The Real Costs of Catastrophe

A CFO’s job is to protect the value of the company, and one of the biggest potential threats that a company can face is the sudden disruption caused by a catastrophe, such as fire, flood, earthquake or cyber-attack. While parts of these losses are insured, there is still a good amount of loss that is not. And even though many are aware of the potential risk, we rarely think to put in the numbers and run the data.

For example, if there was a flood- 

There could be a loss of revenue if the office is unsafe for employees or the on-site server that hosts your website is damaged. Don’t take these losses lightly as they can destroy an entire enterprise. A proactive measure against this type of threat may be storing your data offsite or in the cloud.

Quantify uninsured loss before a catastrophe hits

While it may seem cost-prohibitive to make improvements to your strategy when you have insurance coverage, remember to take into consideration these three things:

  1. Customer loss. An extended disruption could prompt even loyal customers to seek-out other vendors, resulting in a loss in the enterprise value.
  2. Stunted growth. Even if the company rebounded to its prior growth rate, it will have missed out on the growth period during the disruption. 
  3. Lost investor confidence. Major disruption is considered elevated risk, and that elevated risk makes investors nervous.

Each of the above-uninsured losses has a monetary value that affects your bottom line.

After calculating the numbers, you may find that the upgrades needed to protect the company are much more affordable than you thought.  

Protecting the company’s uninsured value is just as important as the insured content. Unfortunately, many companies don’t realize this until after a disaster has struck. As a CFO it is important to be on the outlook for any threats that insurance won’t cover.

For more tips about safeguarding your company’s assets, check out: Combating Data Breaches.