Which cost should a business consider when managing risks associated with productivity?

When managing risks associated with productivity, considering the loss of productivity and overtime costs is essential. Productivity directly influences a business's operational efficiency and profitability. When a risk event occurs—such as equipment failure, labor shortages, or supply chain disruptions—it can lead to a decline in productivity as tasks are delayed or halted.

Moreover, during times of reduced productivity, companies may find themselves incurring overtime costs in an attempt to meet deadlines or compensate for lost output. This can strain financial resources and impact overall profitability. Therefore, focusing on these aspects allows businesses to strategize effectively—implementing risk management practices that specifically address potential productivity losses and associated costs.

While insurance premiums, physical measures, and inventory costs are also important financial considerations in risk management, they don’t directly encapsulate the core issue of productivity losses and the immediate financial impact that such losses can bring about.