Unwanted Event Consequences
Unwanted event consequences could be many and multiple and, depending on the character of the event and the
circumstances that are present during and after the event, may include:
Property damage to product, buildings,
Personal injury, fatalities
Loss of information
Damage to company image
Liability claims, product, contractual,
Loss or disappearing of goods
Loss of customers
Loss of market
Loss of work days
The first duty of management is to survive and the guiding principle of
business economics is not the maximization of profit – it is the avoidance of
Unwanted event consequences are not limited to the more visible losses,
such as: injuries and property damage, and may occur during the
execution of work and decision making at every level
in the organization and within each discipline. Not properly
carrying out work may mean that one person cut off his own thumb, another person may close
an unfavorable contract while the third takes
unnecessary risks by marketing an insufficiently tested
product and others may design an unsafe product or purchase materials with
Risk identification should be the first step in preventing
unwanted event consequences.
The often preventable and unnecessary costs of accidents, incidents and other unwanted events can have an
important influence business results, ranging from reduction of financial results to termination of activity.
Although exact figures are often missing as most companies do not register those - unnecessary – costs, there are
indications that these costs could reach 5 to 10% of the gross national product, or 20% or more of production of
individual companies. Preventable “failure costs” in the construction chain in The Netherlands, has for years been
between 5 and 10% of turnover and increasing from 7,7 % in 2001 via 10,8% in 2009 to reach 11,4 % in 2010.
Different losses - common causes
At the beginning of this page, I listed different type of losses resulting from accidents, incidents and other
unwanted events. Different losses, but often with common causes. Just find out by yourselves what causes - on the
horizontal - may have contributed to the losses - on the vertical.
Accident Triangle or Pyramid
There are many accident triangles or pyramids. If you search on the Internet you will find them with different
descriptions and different numbers. One of the first was the accident ratio study that was carried out in 1969
under the guidance and supervision of Frank E. Bird, Jr. at that time Director of Engineering Services for the
Insurance Company of North America (INA). The study included analysis of over 1 3/4 million accidents that were
reported by close to 300 companies that represented over 20 different groups and employing close to 2 million
employees working over 3 billion hours during the exposure period analyzed. The result is shown below as the
The message in this is that you can gain tremendously if your accident, incident and
other unwanted event cause analysis goes deep enough - into the basic or "root causes" and the management system.
Use a classification system to pick out the events that are serious enough
to get serious attention and broaden your scope to get the multiple benefits from an in-depth single event cause
analysis; consequences of unwanted events are often consequences of management system failures and can be
Accident triangles or pyramids tell us this: there are many more accidents or
unwanted events than there are lost time injuries which are traditionally the focus of industrial safety.
bottom of the triangle is formed by "incidents", substandard acts and conditions where "substandard" means that
they are not in line with proper work methods, instructions or procedures, possibly because these methods and
procedures are not correct or outdated or maybe even not available.
Please bear in mind that the consequences of
an unwanted event may range from no visible loss (an "incident", "near miss" or "near loss") to catastrophic and
will depend largely on:
These incidents are unwanted events that could
have resulted in property damage, injury or other loss under different circumstances. They can be a good learning
source to also improve the management system. Use risk classification to select the incidents that are worth an
in-depth investigation and cause analysis.
Including property damage, other losses and
substandard acts, conditions and behavior of people as part of controlling unwanted events offer much greater
potential for improvement than only looking at the injury type event.
Accident Cost Iceberg
Experience in North America
and other countries has led to the assumption that the
costs resulting from accidents could be 50 times or more than the costs associated with
injury alone (medical costs and compensation
Louis A. Allen
Minimizing loss is as much improvement as maximization of profit
In 1966 Frank E. Bird, Jr, when working for Lukens Steel wrote the book "Damage
Control" to in fact say: "hey guys there are much more accidents and they cost a bundle". Did his message come
across? Hard to say .. in 1997, 30 years later, he wrote the book "The property Damage Accident" with the same
message. Even today and in high hazardous industry, safety is still measured by red and green lights at the gate
referring to lost time accidents: one million hours without an accident meaning one million hours without a
reported lost time injury.
While there are more of these accidents costs icebergs to be found through the
Internet, they all point into the same direction: the cost of substandard work and conditions is much greater than
those of injuries alone. It follows then that there are much greater cost reduction opportunities by having a broad
look at accidents, incidents and other unwanted events.
Depending on your profit margins you may have to sell quite a lot to make up for the costs of accidents,
incidents and other unwanted events. The table below indicates this.
Do you know the annual losses caused by accidents, incidents and other unwanted
If annual losses from accidents, incidents and other unwanted events total $ 10.000 and your profit margin is 4
%, your sales people have to bring in $ 250.000 in addition to what they are doing already. Realizing this, you
will understand the quote below from management guru Peter Drucker.
This cost of accidents calculator may
give you an indication of what the the financial consequences are of accidents in your organization. Please note
that the basis for these calculations comes from data applicable in the USA. Also look at information provided
by the United States Department of Labor
In case of keen competition and low profit margins, learning from accidents
can contribute more to profits than an organization’s best salesperson.
An effective (safety) management system can help you to bring down the unnecessary
cost of unwanted events. The 17-step process may be your guide to set up such management system.