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IR In The Time Of Coronavirus

AIAF “Il Valore Della Ricerca Nell’investimento” e Lo Status Di MIFID 2
20 February 2020
IR In The Time Of Coronavirus – Part 2
19 March 2020

IR In The Time Of Coronavirus

Tips For IROs in uncertainty periods 

by Simona D’Agostino Reuter

 

In my Blog “Crisis Management: Always a HOT topic” I suggested that in critical situations it is essential to “Communicate with honesty, candor and openness while acknowledging risk”

https://hear-ir.com/ir-blog-crisis-management-always-a-hot-topic-part-1/

https://hear-ir.com/crisis-management-always-a-hot-topic-part-2/

 

Coronavirus has brought fear to markets

A good news with oil and stock markets which rebounded from their historic sell-off a day earlier as investors bet policymakers would launch measures to soften the economic blow from the global coronavirus outbreak.

Nevertheless, the coronavirus crisis is driving stock markets around the world into a panic phase similar to what we saw in 2008..

Yesterday, Italy has extended its emergency coronavirus measures, which include travel restrictions and a ban on public gatherings, to the entire country. Economic activity in Italy is weak, with public debt remaining an “important source of vulnerability” for the economy. The balance of risks to the growth outlook remains skewed to the downside. Furthermore, the outbreak of coronavirus is expected to have a material impact on EU economy in 2020, although it is still to early to assess it and to reflect it into EC’s forecasts.

Legendary investor Warren Buffett gave a wide-ranging interview to CNBC in which he discussed issues such as crypto-currencies, and some of his stock holdings, arguing that banks are a good place to be invested right now. ‘They’re very attractive compared with most other securities I see,’ he said.


Well, now as in 2008, stock prices are falling to levels that bear no resemblance to companies’ real values. As in 2008, today’s crisis will be over, and prices will recover.  The news-flow continues to be certainly worrying and, if it is not resolved quickly, it is likely to have a burden on economic activity. Investor fears that the worldwide coronavirus outbreak would push the global economy into recession.

Now as then, the right attitude for investors is to keep their composure and wait for the end of the storm.

 

From our side, what can we do? What is the IROs’ role in times of uncertainty?

As just reminded, in a crisis we need to focus on communicating quickly, sending messages through the financial market and the media, both traditional and social media, to reach a wide spectrum of stakeholders, while being in compliance with all the regulations.

We refer herein also to some abstracts from the IR Magazine latest articles.

While businesses around the world have been moving quickly to navigate the rapidly evolving situation, for listed companies, there is an added, inevitable need to start preparations for communication with external stakeholders as the corporate earnings season kicks off in the next few months.

IROs’ role in such a circumstance is key, more than ever, along with that of communications professionals, and leadership teams, who have to  deliver the ethical commitment to resolving the crisis in order to do what is right and effective for the company’s stakeholders.

 

We would recommend the following:

  1. Communicate with honesty, candor and openness while acknowledging risk
  2. Collaborate and coordinate with credible sources
  3. Meet the needs of the media and remain accessible
  4. Communicate with compassion, concern and empathy
  5. Accept uncertainty and ambiguity

 

 

More deeply, below are some key areas IROs and business leaders should bear in mind when communicating with the investment and financial communities.

Work from the inside out

In difficult moments such as this, companies need to prioritize timely, quality and consistent communications with employees, vendors and partners. Apart from being an integral component of sound leadership, this will be key in ensuring all of the business fundamentals the investment community values. It will also be a good litmus test – because if your own employees don’t buy into your position, message or initiative, it won’t succeed externally.

Be transparent in communicating near-term challenges

Communicate transparently and candidly about the short-term challenges the company expects to face from operational risks to disruptions in the supply chain or changes in market dynamics. Transparency is not a sign of vulnerability but of sensible risk management and sound governance. When carried out effectively, it can demonstrate management’s grasp on the situation and its strong leadership capabilities in navigating challenging circumstances. The management team should articulate clearly and to its best ability an assessment of the immediate, material impact of the current situation on the business. Avoid downplaying the impact of short-term disruptions or brushing them off; instead, address the challenges in a clear and transparent way.

 Use the opportunity to reinforce the  business’ long-term fundamentals

This is also a critical opportunity for leadership to highlight and reinforce the business’ long-term fundamentals, which will support an eventual recovery and deliver long-term value. Refresh the messaging on the strengths of the company, from the value of its key offerings to talent and even investment in innovation.

Communicate solutions and commitment…

The assessment of the epidemic’s impact should also include communications around solutions and mitigatory measures that the company has in place. It is important to show the company’s ability and resolve to weather the storm.

…But also be ready to respond to concerns and uncertainty

Be realistic when communicating your outlook and guidance on the remainder of the financial period and be ready to brace for worst-case scenarios. The current situation may present a prolonged challenge that persists for a long time. Stay abreast of the latest developments, consider possible scenarios and be ready to address legitimate concerns and doubts from the investment community.

Think about your communication goals

The interest of your investors will no doubt be weighted toward the business and financial impact of the epidemic. The company would need to demonstrate its commitment in delivering what each stakeholder is looking for. By effectively demonstrating the company’s ability to achieve shared goals and find alignment with its stakeholders (such as business partners and customers) during difficult times, the company also makes its case for its ability to create long-term, sustainable value for investors.

 

The primary goal is to get a balance between providing an assessment of the impact, as well as conveying long-term confidence and resilience. This will help the companies to reassure and offer clarity to investors during these times of uncertainty.

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