EconomyHow to improve communication with investors in times of...

How to improve communication with investors in times of volatility

(Expansion) – There are critical times when companies need to effectively and strategically communicate their key messages to all of their key stakeholders. We are currently in one of those periods, characterized by high volatility in the value of shares and rising interest rates. The markets are clearly showing concern about the future of the economy and corporate profits.

Communicating with investors during times of economic volatility can make or break a management team’s credibility. By focusing on clear messages that help the investment community assess potential impacts on short- and long-term prospects, companies can earn investor loyalty and trust.

Two critical moments of time must be considered to communicate:
– the transition period we are in now, when the financial performance of companies remains positive but the markets anticipate a slowdown and
– the period when the economic slowdown materializes and is reflected in adverse financial indicators.

Navigating the transition to a recession

We are currently seeing a stark difference between relatively positive corporate management commentary and more pessimistic investor sentiment, focused on a possible economic slowdown and its likely impact on reduced revenues and higher financing costs.

For businesses it can be a difficult time to navigate: how do you bridge the gap between what your business is currently seeing, which may still be healthy, and what the market expects or fears?

In this context there is a real danger of becoming the company that claims ” there is nothing to see here at the moment ” until they are forced to change direction. This is when a company can lose credibility if it is perceived that management was not paying attention and planning ahead.

Here are some ideas on how to approach this difficult transition period:

Acknowledge the disconnect . It should be explained that the company understands the concerns of the market, but that its current reports are based on current actions and what it sees and hears from its customers and end markets. However, it is important to communicate that the current economic situation and the strategies that are in place in the near future to address possible changes in demand are considered.

Provide examples and data . If the company has been through a previous downturn, it is advisable to provide examples of how the business has adapted to difficult situations, mentioning the lessons learned and how they influence your current decision-making.

Fine tune the business model guide . It is recommended to provide stress tests or other scenarios to illustrate your readiness, as well as a variety of potential impacts on your key metrics. Be clear about the assumptions built into your ranges so analysts can make their own decisions.

Investors don’t expect management to have a crystal ball, but they do want the peace of mind that there is a strategy in place that considers multiple economic scenarios and they want to understand what actions can be taken to protect both earnings power and capital. as possible.

Credible and proactive communication. Successful communication during a period of economic transition helps level the way for when the company’s results begin to weaken.

Report significant new metrics . Are there metrics that can be provided that have not been provided before, that are more meaningful in managing the business during a downturn? While it is difficult to remove information once it is submitted, the temporal metrics sought during periods of economic stress will be appreciated. Likewise, don’t hide already reported data just because it turned negative. This is a path to loss of credibility.

Review your long-term strategy . While companies need to address the short-term impacts of an economic downturn, investor communications should also focus on how the current environment may affect long-term strategy. This is a good time to review what has been shared about the growth strategy and what goals are seen in the context of a prolonged slow economy (mergers and acquisitions, cost reductions, efficiency programs, capital allocation, etc.)

Analyze the balance . During economic downturns, “cash is king.” Make sure the balance sheet and cash flow are clear and review what actions can be used during a downturn and how it will affect the company’s capital structure and objectives (capex, etc.).

Minimize surprises . With recessions often come profit and loss surprises. Communicating them as soon as possible and explaining the methodology to analysts and investors, who may not be familiar with the process, can avoid some tough questions.

These times of uncertainty are accelerating the scenario of a global economic crisis. No one knows for sure if or when this will happen, or the depth and duration of a potential recession. What we do know is that business cycles are ultimately inevitable.

A strong communication plan should always consider the best case, worst case, and base case in good times and hard times.

Editor’s note: María José González de Cossío is CEO of GDC Consulting, a Financial and Corporate Communications, Public Relations, Crisis Management and ESG company. He has experience working in the private and public sectors, as well as in NGOs on issues related to the energy sector, infrastructure, risk management, education, economic analysis and public relations. Economist from ITAM and member of the Consultative Council of the Women’s Forum, Women in Energy, as well as the Consultative Council of ITAM Alumni. Follow her on and on . Write to [email protected]. The opinions published in this column belong exclusively to the author.

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