Uncertainty is often the guilty leading to market volatility. Investor relations plays a big role in managing the two way communications between company and key shareholders, in that period.
Given its bridging function of two way communication, between internal and external audiences, investor relations should serve as an information center during periods of significant market volatility that will test investors’ resolve. Since volatility is a direct result of the fear and doubt caused by a lack of information, companies should consider any proactive means at their disposal to alleviate investor concerns at the company level and defend the business story in an overall uncertain environment. In fact, considering that investors may shift their investments quickly and at any time, company must be fast and proactive to defend its business story.
Potential macroeconomic issue in different countries around the word could heavily affect the financial markets and a large number of stocks. While companies have direct exposure to these countries, the resulting impact on the local currency, and by extension the outlook for the global economic recovery, could be significant. These factors could affect valuations across the global markets. Providing perspectives on the company’s exposure to the local currency or the broader country’s economy is key to allowing investors community to properly gauge the company’s exposure to this issue.
Contextualize the stock’s performance could help the internal audiences to prepare intelligent answers to the stakeholders.
Be ready! Be alert! In any period of volatility – particularly when macroeconomic issues are making headlines and driving uncertainty and volatility – communicate with the management team early and often on what you are hearing from the financial community, financial media, and, especially from investors – and giving them the right answers is the first step to manage and reduce volatility.
Take the company message to the investment community, like a normal communications, maintaining an open line of communications with the investment community during times of uncertainty.
Be proactive and purposeful. Investors are often forced to contend with numerous crises at once, particularly if the cause is systemic. Do not reach out unless company can provide meaningful insight that can help them in their analysis, such as context as to how the trends in question do or do not impact the company. If IRO has a particular perspective to share, even through the lens of historical information, it could prove useful in synthesizing the risk and opportunity specific to the company’s stock.
In addition, listen to the company investors’ perspectives on the situation and understand their concerns. If necessary and appropriate, provide them with access to the senior executives of the company and, if is always the case, be careful to avoid sharing any new material information.
Do not ignore the obvious. Macroeconomic uncertainty will almost certainly impact the company business – the real question is by how much and how long. IRO could not be able to answer these questions directly, but any historical information, or linkages to other already established fact patterns may help put current uncertainties into better context.
Time and trust are the keys to maintaining credibility.
Credibility is largely built by consistently delivering on your commitments through good times, and even more so, by managing effectively through times of challenge or uncertainty. The latter is usually where a misstep or divergence from the business story causes the investment community to re-assess their investment thesis. Once this re-evaluation has begun, it is difficult to reverse. In times of volatility, providing additional perspective to investors can help clarify the relevance of a given market issue to your company and fill in some of the information void that be unnecessarily impacting valuation.
Bianca Fersini Mastelloni
Bianca Fersini Mastelloni is Chairman and CEO of Polytems HIR. She is a seasoned consultant in Corporate Communication with extensive experience for over 30 years. Since 1999 she is active in Investor Relations and Financial Communication for companies listed on the major financial markets. Bianca provides strategic IR, corporate access in Italy, Europe, USA, investor’s market intelligence, profiling investors, critical communication and reputation. A scholar of issues pertaining to Communications and Investor Relations. Bianca studied at SUNY – State University of New York, Buffalo and at Boston University, Boston, and she works as lecturer with some Italian University. Bianca is author of the book Investor Relations ed Etica , Efficacia e Vantaggi Competitivi - edited from Guerini e Associati - as of as several articles about Investor Relations and financial communication.