Investor Communication during the COVID-19 era
Investor communication directly influences investor relations
Restrained mobility and volatility in stock prices are a common-stance on D-street and resultantly companies are swamped with phone calls from analysts and investors seeking information, which can be a challenge with the current government-mandated restrictions on traditional workplaces.
Investor communication directly influences investor relations, which determines the health of company balance sheet in coming quarters.
However, the major setback is the multiplicity of channels that disseminate breaking news every couple hours, which leads to the dilution and probably passing off of genuine breaking news having potential gargantuan effects.
Breathless news channel commentary apprise viewers of latest advisories, notifications, legal amendments, corporate actions, etc. made by Companies, Regulators, Central and State governments that impact Indian citizens at large.
But without a comprehensive crisis playbook in sight, credible and timely communication is of paramount importance to investors. With this in mind, companies should adopt some of the best industry practices as outlined here after:
1. Dedicated Communication Team
With the changing circumstances, companies must furnish accurate information in a timely and consistent manner to its partners, vendors, and employees.
In larger companies with complex organizational structure, decentralized communication maybe encouraged with groups of about 5 to 7 individuals consisting of a key member from the leadership team, a legal counsel, corporate communication specialist, human resources head, a technical expert in the domain area, etc.
External communication may prove to be troublesome in case its employees fail to comprehend it. Studies show that interaction with company leaders boosts productivity, lessens uneasiness and as a consequence gives hope, regardless of the medium i.e. emails, telephone messages, or webinars.
Communication of business fundamentals and investment values with employees will be a good litmus test –because if companies fail to engage employees and vouch for their business position, or initiative, then its success outside the organization is unlikely.
2. Leverage Technology for Enhanced Communication
The medium of communication to external stakeholders is of prime importance and in times of social distancing – online communication takes the cake! Technology-backed virtual options provide flexibility to groups in different geographies to connect and have an open dialogue with investors, and this way companies can continue to connect and furnish information.
But prior to taking the tech-plunge it is important to test the technology internally among employees from different rungs of the corporate ladder who will be dialing remotely through - phones, computers, or other devices – to attend videoconferencing, webinars, and presentations to interact with current and prospective shareholders.
Success of virtual meets is contingent upon participation of its stakeholders, which is largely dependent on the presence of adequate equipment, internet connection, and a comprehensive understanding of the virtual meeting platform.
In the event of several conference and road-show cancellations, investor conferences must make the transition from in-person to virtual formats of communication.
3. Communicate Solutions and Commitment
Unprecedented times necessitate unprecedented measures. So it is vital for companies to demonstrate the capacity and resolve to weather the storm by opening its cards on business strategy, corporate governance, and financial updates – now and even after the coronavirus dust settles.
Companies can achieve this through two modes – first, transparent and candid communication of impending challenges in the way of growth and expansion plans with all stakeholders.
Transparency should not be misconstrued as vulnerability but a sign of the company’s grasp on its current situation and resolve to effectively navigate challenging circumstances.
Also, in the interest of investors and other stakeholders, companies should avoid downplaying the impact of short-term disruptions or brushing them off; instead challenges must be addressed in a clear and transparent way.
Second, companies must highlight and reinforce long-term business fundamentals. This in turn, will support a gradual recovery and deliver long-term value.
Apprising stakeholders of the company’s financial health without window-dressing or downplaying the impact on its business, while shifting gears to concentrating on the company’s strengths leading to innovation is the way forward.
4. Responsiveness and Reactions
While managing communication during a crisis, the management and leadership should analyse the situation through the lens of its audience.
The existing situation poses a prolonged challenge that may persist for a long time, but companies must address concerns from the investment community with compassion, while being prepared for the worst-case scenarios.
Interests of an investor are divergent from those of a promoter or a vanilla-shareholder, but companies must illustrate its conviction in delivering the needs of each stakeholder despite the challenging times. An alignment of business objectives with those of shareholders leading to a shared business goal during the pandemic may create sustainable value for investors in the long-run.
5. Protect Your Flanks
Lastly, the pandemic has hurled numerous businesses in the quagmire of opportunistic maneuvers by activist shareholders.
This makes it imperative to monitor the dialogue with investors so as to identify challenges, motives and opportunities from an investor’s standpoint.
Companies must ensure to foresee this, review its corporate defenses and place an equipped communications team to respond to potential activism. The actions taken by corporate fangs will be remembered long after the COVID-19 dust settles and may set the perception of a company.
The ongoing pandemic has cast a cloud over the economic recovery of companies, stock markets, and economies across the world.
The tumultuous start to businesses in FY 2020 along with rapidly evolving changes in terms of company policies, government-mandated amendments or advisories, coupled with day-on-day disruptions caused by the spike in coronavirus, necessitates clear and open communication channels by companies for its investors, vendors, customers and other stakeholders alike.
Although disclosures and communication maybe delayed due to current challenges, companies must try to alleviate concerns around business continuity, growth strategies, and overall financial well-being of the company.
With many unknown variables and contradictory information being published on the web or broadcasted through TV, financial insecurity and panic will increase further deepening the hole of uncertainty.
Moreover, investors should receive complete and accurate information at the same time and same degree of candor, irrespective of their shareholding percentage.
In the view of quick-changing dynamics, the central objective should be demonstrate long-term resilience and confidence by striking a balance between providing guidance to shareholders and a clear assessment of the impact on business and thereby giving clarity to the investment community during uncertain times.
This article was originally published on medium.