Applying Real Options to Safety and Ergonomics Investments

This paper applies real options pricing theory to value investments in safety and ergonomics (S&E) interventions. Through a case study involving a material handling system, the authors show how deferring an investment can be valuable under uncertainty. Using both traditional and perpetual call option models, they quantify the flexibility gained by delaying or investing immediately. The analysis demonstrates that considering the costs of workplace injuries alongside investment timing provides a more complete valuation framework. Real options can help companies make smarter decisions while still prioritizing employee safety.