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Trade Publication Article
Calculate the Real Cost of Catastrophe
2019
Overview
The best available evidence indicates that a serious fire would cost the company $220 million in property damage and lost revenue from business disruption. [...]you buy the requisite insurance coverage based on that projection. In addition to the $220 million in insured loss that a serious fire would cost, the model projected these uninsured losses: * Customer Loss: A protracted business disruption would prompt longtime customers to turn to other vendors, resulting in a projected loss in enterprise value of $200 million. * Lost growth: A major disruption would curtail the company’s growth at least over the short-to-medium term, and that lost growth is growth that it would never get back. Simply put, the total financial loss model takes a loss scenario and quantifies that risk in a completely different way, using a discounted cash-flow approach to calculate the loss in enterprise value that could occur as a result of reduced future cash streams and a related cost of capital increase.
Publisher
CFO.com
