FDs should be aware of fleet risk

Many of the day-to-day mechanics of the new corporate manslaughter law are simply not known yet, but finance directors could come into the firing line, as we look at some of the key facts driving the fleet risk debate, says Ashley Martin

Organisations have six-months to get into gear to meet new corporate manslaughter legislation or face the consequences of an unlimited fine and detrimental media coverage.

Successful prosecution under the new Corporate Manslaughter and Corporate Homicide Act could run into millions of pounds, although the pecuniary costs could be dwarfed by damage to employer reputation.

But road risk experts say that the new law that comes into operation on 6 April next year asks nothing more of organisations than they are already legally obliged to do under a raft of legislation such as the Health and Safety at Work Act 1974 and the Management of Health and Safety at Work Regulations 1999.

But leading fleet industry solicitor David Faithful, of law firm Lyons Davidson, suggests that small and medium-sized firms in particular, may be turning a blind eye to the legislation. Faithful, also an advisory board member of automotive-led road safety charity RoadSafe, which is managing the government’s ‘Driving for Better Business’ programme, says that “the cost of compliance is not great, but the cost of non-compliance is enormous, [with] much of [the expenses] hidden in other areas of business.” Therefore, managing occupational road risk in accordance with the law is as much a financial issue as a corporate responsibility issue.

Effective management of health and safety must be a key business goal in every organisation, according to Roger Bibbings, occupational safety adviser at the Royal Society for the Prevention of Accidents (Rospa), and it must be led from the top with clear reporting on performance to all stakeholders. “The new Act makes clear that the full weight of criminal law will be brought to bear on organisations of all sizes that [by act or omission] cause death.”

Organisations that can show they have taken all reasonable steps to manage risks, and have effective health and safety management systems in place, have nothing to fear from the new law.

The starting point for directors of organisations that run business vehicles and have yet to implement occupational road risk management policies should be the Health and Safety Executive’s document Driving at work – managing work-related road safety guidance (accessible by visiting www.hse.gov.uk/ pubns/indg382.pdf).

Dubbed the ‘bible’ for managing all at-work drivers, including staff who drive their own cars on business, it details the safety steps directors and senior managers should take to responsibly manage driving at work.

Essential reading for directors
Richard Schooling, commercial director of fleet management company Alphabet, says: “The new law makes it clear that juries should take into account how well or badly an organisation has complied with all the relevant laws and guidelines. In the case of a road fatality, that will make the HSE Driving at work guidelines a critical benchmark in any prospective case. The HSE’s guide is probably the most essential 20 pages of reading for any company director this year.”

The key to mitigating the risk of prosecution is a formal written risk assessment of drivers, vehicles and journeys. That then becomes the focal point as to whether enough actions have been taken to ensure safe working practices or whether interventions need to be put in place to minimise the risks posed. “This may require a management change whereby responsibility for health and safety will have to be demonstrated from the managing director down; this is a prerequisite of avoiding a prosecution,” says Faithful.

Thorough risk assessments
Jeremy Hay, managing director of the Essential Risk Consultancy, says that many organisations adopt a scatter-gun approach and purchase solutions such as driving licence checks, driver assessment or driver training but fail to undertake an initial risk assessment process. An initial assessment would result in an audit trail of both employees and the employer and lead to a cultural change with implementation of an action plan. “Each intervention is OK but they should be part of a solution to the overall problem. We continually find that fleets have bought ‘solutions’ from risk management providers, but they have not assessed the scale of the problem at the beginning,” he says.

It’s a view shared by Jim Kirkwood, managing director of risk management providers DriveTech (UK). “Time after time, the directors of many organisations are completely reactive to occupational road risk issues and only act when something dramatic, or serious, happens… but, by then, it’s frequently too late. It’s often a case of penny wise, pound foolish,” says Kirkwood.

Average crash repair costs are around £700-£750 per insurance claim, but the Health and Safety Executive has calculated that for every £1 recoverable, between £8 and £36 may be lost to the organisation in uninsured costs.

Steve Johnson, of risk specialist Drive & Survive, explains: “A properly run driver risk programme should do far better than break even – it should produce a positive return on investment. Fleets should be able to negotiate more favourable insurance terms and, at worst, premiums will not accelerate at the rate they otherwise would have done before a risk management programme was introduced.”

