Investor relations management in troubled times

Investor relations management in troubled times

To say that the world's stock markets are volatile would be in an understatement. Against a backdrop of the Eurozone debt crisis, political paralysis in the US and increasingly gloomy economic news from major western economies, investors have gone into def con one mode.

Every gnomic utterance from politicians and central bank officials is scrutinised for hints of a deepening crisis. Every piece of data is searched for signs of deteriorating conditions. And all too often the result is yet another toxic day on the markets. Shares tumble and the sense of panic rises.

For many boards, the downward pressure on shares that we've seen in recent months must seem unjust. In an atmosphere of all pervading gloom, it's hard to buck the market trends and the danger is that even those companies that have turned in more than decent performances over the past couple of years will see their share prices fall.

In this environment, a proactive approach to investor relations has probably never been more important and that will inevitably add to CFOs' workload, as it typically falls to the finance chief to deal with investors.

Joan Harper, investor relations expert and managing director of consultancy Arthur Schmidt, says: "When circumstances are difficult the investor relations message should always come from the CFO or the CEO. You should never delegate the job to a head of IR."

Professor Steve Young, who has carried out research into investor relations for Lancaster University's Business School, agrees. "In volatile times, what investors want is direct access to senior management," he says.

But that begs the question of whether CFOs and their fellow board members should be stepping up their IR efforts in line with deepening despondency in the markets. You could argue the case for business as usual, taking the view that if a company has a tried, trusted and effective investor relations strategy, the best medicine is to simply carry on as before.

Professor Young says continuity between pre- and mid-crisis IR strategy is vital. "You can't really invent an investor relations strategy overnight," he says. "Effective strategies develop over a period of time during which the company establishes a relationship of trust with analysts and investors."

If the trust isn't there then any sudden IR offensive is unlikely to be effective simply because the audience will inevitably be sceptical when confronted by upbeat messages coming from businesses struggling to maintain share prices. Indeed, according to Harper, hitting investors with a rush of information can be counter-productive.

"In times of crisis it is important to get the company's message across, but I would be a bit concerned about companies that are out there too often. That can actually drive volatility," she says.

But that's not to say that companies should do nothing. Professor Young says those companies that have built credibility with the markets in the good times are in a much better position to get their message across when a crisis hits.

"If you have a good reputation with investors and analysts you have an opportunity to do something effective. And it is often in troubled times that the investment a company makes in IR really pays off," Young says.

Core message

So what can be done when market conditions get choppy? The key to managing and maintaining a share price in volatile times is to have a one or two core messages that will provide assurance to investors, says Harper

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