Companies that experience extended periods of incident-free, operational continuity, often develop a dulled sense of vulnerability that impedes response planning and preparedness. EHS managers must continually address complacency and fluctuating real-world potential issues, site-specific risks, and regulatory compliance within set budgets. Securing the status quo when daily operations and external influences can provoke everything from critical incidents to catastrophic disasters presents a continuous balancing act for EHS managers.
The challenge of sustaining effective safety and preparedness levels is often met with budget justifications for intervention, prevention, and response planning. However, the cost of complacency and stagnation is typically higher than the cost of advancing and implementing safety, preparedness, and response planning initiatives.
EHS budget justifications are often plagued by challenging internal and external factors. Internal challenges often include profitability, shareholder value, and cost control measures. These factors often propel management to question the likelihood of profit/loss scenarios. Additionally, regulatory compliance mitigation opportunities and response planning initiatives are often sacrificed during this process. However, one ineffectively handled emergency or crisis situation can cost a company many times the cost of implementing and maintaining an effective program.
External factors such as regulatory compliance, high-risk locations, shifting labor markets, and emerging competitors can increase the complexity and cost of overall operations. However, these external factors also introduce the potential for additional costs related to fines, emergencies, crises, and business continuity issues. Without a proactive approach to preparedness and response planning, reactionary costs will eventually overtake the cost savings of an effective program.
A detailed emergency management program cost-benefit analysis can highlight the potential cost savings of an effective program and communicate the various threats to operational continuity and longevity. Prevention, mitigation, and planning costs should be compared with the financial impact of situational recovery processes and the overall costs of an incident. The analysis should identify and evaluate low, medium, and high impact likely scenarios, associated response expenditures, and total estimated recovery costs including, but are not limited to:
- Impacts on employees
- Short term or long term business interruption
- Regulatory fines or mandated shutdown for non-compliance
- Infrastructure damage
- Equipment failure
- Inventory/stock losses
- Environmental damage
A thorough emergency management program review and response plan audits can reveal specific deficiencies and identify areas for program improvement. These deficiencies should be prioritized, quantified for mitigation, and included in a long-term budget plan. In addition to fulfilling a moral responsibility to protect employees, the community, and the environment, an effective and exercised emergency management program should meet certain key strategic and tactical objectives in order to be cost beneficial. Objectives should include, but are not limited to:
- Enhancing employee safety to minimize harm
- Facilitating compliance with Federal, State, and Local regulatory requirements, eliminating the threat of potential fines.
- Reducing the potential for infrastructure and property damage
- Enhancing the ability to recover from business interruption and loss
- Reducing indirect business interruption loss (ex. supply chain “ripple” effects)
- Reducing environmental damage
- Enhancing a company’s image and credibility with employees, customers, suppliers and the community.
- Reducing community damage and impacts (ex. historic sites, schools, neighborhoods)
- Minimizing societal losses (ex. casualties, injuries, layoffs)
- Reducing need for costly emergency response
- Reducing exposure to civil or criminal liability in the event of an incident.
- Potentially reducing insurance premiums (check with individual insurance providers for associated savings).
Over the long term, emergency management complacency becomes expensive and has a negative effect on corporate preparedness and response planning. By properly budgeting and continuously evaluating incident mitigation opportunities, improving response capabilities and quantifying regulatory compliance, EHS managers can reduce the costs associated with incidents and contribute to the longevity of a company.