Crisis Management - a long term investment

In today’s current climate, with the constantly changing landscape and multi-faceted threats, the ramifications of an emergency can have a disastrous impact on your business. A catastrophic event, be it a natural disaster, security breach or being targeting by an organised crime group in a high profile offence, will almost always lead to an initial financial decline. And as the threat of organised criminality, terrorism, fraud and cyber-crime now affects those previously feeling secure, crisis planning and resilience is an issue that all major businesses should consider.

In the initial aftermath of a ‘catastrophic’ incident, it is common to see several immediate symptoms – a reduction of shareholder value; issues surrounding cash flow due to unforeseen costs, expenses and loss of trading; and the impact on the company from a potentially negative mainstream and social media focus.

However, in the medium to long term, these incidents actually are not as detrimental as one might think, and the reasons more complex than it initially appears. That said, for long term recovery, companies fall into two categories; those that have planned and prepared, and those that haven’t.

For those that fall in the former group, and have a tailored, intelligent and streamlined post-incident response, the benefits are considerable. Studies show they suffer a smaller initial loss, but most noticeable is that within 50 days the net impact on the shareholder value can in fact be an upturn. This is in comparison to those who have no systems in place – they suffer a higher initial loss, negative press is difficult to rebut, and they average a net loss of 15% in the first year. Sometimes, and in the worst instances, they never actually recover.

So what makes the difference, and how do you turn a catastrophe into a positive event?
Firstly, conducting an immediate estimate of direct financial loss and associated economic loss is key. Working closely with insurers from the outset will cushion the blow, reducing short term cash-flow concerns. An open, honest and timely media strategy can also have a positive affect, and sympathy from the public can actually lead to an increase in sales.

Secondly, the key factor in contributing to recovery and long term growth is dependent on management and their response to the crisis. While all major incidents have an initial impact on value, paradoxically they allow the management to show their ability to deal effectively with difficult situations, creating a long-term benefit.

The combination of both factors will have a huge impact on the speed of recovery following a major incident, the image of your company through the critical eyes of the media and competitors, and the overall net profit or loss following these crises. At AnotherDay, we understand and speak the language of insurance, while giving you the tools, response and support to ensure effective management following a major incident. We aim to ensure your company has the best chance of not only surviving, but thriving. through adversity.