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by H. R. Noel Van Erp, Genserik L. L. Reniers
Operational Safety Economics
Cover
Title Page
Copyright
Preface
Disclaimer
Acknowledgements
List of Acronyms
Chapter 1: Introduction
1.1 The “Why” of Operational Safety
1.2 Back to the Future: the Economics of Operational Safety
1.3 Difficulties in Operational Safety Economics
1.4 The Field of Operational Safety within the Profitability of an Organization
1.5 Conclusions
References
Chapter 2: Operational Risk, Operational Safety, and Economics
2.1 Defining the Concept of Operational Risk
2.2 Dealing with Operational Risks
2.3 Types of Operational Risk
2.4 The Importance of Operational Safety Economics for a Company
2.5 Balancing between Productivity and Safety
2.6 The Safety Equilibrium Situation or “HRO Safety”
2.7 The Egg Aggregated Model (TEAM) of Safety Culture
2.8 Safety Futures
2.9 The Controversy of Economic Analyses
2.10 Scientific Requirements for Adequate Economic Assessment Techniques
2.11 Four Categories of Data
2.12 Improving Decision-making Processes for Investing in Safety
2.13 Conclusions
References
Chapter 3: Economic Foundations
3.1 Macroeconomics and Microeconomics
3.2 Safety Demand and Long-term Average Cost of Production
3.3 Safety Value Function
3.4 Expected Value Theory, Value at Risk, and Safety Attitude
3.5 Safety Utilities
3.6 Measuring Safety Utility Functions
3.7 Preferences of Safety Management – Safety Indifference Curves
3.8 Measuring Safety Indifference Curves
3.9 Budget Constraint and n-Dimensional Maximization Problem Formulation
3.10 Determining Optimal Safety Management Preferences within the Budget Constraint for a Two-dimensional Problem
3.11 Conclusions
References
Chapter 4: Operational Safety Decision-making and Economics
4.1 Economic Theories and Safety Decisions
4.2 Making Decisions to Deal with Operational Safety
4.3 Safety Investment Decision-making – a Question of Costs and Benefits
4.4 The Degree of Safety and the Minimum Overall Cost Point
4.5 The Type I and Type II Accident Pyramids
4.6 Quick Calculation of Type I Accident Costs
4.7 Quick Calculation of Type II Accident Costs
4.8 Costs and Benefits and the Different Types of Risk
4.9 Marginal Safety Utility and Decision-making
4.10 Risk Acceptability, Risk Criteria, and Risk Comparison – Moral Aspects and Value of (Un)safety and Value of Human Life
4.11 Safety Investment Decision-making for the Different Types of Risk
4.12 Conclusions
References
Chapter 5: Cost-Benefit Analysis
5.1 An Introduction to Cost-Benefit Analysis
5.2 Economic Concepts Related to Cost-Benefit Analyses
5.3 Calculating Costs
5.4 Calculating Benefits (Avoided Accident Costs)
5.5 The Cost of Carrying Out Cost-Benefit Analyses
5.6 Cost-Benefit Analysis for Type I Safety Investments
5.7 Cost-Benefit Analysis for Type II Safety Investments
5.8 Advantages and Disadvantages of Analyses Based on Costs and Benefits
5.9 Conclusions
References
Chapter 6: Cost-effectiveness Analysis
6.1 An Introduction to Cost-effectiveness Analysis
6.2 Cost-effectiveness Ratio
6.3 Cost-effectiveness Analysis Using Constraints
6.4 User-friendly Approach for Cost-effectiveness Analysis under Budget Constraint
6.5 Cost-effectiveness Calculation Often Used in Industry
6.6 Cost–Utility Analysis
6.7 Conclusions
References
Chapter 7: Beyond the State-of the Art of Operational Safety Economics: Bayesian Decision Theory
7.1 Introduction
7.2 Bayesian Decision Theory
7.3 The Allais Paradox
7.4 The Ellsberg Paradox
7.5 The Difference in Riskiness Between Type I and Type II Events
7.6 Discussion
7.7 Conclusions
References
Chapter 8: Making State-of-the-Art Economic Thinking Part of Safety Decision-making
8.1 The Decision-making Process for an Economic Analysis
8.2 Application of Cost-Benefit Analysis to Type I Risks
8.3 Decision Analysis Tree Approach
8.4 Safety Value Function Approach
8.5 Multi-attribute Utility Approach
8.6 The Borda Algorithm Approach
8.7 Bayesian Networks in Relation to Operational Safety Economics
8.8 Limited Memory Influence Diagram (LIMID) Approach
8.9 Monte Carlo Simulation for Operational Safety Economics
8.10 Multi-criteria Analysis (MCA) in Relation to Operational Safety Economics
8.11 Game Theory Considerations in Relation to Operational Safety Economics
8.12 Proving the Usefulness of a Disproportion Factor (DF) for Type II Risks: an Illustrative (Toy) Problem
8.13 Decision Process for Carrying Out an Economic Analysis with Respect to Operational Safety
8.14 Conclusions
References
Chapter 9: General Conclusions
Index
End User License Agreement
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Index
absolute
safety
acceptability of risk
acceptable operational risk
acceptable region
accident investigation avoided costs
accident metrics
accident pyramid
add-on safety
affect heuristic
ALARP
see
as low as reasonably practicable (ALARP)
ALARP region
see
as low as reasonably practicable (ALARP)
