Fleet Risk Management - the business case for change
It’s an undeniable truth: many companies and senior managers do not yet view fleet safety as a top priority. Yes it’s true that businesses running a fleet of vehicles probably do understand the ‘process’ of managing their fleet; the functional areas such as vehicle servicing, insurance plans and employing qualified drivers. However, do they actually understand true performance management and how to reduce operating costs through:
- accident reduction
- efficient fuel usage
- minimising vehicle wear, tear and damage
- lower insurance premiums
and ultimately improve the safety of their fleet and reduce the number of collisions.
With road traffic injuries claiming more than 1.25m lives each year, the cost to governments runs to approximately 3% of GDP*. Reports show that total accident rates for commercial fleets is around 20%, with certain industries even higher.
These simple facts alone show it’s a subject that cannot be ignored and must be taken seriously at the highest levels within an organisation. Aside from the need to help reduce accident rates, there are a number of clear efficiencies which can be obtained by having a defined, effective and ongoing Fleet Risk Management programme.
It’s your duty
Driving for work is a high risk activity that has the potential to cause harm to both people and an organisation’s reputation. In a world where road traffic crashes are expected to be the fifth leading cause of death, employers must be aware of the obligations and benefits to protecting one of their most valuable assets – its employees.
The phrase ‘duty of care’ is used regularly in relation to fleet risk and is defined as:
“a moral or legal obligation to ensure the safety of others” Oxford English Dictionary
In the UK for example, employers have a legal obligation and in 2007 the landmark Corporate Manslaughter and Corporate Homicide Act 2007 came into force. This act can find companies and organisations guilty of corporate manslaughter as a result of management failures that result in a breach of their duty of care.
Even in countries where there is no threat of prosecution, employers are still exposed to potential liability in many forms. The subject cannot be ignored and should be given the same level of priority as workplace health and safety. It is the obligation of the employer to ensure the safety of its employees and in the case of fleet safety, the public with whom their vehicles inevitably interacts.
Often a business will begin to think about implementing a Fleet Risk Management programme once a tragic incident has occurred. It goes without saying this is the wrong way to approach the subject; senior managers, fleet managers and health and safety managers should collaborate to proactively initiate a programme to manage the risks its fleet presents. The companies which do this successfully are able to demonstrate clear business benefits in terms of cost savings, operational efficiency, employee engagement, improved reputation and more.
Management of your fleet can reduce costs
The costs associated with a company’s fleet are not insignificant: value of fleet assets, insurance premiums, servicing, repairs, fuel and the list goes on. Of course fleet managers will be well informed of these costs at any point in time, and most likely looking for opportunities to identify efficiencies.
Accident and insurance-related costs along with the residual value of vehicles account for a significant part of total cost of fleet ownership. Consider the ‘direct’ costs of the premium, policy excesses and uninsured losses. Then take into account the ‘indirect’ costs – these are much harder to quantify, but include:
- employee injury – what’s the short term effect of days at work lost due to injury and the long term effect on employee performance
- productivity – what’s the impact of vehicle ‘down time’ on the business
- administration time – how many hours are spent in reporting and handling claims and repairs
These accident-related costs are just the tip of what could be a very large iceberg. It’s proven that dramatic savings can be made by looking at ways of reducing the number of collisions, rather than simply attempting to reduce accident repair costs.
Aside from the costs associated with accidents, there are also ways to reduce spend on fuel and maintenance etc. Awareness and education, combined with the monitoring, measurement and management of both vehicles and drivers is key. Undoubtedly analysis and understanding of cause and effect can highlight opportunities for greater cost control.
The fundamental aspect – your drivers
Driver behaviour has long been viewed as one of the toughest areas to manage and control within a vehicle fleet. However the benefits of a driver with the appropriate knowledge, skills and attitude cannot be underestimated. By focussing on the cause (drivers) and not the symptom (rising costs) and by implementing a behavioural-based programme which ensures employees are driving safely and efficiently, will pay dividends.
What can be done?
Operating a fleet of vehicles is an increasingly complex discipline. It’s one of the largest overheads for most organisations and the difference between a safe, well-run fleet and an inefficient and potentially lethal one, can make a sizeable impact on a company’s profit margin and reputation.
Implement an effective fleet risk programme and monitor, manage and measure performance. Any organisation should know the financial and non-financial costs of their fleet. They should also know the full range of performance indicators to help reduce these costs.
A fleet risk programme will demonstrate that road safety is being taken seriously and thus provide operational reassurance; which in turn will:
- demonstrate a duty of care to employees and the general public
- lead to enhanced corporate image and reputation
- help deliver competitive advantages and improved profitability
- boost a company’s corporate social responsibility credentials
No matter the size of fleet, type of vehicle and whether vehicles are owned or leased; a robust and effective Fleet Risk Management programme should be part of every company’s systems and processes.
Read also "Understanding the true cost of driver behaviour"