This archive report was first published on 25 May 2020.
Investor Communication Key in Uncertain Times ¶
May 25, 2020
With the COVID-19 pandemic causing unprecedented disruption to businesses worldwide, maintaining open communication with investors is crucial for companies to preserve shareholder wealth and navigate uncertain times.
Business leaders should be timely and honest in all their messaging with their stakeholders, according to Suzanne Kilolo, a capital markets expert with nearly 20 years of experience.
The Capital Markets Authority (CMA) has authorized virtual shareholder meetings in place of physical conventions, and companies are grappling with how best to preserve shareholder wealth during the pandemic.
From an operational point of view, trade and supply chains across a wide spectrum of industries are broken, and the difference with previous pandemics is that COVID-19 presents an extraordinary level of uncertainty that will resonate across businesses for possibly years to come.
As corporate leaders work on their companies' mitigation strategies, they will need to update their investor communication frameworks as a good case practice in stakeholder management.
The Investor Relations function is increasingly becoming a critical component in developing credible information that supports investor understanding of a company's decision-making process during these uncertain times.
Clarity in communication or lack of it also impacts a company's valuation over the long-term, and investor relations teams within companies should prepare and present scenario analysis on the impact of the pandemic on their businesses.
Such scenario analysis supports an organisation's awareness of future uncertainties, while providing a range of possible outcomes (worst-, base-, and best-case).
Pay attention to specific industry mitigation initiatives, as well as the company's likely areas of both downsides and opportunities, including effects on the supply chain, earnings, cash flow, liquidity and covenants.
Stay close to the detailed Business Continuity Plan (BCP) in place and act quickly to mitigate financial and operational headwinds.
Ensure all stakeholders (employees, suppliers, customers) in the business ecosystem are safe and informed.
Present the facts 'as they stand at this point in time.' Investors expect a meticulous business analysis from the management that is up to date, transparent and realistic.
By demonstrating a grasp of the situation, in terms of having a level of control over the unpredictable during this time of turbulence, companies can articulate their enduring, long-term value to investors now more than ever.
