21Apr, 2017

The Role of Investor Relations During Financial Crisis

public relations, The Role of Investor Relations During Financial Crisis-Public Relations and Communications Business Portal News Indonesia

By: Indah Soepraba – Business Group Director of Fortune PR

The most common of today’s corporate financial crises is an earnings shortfall or a serious deviation from anticipated results in profits and revenues. It’s important to note that during financial crisis, the impact of mishandling a crisis itself can go far beyond the financial community. The role of an Investor Relations (IR) professionals who normally interact with the highest level of company management, including CEOs, CFOs, and boards of directors, are vital to overcome any unplanned financial crisis.

According to Breakstone and Ruth International[1], a financial crisis includes unexpected takeover rumor or offer, merger of your largest competitors which changes the competitive landscape, uncovering financial fraud, an accounting restatement, a key executive illness, a precipitous and unexplained drop in the stock price, an unexpected analyst downgrade, damaging rumors, and negative media coverage.

Moreover, a financial crisis can result in a damaged reputation, loss of credibility, trust and confidence in the business, loss of employee respect, loyalty and productivity, problems with customers and suppliers, loss of management focus on the business, as well as increase costs for litigation, Public Relations, and a whole range of communications costs.

During crisis, speed of handling a problem can be a major head start. You can be more effective if you plan before rather than panicking when starting from zero. Note that a long-term crisis has the risk of loss of credibility. This is not just necessarily resulting from the crisis, but it depends on how the PR professional handle the crisis.


Overcoming Financial Crisis

On 2007, Arthur W. Page[2] developed a guideline for all communications professionals when handling a crisis. This can be applied for the context of financial crisis. Page’s guideline advised PR professionals to tell the truth, prove with action, listen to the customer, manage for tomorrow, conduct public relations as if the whole company depends on it, remain calm, patient and good humored, and lastly realizing that a company’s true character is expressed by its people.

During a crisis, IR professionals together with corporate secretary and board of directors should prioritize corporate reputation over shareholder retention or share price. One way to handle this is to get a positive coverage from the top media, so the stock price doesn’t fall. If a company’s reputation is positive, the stock price will eventually get better. Paying attention to the company’s employee is also important. During a crisis, employees usually sense a high level of uncertainty. They can be threatened to get fired or relocated since the company’s productivity and effectiveness is crucial at that time. So, as an IR professional, one of the ways to deal with this is to hold an internal gathering and be transparent to the employees so there will be no misinformation.

Finally, it is important to always include ways to obtain feedback and input from the financial communities. Feedback will be important to determine adjustments to communications and to provide input to IR professionals and the company’s board of directors to plan the next actions. One last important thing to note is to establish and maintain a good relationship with the media which has been targeted by the investors, and how to construct key messages that can keep the stock value stable or even increase during times of crisis.

[1] Hyperlink: https://www.slideshare.net/Nostrad/the-role-of-public-relations-in-crisis-management

[2] Hyperlink: http://www.awpagesociety.com/images/uploads/2007AuthenticEnterprise.pdf

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