Allais paradox
ambiguity aversion
annuity (discount) factor
anti-recklessness of management
approach of Kinney and Wiruth
as is safety
as low as reasonably practicable (ALARP)
auto-financing
average cost of production
avoided accident costs
categories
avoided costs related to legislationchanges
avoided costs related to medical treatment in hospitals and revalidation
avoided costs related to using medical equipment and devices
avoided costs with respect to damage to other companies' material/property
avoided costs with respect to damage to own material/property
avoided costs with respect to damage to public material/property
avoided costs with respect to damage to surrounding living areas
avoided costs with respect to environmental damage
avoided recruitment costs
Bayesian decision theory
Bayesian networks (BN)
benefit(s) (avoided accident costs),
see also
avoided accident costs
benefit–cost ratio
Bernoulli
best case scenario
BEST ratio
see
break-even safety target
(BEST) ratios
black swan accidents
Borda algorithm
break-even safety target (BEST) ratios
brief sensation-seeking scale
budget constraint
calculation of DF*
categories of data
certainty effect
certainty equivalent
changing guidelines and informing safety costs
classes of hypothetical benefits
clean-up avoided costs
collective mindfulness
company degree of safety
company profitability
conditional probability table (CPT)
consequence(s)
consequence-averse
consistency
contingent valuation
contractor safety costs
contractor selection safety costs
contractor training safety costs
controversy of economic analyses
cost-benefit analysis
for type I safety investments
for type II safety investments
cost-benefit ratio
cost of carrying out cost-benefit analyses
cost categories of safety measures
cost-effectiveness
analysis
ratio
cost-utility analysis
cost variable approach
criterion of choice
cumulative expected value
cumulative frequency
damage avoided costs
debatable information
decision analysis tree
approach
decision-making heuristic
decision-making process for an economic analysis
decision nodes
degree of freedom
design-based safety
DF
0
DF whereby the NPV equals zero
direct accident costs
direct costs
direct rating
direct subjective assessment
discount rate
discretization of the risk matrix
disproportion factor
drafting control lists safety costs
dynamic non-event
economic assessments
economic break-even safety point
economic rate of return
effectiveness
Egyptian pyramid
Ellsberg paradox
emotion(s)
emotional system
endowment effect
equal marginal principle
equilibrium situation
equipment safety costs
equity principle
ethical dimensions
ex ante CBA
expected hypothetical benefit
expected utility
expected utility theory
expected value theory
experts at hearing avoided costs
ex post CBA
external uncertainty
fairness principle
financial uncertainties
fines-related avoided costs
five principles of design-based safety
FN graph
game
theory
group risk
Heinrich
high-impact, low probability (HILP)
event
accidents
high rational thinking style
high reliability organizations (HRO)
principle
safety
high-uncertainty decisions
HILP accidents
see
high-impact, low probability (HILP)
how bad
how risky
how variable
HRO principle
see
high reliability organizations (HRO)
HRO safety
see
high reliability organizations (HRO)
human and environmental avoided costs
human capital approach
Hurwicz criterion
hypothetical benefit
immeasurable costs
immediacy effect
implicit value of safety
incremental cost-effectiveness ratio (ICER)
indirect accident costs
indirect costs
individual risk
inflation
information availability
inherent safety
initial wealth of the decision-maker
initial wealth functions
initiation safety costs
injured employees avoided costs
inspection safety costs (inspection team costs)
installation safety costs
installation team safety costs
insurance
avoided costs
management
insured accident costs
interim lawyers avoided costs
internal rate of return
internal research team avoided costs
interval data
intervention avoided costs
intuition
intuitive thinking style
investigation safety costs
investment analysis
isolation effect
iso-risk curves
iso-utility curves
Knapsack problem
law of diminishing marginal rate of return
lawsuits avoided costs
legal consequences avoided costs
level of societal concern
likelihood
limited memory influence diagram (LIMID) approach
location-based (individual) risk
logical relationships
logistics and transport safety costs
long-term average cost of production
loss aversion
principle
lost time injury (LTI)
frequency rate
incidence rate
severity rate
lowered/lost productivity avoided costs
low-impact, high-probability (LIHP) event
low-uncertainty decisions
LTI
see
lost time injury (LTI)
macroeconomics
magnitude effect
maintenance safety costs
major
accidents
management
manager work time avoided costs
marginal safety utility
material safety costs
matrix (information, variability)
maximax criterion of choice
