Case Study - Cost Allocations
Problem
Entity with retained risk wanted to share costs among separate P&L’s equitably in order to incentivize safety, loss reduction and loss avoidance.
RCS Action
RCS’s team members worked collaboratively with the client’s management team to 1) understand the current process, 2) identify areas of inequity in current process and 3) suggest a comprehensive solution that would ensure each P&L was being charged an amount that was commensurate with the risk it added to the group.
Outcome
RCS created a dynamic allocation system that enabled the client to balance the responsiveness and stability of the allocation approach. RCS owned the creation and ongoing updates of this solution, freeing the management team’s time. Ultimately, the management team was able to report an increase in equity of over $5M (over 50%) in the four years following RCS’s involvement.