Independent consultancy SenateSHJ has published new research into the financial impacts of crises, revealing that crises can lead to a staggering 50% drop in share price.

The study, which analysed 70 listed Australian and international companies, found that 80% of these companies experienced a drop in share price during a crisis, with the average drop being 12%. The median earnings per share drop was a significant 100%.

The Crisis Value Erosion Index, a tool developed by SenateSHJ, was used to analyse the financial impacts. The index revealed that on average, share prices took 60 days to recover. Crises involving casualties saw an average share price drop of 24.4% and a median earnings per share drop of 191%. Environmental crises resulted in an average share price drop of 23.4% and a median earnings per share drop of 222%.

“The Crisis Value Erosion Index places a hard number on reputation when things go wrong,” said SenateSHJ partner, Craig Badings. “The numbers show how devastating a crisis can be for a company and its shareholders and this doesn’t even touch on the brand and personal reputational impacts felt by the company or the executives involved.”

The most significant drop was experienced by BP, which saw a 50% drop in share price following the Deepwater Horizon explosion and oil spill. BP’s share price took more than three years to recover. Businesses in the mining and materials sector had the highest average share price drop of 21.9%, followed by retail (18.5%) and travel (17.5%).

“Placing a dollar value on a crisis is a stark reminder to companies how important it is to spend the right amount of time, money and effort on risk management,” Badings said. “We have seen time and again that companies with the right crisis preparation, management systems, tools and support teams in place are in the best position to minimise the long-term damage from a crisis. They also tend to recover quicker.”