The crisis enveloping Olympics security provider G4S triggered a fresh slump in its share price today.
The FTSE 100 Index firm admitted on Friday night that it will incur a loss of up to £50 million on the high-profile contract.
Investors fear the group's reputation has been tarnished by its failure to provide enough staff for the Games, with G4S also facing a period of uncertainty if chief executive Nick Buckles loses his job in the fiasco
The company's shares dived by as much as 10%, wiping £400 million off its stock market valuation, and adding to heavy losses seen at the end of last week.
Seymour Pierce stockbrokers removed its buy rating on the stock and cut its profit forecasts for the current financial year by £60 million.
Analyst Kevin Lapwood said: "It appears certain that Mr Buckles will fall on the sword along with other senior UK management.
"This could lead to a period of instability at the company which appointed a new chairman just over a month ago. Whoever is in charge will have a lot of work to do to repair the company's reputation, especially at home in the UK and with the UK Government, its single largest customer. This will be crucial for the company's future."
Mr Buckles survived the collapse of a £5.2 billion takeover deal for Danish cleaning giant ISS last year after a shareholder rebellion scuppered the move, but the latest debacle has put his position under renewed pressure.
G4S's revenues hit £7.5 billion last year, while underlying profits grew 2% to £531 million.
And Mr Lapwood is hopeful that G4S will eventually recover from the crisis.
He added: "There will be some short-term repercussions but overall we believe G4S has a good track record with the UK Government. The shortcomings on the Olympics contract should not significantly affect its chances of benefiting from government outsourcing in the longer term."
G4S said on Friday that it accepted responsibility for the additional cost of the increased military deployment and that it was incurring other significant costs as it endeavours to meet the contract challenges.
It added: "Whilst it is not possible to gauge the precise financial impact, it is estimated that the company will incur a loss on the contract in the range of £35 million to £50 million, all of which will fall in the current financial year."
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