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SUMMARY OF COST SAVINGS EXAMPLES

Figure 2 Examples of Cost Savings

Cost Saving Module Example Value
Reduction of Injury Incidents Incident Management $50000 (Direct Costs: 10000 + Indirect Costs: 40000) per injury reduced, per year
Time Savings/Reduction of Labor Expenses Reporting & Dashboards $25000 based on 2 employees reduced report generation time of 10 hrs per week
Management of Sustainability Programs (energy reduction, water consumption reduction, recycling income, etc.) Metrics $0, $15000, $16000, $22000 Year over year reduction in energy and water usage.
Reduction of travel expenses Audit, Compliance, Corrective Actions $7500, 5 trips at $1500

The above cost savings descriptions are examples only. Actual cost saving opportunities should be found in your cost benefit analysis.

Using Assumptions to Calculate the NPV: Example

The Corporate EHS Manager of XYZ Corporation is looking to implement a global system that includes the following modules – Incident, Audit, Corrective Actions, Environmental Metrics, and Reporting and Dashboards. The primary goals of this system implementation are to streamline reporting and create a centralized repository for all data to support and facilitate corporate wide EHS program initiatives. Additionally they would like to begin a sustainability initiative using the tool to establish targets and track performance towards reducing water and energy consumption. The fees for the new system are estimated to be $50,000 for initial system configuration and installation and another $50,000 in yearly subscriptions fees.

While creating the business case, the EHS manager decides to use net present value calculations to justify the cost to his financial executives. The first step in identifying the NPV of the entire implementation is to make and document the assumptions. Cost savings assumptions must be applied to all periods in the expected life of the software. Figure 3 gives a breakdown of the assumptions used to calculate the net present value.

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