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<ul><li>Risks are  known/unknown exposures to uncertainties that may impact a company’s ability to achieve business object...
<ul><li>Traditional risk management provides a good conceptual model  </li></ul><ul><ul><li>Insurable risk:  Bodily injury...
<ul><li>Frequency/likelihood factors: </li></ul><ul><ul><li>Actual occurrence history/data – internal and external </li></...
<ul><li>Leverage risk management function </li></ul><ul><ul><li>Frequency/severity based on risk management definitions </...
<ul><li>Generate  probability-weighted EHS loss </li></ul><ul><li>Return on Investment of Loss Avoidance Costs (ROIa) </li...
ROIa Presentation
ROIa Presentation
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ROIa Presentation

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ROIa is The Elm Consulting Group International's methodology for demonstrating the economic value of EHS risk avoidance costs. This presentation was made in April 2009 at The Auditing Roundtable.

Published in: Economy & Finance, Business
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ROIa Presentation

  1. 1. <ul><li>Risks are known/unknown exposures to uncertainties that may impact a company’s ability to achieve business objectives </li></ul><ul><ul><li>A predictive concept </li></ul></ul><ul><li>Risks should be identified without considering controls or impact </li></ul><ul><ul><li>Baseline (uncontrolled) risk profile </li></ul></ul><ul><ul><ul><li>COSO Enterprise Risk Management model </li></ul></ul></ul><ul><ul><li>Reduces latent assumptions and robust predictions </li></ul></ul>
  2. 2. <ul><li>Traditional risk management provides a good conceptual model </li></ul><ul><ul><li>Insurable risk: Bodily injury, off-site clean-up, diminution of property values, third party claims, business interruption/loss of revenue, legal defense costs, product liability-type exposures </li></ul></ul><ul><ul><li>Uninsurable risk: Most fines and penalties, capital equipment costs (including pollution controls), voluntary expenditures, known contamination conditions (generally) </li></ul></ul>
  3. 3. <ul><li>Frequency/likelihood factors: </li></ul><ul><ul><li>Actual occurrence history/data – internal and external </li></ul></ul><ul><ul><li>View of the future, changes in business/operations, emerging trends </li></ul></ul><ul><li>Severity/impact factors: </li></ul><ul><ul><li>Assumes the event will occur with no mitigation </li></ul></ul><ul><ul><li>Existing, established and CREDIBLE value benchmarks </li></ul></ul><ul><ul><li>Appropriate and CREDIBLE impacts – internal and external </li></ul></ul>
  4. 4. <ul><li>Leverage risk management function </li></ul><ul><ul><li>Frequency/severity based on risk management definitions </li></ul></ul><ul><ul><ul><li>External and/or internal loss data </li></ul></ul></ul><ul><ul><li>Economic valuation of “risks avoided” </li></ul></ul><ul><ul><li>Cost of retaining risk with ROI calculations, for example: </li></ul></ul>
  5. 5. <ul><li>Generate probability-weighted EHS loss </li></ul><ul><li>Return on Investment of Loss Avoidance Costs (ROIa) </li></ul><ul><li>ROIa can evaluate economic benefit of EHS expenditure in light of: </li></ul><ul><ul><li>Probability-weighted EHS loss </li></ul></ul><ul><ul><li>Profits needed to offset the EHS loss </li></ul></ul><ul><ul><li>Gross revenues needed to generate offsetting profits </li></ul></ul>

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