OSHA? DHS? DOE? DOT? Reactive Keep “that “ from happening again

9. Hindsight Foreseeable

13. “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.

14. Traditional Metrics Inspections Accidents Incident / Accident Rates Investigations Meetings Training sessions If you continue to do what you’ve always done, You’ll continue to get the same results ! 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?

15. Cost of Risk Sales required to pay for loss costs 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% $100,000 $10,000 $1,000 Cost of Risk Profit Margin

16. Lean = A systematic approach to identifying and eliminating waste • Defects • Overproduction • Waiting • Non-value added processing • Transportation • Inventory • Motion • Employees who are underutilized 9. Accident costs

17. 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

18. 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 survey The National Alliance Research Academy

19. Errors Causes Countermeasures Rushing Frustration Fatigue Complacency Impairment Ignorance Eyes not on task Mind not on task In-the-line of fire Balance, traction & grip Accident Causation • Eliminate the hazard • Substitute a less hazardous substance or process • Engineering controls • Administrative controls • Personal protective equipment • Training

21. 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?

22. Organization Countermeasures Risk Management Inventory Reporting Return-to-Work Engineering Design Crisis Management Boiler& Machinery Business continuity planning Fire Protection Investigation Environment 1st Aid Case Management Wellness Quality Control MVR’s Fitness for Duty Drug testing Ergonomics OSHA/Safety Selection & Placement Background Investigations New EE orientation Security Performance Management DOT Human Resources Products liability Recruiting Training ADA Supervisor development Harassment Onboarding Discrimination

24. 6 Levels of Evaluation 6.Intangibles Not quantifiable 5. ROIFinancial Performance 4. Results Costs & Benefits 3. Behavior Application 2. Learning Testing 1. Reaction Feedback Organization Individual 0. Activities IBNR

25. 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

26. Case studyROI of an ergonomics intervention Problem analysis Management buy-in Ergonomic hazard recognition Facilitated problem solving Forecasting Implementation Isolation Evaluation Communication

29. Expected losses $662,959 $411,608

30. Program Costs Engineering modifications $ 58,438 Consulting, training and evaluation expenses $ 16,125 Total costs $ 74,563 ROI Calculation Expected annual claim cost w/o intervention $662,959 Actual claim cost -$251,351 First year post-intervention improvements $411,608 Total costs - $74,563 Net benefit =$337,045 ROI = $337,045 / $74,563 X 100 = 452% net benefit total costs

31. ROI Forecasting $551,470-$250,000 ($301,470) $250,000 x 100 = 120.58% Estimated total costs $250,000

32. 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.

33. Performance Cost Activity Value

34. Sonny Blackwell Vice President sonny.blackwell@bxsi.com cell - 228-697-1200