Shareholders and Risk

What is the impact of a lack of disaster planning on shareholders of public companies?

First, lack of planning ensures that a disaster will have worse effects than it should, plants will shut down longer, personnel injuries lead to litigation. An organization can often avert or reduce serious liability by planning and demonstrating that it took necessary steps to prevent and prepare for emergencies. In addition, lack of planning affects the organization’s ability to control information and maintain truthful and effective information dissemination. If information is controlled and disseminated strategically, ensuring that truthful and accurate information reaches the public. Poor information operations are a sign of ineffective leadership, further shaking investor confidence. All of these factors shake shareholder confidence and have deep implications in the overall security of the organization. If a major disaster affects a public traded company and shareholders are not confident in the company’s ability to recover quickly, they will sell stock. If too much stock sells off, the company’s stock value drops. Devalued stock affects the company’s value; it also affects employee retirement plans and the company’s ability to raise revenue for rebuilding and recovering from the disaster.

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