Cost-benefit Analysis

Cost-benefit analyses

Are of assistance, whenever future costs and benefits cannot be predicted with certainty

Cost-benefit analyses are, first of all, systematic comparisons of alternatives aimed at finding rational decisions.

Generally, future costs and benefits are discounted to the present and compared with alternative investment projects.

The conventional cost-benefit analysis, however, can also be combined with a risk analysis, thus allowing the incidence rate of various consequences, including their respective costs and benefits, to be determined.

This method enables you to take incalculable future events into account. Additionally, it is often impossible to avoid regarding costs and benefits as haphazardly distributed, statistical values. This is the only way, for example, in which the costs and benefits involved in a measure to prevent hazards to human life and health can be evaluated.

By merging business-evaluation methods with statistical and risk-analysis procedures, TÜV SÜD can ensure optimum allocation of scarce resources.

In practice, this is done by defining the costs involved in maximizing the benefits or determining the minimum costs incurred by achieving a predefined benefit (maximizing and minimizing principle).