When natural disaster catches a company under-prepared, the chief financial officer is increasingly on the hot seat to break the bad financial news to shareholders and investors.
That according to a new FM Global whitepaper, “Master the Disaster: Why CFOs Must Initiate Natural Catastrophe Preparedness in 2019 and Beyond,”based on an analysis of 10-K filings of nearly 100 public companies, many of which suffered property damage and business disruption from hurricanes in 2017. Notable losses ranged from a few million to hundreds of millions of dollars (USD).
“Were [CFOs] to conduct a more systematic cost-benefit analysis of natural disaster risk preparedness, they would realise that allocating capital toward loss prevention provides significant long-term returns,” Wharton professor Howard Kunreuther said in the whitepaper.
With institutional investors saying enhanced reporting of natural disaster risks has become a priority, Kevin Ingram, executive vice president and CFO at FM Global, notes, “If the CFO doesn't lead the charge to invest in reducing natural-hazards exposures, they will be the ones that stakeholders hold accountable for not properly addressing the risks.”
The whitepaper includes the viewpoints of other business risk analysts who say the growing CFO responsibility is not going away in an era of increasing business concerns over climate change risk and disclosure.
Former economist Robert Hartwig, director of the Risk and Uncertainty Management Center at the University of South Carolina, said he expects natural disasters to “get lots of ink in future financial filings because I don’t think they’re currently getting the attention they’re due.”
To learn more, download the white paper.
About FM Global
Established nearly two centuries ago, FM Global is a mutual insurance company whose capital, scientific research capability and engineering expertise are solely dedicated to property risk management and the resilience of its client-owners. These owners, who share the belief that the majority of property loss is preventable, represent many of the world’s largest organisations, including one of every three Fortune 1000 companies. They work with FM Global to better understand the hazards that can impact their business continuity in order to make cost-effective risk management decisions, combining property loss prevention with insurance protection.