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Paris attack financial implications

Profile Photo By: Steve Shellum
November 17, 2015

Paris attack financial implications

Eiffel Tower, ParisFinancial implications from the attacks on Paris that killed at least 129 people are of a second or third order, Reuters reported.
Still, companies may now find the world is different. Lower revenue, coupled with increased security and energy costs, will squeeze profit margins, and not just in the short term.
Shares in France-based Accor fell sharply when markets opened on Monday. With high fixed costs, asset-heavy tourism businesses are exposed to sharper falls in operating profit.
Hotel companies, airline and rail operators ? among others ? have overheads that cannot be quickly turned off.
Businesses with less rigid operational gearing face a lesser impact, but costs per unit of revenue may rise anyway. More money may have to be spent on physical and cyber security.
Input costs of energy and other hydrocarbon-linked raw materials may increase if the price of oil rises, as often happens in times of heightened risk. Oil prices spiked after the September 11 attacks in New York, the 2005 bombings in London and the Mumbai killings in 2008.
Pricing effects may be temporary, according to Reuters. Oil and gold often attract investors during moments of uncertainty, but the events in Paris will not change oversupply issues depressing both. Still, the Paris atrocities are likely to raise the costs of doing business, through higher costs, lower risk-taking and, for a while, lower revenue.
Reuters says good companies and responsible investors will embrace this as a necessary way of keeping the far-more-important human costs as low possible.


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