Investors are in the business of assessing risk and making judgment calls based on their belief in a company’s ability to achieve certain results in the future. During times of crisis, it is more important than ever for management teams to have decisive plans in place, convey a sense of control and communicate effectively with the investment community. Some situations, such as the 9/11 terrorist attacks, the 2008 mortgage crisis, or the global coronavirus pandemic, are so sweeping and destructive that many of the traditional rules and familiar patterns for communications no longer apply. The same is true for the metrics investors prioritize in assessing their portfolios. This can be disorienting and put increased pressure on management and their investor relations (IR) teams to take the right steps to balance investor’s need for information with the best interests of the company amidst a rapidly evolving environment.
For companies in the throes of crisis, investors are first and foremost focused on viability – do the company have the capital (or access to it) to continue operations – hence the emphasis on metrics such as cash-on-hand, burn rate, cash flow, debt maturities, covenant triggers, and alternative financing options, including from government programs, which might not garner much attention in normal times. Cash is king in surviving revenue and business disruption. Be prepared to answer questions about the company’s plan for maintaining liquidity, reducing expenses, and keeping the company well-funded. IR teams should also articulate tactics to ensure the company is positioned for an eventual recovery.
As you review your IR communication plan during crisis times, these steps can help.
1. Continually Assess Your Situation
Review the current state of operations. What parts of the business are operational? What continuity plans are being used? Evaluate how the company is managing and protecting team members, partners, and customers, as well as whether the supply chain, sales, and distribution infrastructure are functioning efficiently. Determine the short-term needs of the business and work with company management to determine the longer-term impact. Disruption may benefit some businesses, which will continue to operate and may even be seeing higher demand. Once you have a good handle on the state of the business, you can develop a strategic IR communications plan.
2. Create a Plan
Together with management the IR team should create a realistic and actionable communications strategy. Focus on the areas you can control and craft your messaging around those themes. Don’t be distracted by the many variables and factors beyond your control; concentrate on the levers you can pull and the outcomes you can influence.
In crisis situations there should be scenarios that management comes up with for the business based on the environment. So once we have a plan, execute it. Keep in mind, the stock may move in the opposite direction than is expected due to market volatility, know that transparent disclosure is warranted when there is material information to share. This should be proactive versus reacting to market movement.
It is important to assess your timing, too. Some companies are considering issuing their earnings releases slightly earlier than normal to give the Street more time to digest the contents before their earnings call. Some are open to letting their calls go longer than an hour to ensure all analysts’ questions are answered. Others are considering not holding a live call at all (just a recorded message) because the normal Q&A dialogue which tends to be forward looking is not a good option in the current uncertain environment. All options are viable based on each company’s specific situation. And be sure you have assessed your company’s vulnerability to shareholder activism and have a plan to deal with it.
3. Mind Your Guidance
Depending on the state of the organization and whether there is still uncertainty that could affect its well-being going forward, your team may consider suspending or withdrawing guidance. If you decided to do so, do your best to explain areas of opportunity and uncertainty that led to the decision. And even if you aren’t giving formal guidance, educate investors on the indicators to watch as business returns to normal. Be sure to keep an open dialogue with investors (in line with established rules, of course). When the IR team “goes into the bunker,” it only causes speculation and fear.
4. Craft Your Message
Your messaging will depend on the state of the business and the strategic decisions you made in the planning phase. In general, transparency and prudence must be balanced. Stay measured if initial results are positive, as crises have a way of delivering an array of surprises. Some other areas you may want to consider addressing:
- What is the company doing to manage controllable expenses?
- What are the metrics or leading indicators that management teams are using to drive operating expenditure decisions?
- What metrics or leading indicators will signal a recovery or upswing?
- What will an eventual recovery look like? Are there regions, countries that have moved past the crisis with their experience post crisis serving as an example for what other areas of the business should/may experience?
5. Leverage Technology to Enhance Your Communication
Today’s technology allows flexible options for groups in disparate places to connect — which is especially important in times of crises. You want to maintain an open dialogue with investors, and virtual options can help you continue meeting and delivering information.
From conferences to earnings calls, attendees may dial in with phones, computers, or other devices to get the information they need. However, it’s important to test drive your technology with management team members who will be dialing remotely. This may be the first time all of them are not together for the call, and you want to be sure they have the proper equipment, connection, and understanding of the platform you’re using to participate appropriately.
6. Protect Your Flanks
The impact of a crisis situation can temporarily expose companies to opportunistic maneuvers by activist shareholders. It is important to carefully monitor dialogue with investors to understand motives and anticipate threats. Which investors are demonstrating interest in the company or requesting to speak with management? What is their investment strategy and historical track record? Be sure that the company has reviewed its corporate defenses and has communications plans in place to respond to potential activism.
Finally, it is important to envision recovery. What is the end state? At some point, everyone will look back on your actions during the crisis period. Think about how you will want your company and your actions to be perceived and act accordingly. Then, once the crisis has passed, you’ll emerge even stronger.
Managing Partner, ICR
Joe and Allison are long-time partners at ICR and lead the firm’s Consumer-Retail investor relations group. Both spent more than a decade on Wall Street as highly-regarded sell-side analysts before transitioning to investor relations consulting.
ICR is the 5th largest independent strategic communications firm in the country and the largest provider of investor relations services, advising with more than 700 clients through 15 industry-focused sector teams. The firm also provides public relations, crisis communication, social/digital, governance and capital markets advisory services.
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