maximum justifiable spend (MJS)
maximum safety level
MaxMax
hypothetical benefit
MaxMin
Mayan
Mayan accident pyramid
medical-related avoided costs
medical transport avoided costs
medical treatment at location avoided costs
medical treatment injury frequency rate
microeconomics
micromorts
minimax criterion of choice
minimum overall cost curve
minimum overall cost point
monetizing risk
Monte Carlo simulation
moral aspects
most likely case scenario
multi-attribute utility
multi-criteria analysis (MCA)
multiple fatality aversion
n-dimensional maximization problem
Neo-Bernoullian decision theory
Neo-Bernoullian theory
Neo-Bernoullian utility theory
net present value (NPV)
neutral
non-safety
normalized variability
normative economics
normative risk control decisions
objective
observable factors
occupational accidents
one-in-a-million probability of death
one-in-a-million risks
operational negative uncertainties
operational positive uncertainties
operational risk
management
management set
type
operational safety
costs (utilities)
operational uncertainties
opportunity cost
optimal safety investment portfolio
optimistic
optimum degree of safety
ordinal data
other avoided costs
other influences while makingecisions
other safety costs
payback period (PBP)
Payment costs
people's pReferences
perceptual factors
permits and licenses avoided costs
personal psychological factors
personnel-related avoided costs
pessimistic
plotting the FN curve
positive economics
prevention benefits
prevention costs
prevention investment
prevention investment decision-making
probabilistic best-case scenarios
probabilistic Hurwitz criterion of choice
probabilistic worst-case scenario
probability theory
process
production investment
production loss safety costs
production-related avoided costs
productivity
profitability
propensity
to take risks
proposed criterion of choice
prospect theory
pseudo-certainty effect
psychological biases
QAAPs
see
quality-adjusted accident probabilities (QAAPs)
Q&Q index (
R
*)
quality-adjusted accident probabilities (QAAPs)
quality-adjusted life-year (QALY)
quantitative assessment using the disproportion factor
quick calculation of type II accident costs
quick cost-estimation approach for type I risks
ratio data
rational system
reflection effect
regret theory
reliability
reliable and valid
reputation avoided costs
result indicators
revealed preference
with discrete choice
risk
acceptability
acceptance
attitude
aversion factor
avoidance
comparison
control
criteria
management
matrix
reduction
retention
thermostat
transfer
treatment
triangle
risk-averse
risk-neutral
risk-seeking
safety attitude
safety-averse
safety benefit cirves
safety bundles
safety climate
safety commodity space
safety culture
safety demand
safety demand curve
safety DNA
safety documents safety costs
safety equilibrium situation
safety future
safety increase premium
safety indifference curves
safety investment decision-making
in the case of type I risks
for type II risks
safety investment option(s)
safety investment option
safety measure portfolio's
safety-neutral
safety-seeking
safety states
safety triangle
safety utility
function
safety utils
safety value function
approach
scenario
thinking approach
schedule-related avoided costs
scientific requirements
selection and design safety costs
self-insurance
short rational-experiential inventory
SMART
so-called risk oriented index
societal acceptability indicators
societal acceptability of risks
societal risk
so far as is reasonably
practicable (SFAIRP)
specialized lawyers avoided costs
start-up avoided costs
start-up safety costs
start-up safety costs (after maintenance)
STOP
storage of hazardous materials safety costs
St. Petersburg paper
St. Petersburg paradox
subjectice
subjectivity of economic analyses
sunk costs
supply chain avoided costs
supply curve
the egg aggregated model (TEAM)
of safety culture
theory of bounded rationality
theory of consumer behavior
time trade-off
time trade-off-based safety utilities
tolerable operational risk
tolerable region
total recordable injury frequency rate
training safety costs
training of temporary workforce avoided costs
transport and loading/unloading of hazardous materials
type I
type I event
type I risks
type II
type II event
type II event decision-making
type II risks
type III
uncertainty
uniformity of safety investment decisions
uninsured accident costs
unit of death
unit of risk
utility
function
nodes
probability distribution
safety costs
utility function of prospect theory
validity
value at risk (VaR)
value of an averted loss
value of equivalent life
value of Human Life
value of live (VoL)
value of risk reduction
value of statistical life (VoSL) numbers
variability
wage costs
willingness to accept (WTA)
willingness to pay (WTP)
worst case scenario
zero-accident
zero-accident situation
zero major accidents
zero occupational accidents
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