What does the return on investment express?
Return on investment, or ROI, compares the net economic benefit attributed to an action with the costs incurred in carrying it out. In prevention, it can be used to study technical, organizational, or training improvements. Before calculating it, the problem to be solved must be defined, as well as how it will be verified that the measure reduces the risk.
An attractive outcome does not automatically make an intervention effective. Economic analysis must be based on a technically sound solution and a reasonable estimate of its effects. Preventive management requires both aspects: protecting people and using available resources responsibly.
Costs that must be included
The cost may include acquisition, design, installation, adaptation, training, implementation time, and maintenance. The resources needed to maintain effectiveness over the chosen period must also be considered. Limiting the calculation to the purchase price may artificially favor an alternative with significant subsequent expenses.
It is important to distinguish between initial and recurring outlays and specify their timing. If comparing options, equivalent criteria should be used. Internal resources can also have a significant cost, but their valuation needs to be consistent with the chosen perspective. A cash flow analysis should not be combined with an economic cost analysis without explanation.
Benefits attributable to prevention
Potential benefits include avoided accident costs, reduced disruptions, and operational improvements related to the intervention. Workplace accident costs provide a starting point, but past expenditure does not automatically translate into future savings. It is necessary to estimate what portion could be avoided by the measure and under what conditions.
Productivity or quality improvements require a plausible relationship and, where possible, tracking data. Duplication between time saved, recovered production, and additional margin should be avoided. Human and social benefits should be recognized even if they are not monetized; inventing a value for each effect does not make the analysis more rigorous.
Formula and time horizon
A simple formula is ROI = (attributable economic benefits minus intervention costs) divided by intervention costs, multiplied by 100. The report should specify the period and what is included in each term. Not all studies use the same denominator, so comparing percentages without reading the methodology can be misleading.
Over several years, the distribution of costs and benefits over time becomes important. It may be necessary to use discounted values and other economic evaluation criteria, with explicit assumptions. The payback period and ROI address different questions: one estimates the time required to recover resources, and the other defines an economic relationship within a defined scope.
Practical example
As a hypothetical one-year example, an improvement costs €10,000 to implement and €2,000 for training and maintenance, included in that period. Attributable benefits are estimated at €18,000, with no duplicate items. With total costs of €12,000, the net profit would be €6,000 and the simple ROI, 50%.
The result depends on the estimate. If the benefits were €8,000, the same calculation would yield approximately -33%. These values illustrate sensitivity and do not guarantee actual performance. The company would need to verify the preventive and economic effects and maintain its protective obligations regardless of the outcome of the example.
Uncertainty and verification of results
The analysis should identify the most influential assumptions: frequency of incidents, expected effectiveness, equipment availability, actual utilization, and evolution of the activity. Comparing conservative and favorable scenarios helps to understand the variation in the outcome. A single figure can mask a wide range of uncertainty.
After implementing the measure, it’s advisable to compare the planned results with the observed ones and document any other changes that might explain the outcome. A decrease in accidents over a short period does not, in itself, demonstrate causality. Leading and lagging indicators help to verify both the effectiveness of controls and the results, providing sufficient context.
Decide without subordinating protection to ROI
Preventive regulations require the adoption of measures in accordance with the risks and applicable requirements. A negative economic calculation does not justify maintaining a non-compliant situation. The analysis is especially useful for comparing alternatives that already meet the protection conditions and for allocating resources within a justified plan.
OSH objectives must retain their protective purpose. If an intervention requires additional resources to function, these must be incorporated into the preventive planning. It is inconsistent to approve a project based on its profitability and then withdraw the training or maintenance that supported that estimate.
Documentation and common errors
The report should clearly define the problem, alternative, perspective, timeframe, sources, assumptions, and calculation rules. It should also indicate which benefits have been excluded due to a lack of evidence. This transparency allows for reviewing the decision and learning when actual results differ from those anticipated.
The most common mistakes are promising a universal return on every euro invested, only considering favorable years, omitting recurring costs, and attributing all improvements to a single action. A useful ROI supports proactive decision-making with verifiable information, but it does not replace technical analysis or the responsibility to protect people.