For example, trained drivers are going to avoid the usual ‘bumps, bangs and scrapes’ that often are not worth claiming on insurance. Often, this sort of damage is either paid for by the employer, and consequently comes straight off the bottom line, or is just ignored in the hope that nobody will notice it at sale time. So a driver risk management programme can have a positive influence on residual values at disposal.

Every employer, says Faithful, should have a nominated director or boss responsible for corporate health and safety including at-work driving and that could be the finance director. In the event of a serious road crash the director will be involved in lengthy and detailed discussions with investigating police officers and lawyers and, possibly, Health and Safety Executive representatives. And, it is not just criminal actions that may result from a serious at-work road crash, but civil claims for damages against employers are a serious likelihood. Organisations that have failed to put in place legal safeguards may find themselves the subject of litigation from injured employees and third parties.

Faithful concludes: “FDs must be aware that it is not instant gratification to achieve cost savings. Equally, spending money on risk products does not directly generate income. But by spending the money they are reducing their organisation’s liability and ultimately will get a return on investment.”


Executive summary

  • The Corporate Manslaughter and Corporate Homicide Act comes into force on 6 April 2008. Organisations and their employees that cause death will face criminal prosecution. Driving is a key liability area.
  • Organisations that can show they have taken all reasonable steps to manage risks and have effective health and safety systems in place, will have nothing to fear from the new law. The key to mitigating against the risk of prosecution is a formal written risk assessment of drivers, vehicles and journeys.
  • Many organisations adopt a scatter-gun approach and purchase solutions such as driving licence checks, driver assessment or driver training but fail to undertake an initial risk assessment process.


Essential elements of a risk assessment

  • Assign a senior executive for managing driving at work.
  • Implement a health and safety policy, which incorporates driving at work.
  • Record and act on the findings of risk assessments dealing with all aspects of driving at work.
  • Ensure that every incident involving any vehicle driven on behalf of the organisation is recorded, the information is analysed and action is taken to reduce recurrence.
  • Provide a handbook that includes road safety guidance and driver responsibilities, in support of employer policies and procedures.
  • Ensure all employees who drive at work are vetted, inducted and regularly assessed, to establish that they are properly licensed, competent, suitably trained and medically fit.
  • Ensure that vehicles are fit for purpose and importance is placed on safety features.
  • Ensure all vehicles used on behalf of the employer are regularly inspected and strictly maintained using the manufacturer’s recommended service schedules.
  • Check whether a road journey is really necessary and encourage the use of alternative modes of communication/transport where practical.
  • Ensure that necessary journeys are scheduled to a realistic timetable and are planned to take into account the essential need for adequate rest periods.


The costs of risk assessments

  • Rospa’s online ‘Complete Compliance Review’ costs from £1,200 VAT for a year’s licence. It includes corporate risk assessment; individual driver risk assessments; driver audits and legally required information; a manual for directors and managers; prioritised management action plans and performance targets; and a return on investment monitor. • Individual online driver risk assessments cost £10-£25. Usually 20% of drivers rate as ‘high risk’ and are recommended one-to-one training at £140-£300 each.
  • Licence checks cost £7-£15. Sight checks cost £18.
  • Individual e-learning programmes cost £20-£35 each.
  • Safety seminars for up to 20 people cost around £400.
  • In broad terms crashes cost the employer of a 750 car fleet some £365,625 per annum. This is based on a statistically-based 65% accident rate, equating to 487.5 incidents a year costing £750 a time.
  • According to risk management specialist Drive & Survive, implementing a driver risk management programme including online risk assessments and remedial training would cost the employer of a 750 car fleet some £51,000 in year one. Industry data suggests that a targeted programme should result in a 20% crash reduction, representing a saving of more than £73,000 – a net saving to the company of £22,000 – with further savings of around 5% in year two and three.
  • The ‘hidden’ costs of crashes is three times the cost of an incident – lost outputs and orders, admin and legal fees.
  • Savings can be accrued through reduced wear and tear (5%), fuel economy (5%-7%) and residual values of the vehicles themselves (4%).

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