Financial Analysis Methodology of the Benefit of Safety Investment

Abstract

People are usually skeptical about the financial merit of safety investment due to inadequate demonstration of safety benefit. Many recent studies on safety economy fail to correlate safety outcome with specific safety investment and to consider its long-term effect. Also loss cost uncertainty is not properly addressed in current researches. In this report, we propose a methodology with the use of long-term financial analysis models. Loss cost is well presented through an innovative use of Poisson Distribution model. Financial indicators including NPV, IRR, Tpp, Tdppare used to figure out benefit of safety investment.A case study is introduced hereby to explore the availability of the methodology. Result shows that the proposed methodology is feasible. Financial analysis of safety benefit constitutes part of a full appreciation of safety investment outcome and could serve as indispensable information for decision-making.