Study: hurricanes can harm long-term company value
Stock prices of companies affected by hurricanes take 5% hit
Any way the wind blows matters when it comes to business.
A first-of-its-kind analysis links hurricane damage to a loss in shareholder value and property protection to value preservation.
These findings were uncovered when FM commissioned Pentland Analytics, an independent strategic advisory firm, to conduct the research that expanded on FM's white paper "Master the Disaster: Why CFOs Must Initiate Natural Catastrophe Preparedness in 2019 and Beyond." Dozens of large publicly traded companies that reported hurricane-related financial damage to the U.S. Securities and Exchange Commission in their 10-K annual statements collectively lost 5% of their shareholder value over the year following the storms.
The upshot: Well-prepared companies preserve their value and poorly prepared companies may not.
A separate dataset shows that FM clients fared better in terms of shareholder value when they followed the company's property protection advice prior to those same hurricanes. Companies that followed all of FM's engineering advice relating to storm protection collectively outperformed clients that hadn't by 10%.
"The lessons are clear," said Deborah Pretty, founding director of Pentland Analytics. "First, hurricanes damage shareholder value as well as property values. Second, property protection pays off."
Download FM's Master the Disaster white paper
Methodology
Pentland Analytics modeled the stock prices of 52 U.S.-based companies reporting financial damage from hurricanes Harvey, Irma or Maria. The companies collectively lost US$18 billion in market value by August 2018 stemming from a collective 5% hit to shareholder value. The companion study reviewed loss-prevention and financial data of 109 clients of FM that had significant property in regions affected by the same hurricanes.