Many companies see loss prevention as just another unnecessary expense. However when you’re striving to develop a competitive edge and do things right the first time, risk management, including loss prevention, is an important investment. Whether you’re improving efficiency or safety with new equipment, teaching staff how to use it, providing safety training, installing monitored burglar alarms and sprinkler systems, or developing employee safety manuals, policies, and guidelines, the benefits are much greater than preventing a single loss. If you develop a culture of doing things right the first time, you can ensure the safety of customers and employees, differentiate your business from competitors and become even more successful.
Loss prevention costs
Two types of costs are associated with losses; insured and uninsured. Insured losses may be fully covered by the policy, but the business can still experience a disruption in their operations that can have detrimental effects. An example of this is a store being fully compensated for the property and product damage that was caused by a flood but still losing revenue because they had to close for renovations. Uninsured costs aren’t covered by insurance. These may be deductibles, time to replace equipment, temporary locations, hiring and training replacement employees, or increased insurance premiums.
Uninsured costs are typically one to three times more than those paid by insurance and can significantly affect your bottom line. For example, if you have a $5,000 uninsured loss and your business has a 10% profit margin, you’d have to increase gross sales by $50,000 to recoup it.
Every functional operation of a business should contribute toward profit. Loss prevention is no exception.
A few benefits of effective loss prevention programs:
- They provide guidance for employees. Employees who are aware of all hazards and are properly trained on how to deal with them tend to be more efficient workers. They respond quickly to potential hazards and perform their work conscientiously. These qualities add up to increased profits as a result of avoided losses and increased productivity.
- They provide opportunities to identify hazards through regular inspections, quality control programs and procedures to handle deficiencies, which can help you avoid and reduce losses.
- They provide opportunities to learn from near misses, accidents without losses, and accidents involving losses to create new loss prevention programs or improve existing ones.
- They provide emergency procedures. Employees who are properly trained on emergency response are prepared to act quickly and correctly during an emergency. This can help mitigate losses and increase profits.
- Compliance to all safety legislation ensures that your workers’ compensation dues are minimized, thereby avoiding any penalties or punitive damages for accidents.
Employees at all levels being involved in the creation, maintenance and enforcement of a loss prevention program will go a long way in helping to enhance your profits and the overall success of your business.