Coal Age

APR 2018

Coal Age Magazine - For more than 100 years, Coal Age has been the magazine that readers can trust for guidance and insight on this important industry.

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30 April 2018 material handling continued for conveyor safety that can be used to reasonably estimate the benefits of in- vestments in safety. The financial analy- sis approach depends upon the potential benefit being sought. Many companies don't want safety information publicized, and the costs are spread out in accounts such as em- ployee benefits, insurance or reserves accounts, making objective analysis diffi- cult. However, this topic has been widely studied by academia, and while opinions vary, there are enough valid studies that the results can be averaged. For example, several organizations provide detailed and regional statistics on the cost of acci- dents. [Figure 2] Lacking specific historical data, managers can turn to numerous reliable sources that provide the probability of accidents and incidents that can be used to estimate tangible and intangible future costs. [Figure 3] FOUNDATIONS for Conveyor Safety contains examples that can answer the two questions posed at the beginning of this article. Managers at every level of the organization will be able to see how an engineering firm might convince an owner to spend more on design to im- prove future safety using the statistics from Figures 1 and 2 or using actual data (in whole or in part) in conjunction with these statistics. The financial technique used to compare options is called a "net present value" (NPV ) analysis. Most spreadsheet programs have a function that can cal- culate NPV once the proper information is entered. Basically, NPV compares dif- ferent investment options with varying costs and savings (cash flows) over time by discounting them by the company's cost of money. Another way of thinking about this is that the discount rate adjusts for the cost of money over time, so differ- ent alternatives in today's money can be compared objectively. For example, a company's internal risk analysis reveals that a facility will have 30 workers exposed to conveyor hazards. The estimated probability of the different classes of accidents (fatal, lost time and first aid) is multiplied by the cost of these accidents to reveal what could be invested to reduce the incident rate by half. (See Figure 4) Figure 4—Estimated total annual cost for all accidents is high. Class of # of Workers Cost of Probability of Projected Accident Exposed Accident Accident Annual Cost Fatal Accidents 30 x $2,750,000 x 3.8/100,000 = 00 $3,135 Lost Time Accidents 30 x 0 $150,000 x 2,900/100,000 = $130,500 First Aid Accidents 30 x 000 $2,750 x 8,700/100,000 = 00 $7,178 Total Estimate: Annual Cost of Accidents $140,813

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