Advice: Investor relations in tough times
From general market issues – such as global oil prices and regulation – to more company-specific problems such as shareholder activism and cyber-security breaches, many companies have experienced, or are likely to experience in the not-so-distant future, the detrimental effect a corporate crisis can have on a business. So how can IR play its part and help companies weather the storm?
For Richard O’Connor, head of IR at RBS, tricky times offer a real opportunity for IR departments to demonstrate their value through giving voice to external perceptions: ‘A good IR team will be able to hold a mirror up to the business itself and be able to feedback important external views to the management team and the board, putting these into context so that management can get a grasp of how any demanding issues are being perceived by the outside world,’ he says. ‘The IR team can act as a vital information conduit between the company and the outside world.’
Nils Paellmann, head of IR for T-Mobile US, believes IR teams must be flexible in their approach to overcome crises. ‘IR is relatively easy to do in good times, but the bigger challenge is to be effective in demanding situations where investors are looking for answers and strategies of how the company will overcome difficulties,’ he says. ‘The best IR teams will adapt their methods to suit not only the type of challenge, for example external market forces versus an internal issue, but also to their different investor audiences.’
The ability of a company, and its IR function, to successfully deal with a crisis is determined in part by the work already done building trust with the investment community, notes Paellmann. ‘A big part of investor relations is to develop strong relationships with your investor base,’ he says. ‘If they know you and know your management team, then they are most likely to trust your business decisions and stick with you during testing times.’
The same goes for internal relationships, notes O’Connor. If you are already thought of as a trusted internal adviser, management is more likely to heed your advice when a crisis emerges. ‘By being consistent in both good times and bad, people within your company will come to you to seek your advice, and will listen to you and appreciate your honesty and candour in more troubled times,’ he says.
‘At the same time, it’s vital that you don’t just point out problems – anyone can do that. Your real value will lie in being able to help, in conjunction with others, to develop proposed solutions based upon your investor and company knowledge,’ continues O’Connor. ‘These solutions could include proactive communications plans and shareholder engagement proposals, amongst others.’
This article was produced in association with ELITE Connect. It was originally published on the ELITE Connect platform.