By Enam Obiosio
Following my engagements with Chief Executive Officers (CEOs) and Chief Finance Officers (CFOs), investors and executives with experience of investor relations, I have been able to track some of the elements of effective investor communication.
In the course of these engagements, I have also realised that making unexpected changes in strategy without first preparing the groundwork with investors is certain to create glitches. Therefore, in telling and balancing the story of investment across developed, rapidly-growing and divergent markets, I have highlighted for you below top 9 investor communication tips for CEOs and CFOs:
- Avoid surprises.
This is to ensure that you don’t make unexpected changes in strategy without earlier enough preparing the footing with investors so as to avoid misunderstanding in the investment and financial community. This, of all, is perhaps the most important tip; although investors will celebrate strategic choices that lead to sustainable growth, but they will expect to be informed about key decisions, which, however, should not be just sudden.
- Considering disclosure policy highly.
To protect and attract investors, the capital markets are strictly regulated with security laws governing such matters as timely financial and material fact disclosures. Everyone in the organisation must comply with relevant laws on disclosure, including educating board of directors and others about what constitutes insider trading, its consequences and the responsibilities of everyone in the team. Besides, if a CEO or CFO is repeatedly asked the same question by different investors, then it is probably time for you to work on communicating strategically the underlying message in the question to the market more broadly.
- Say it as it were with a thoughtful plan for change.
There are all kinds of bad and good news. While every company would love to be consistently identified with good news, investors will be suspicious of you whose company never seems to make a mistake, which invariably is part of life. Therefore, the best way for you to deal with bad news is to release it all at once. This is because by admitting to investors when problems have occurred and explaining what actions or thoughtful plans are being taken to rectify, and learn from the issue, finance leaders and the entire board or directors earn the confidence of investors and the financial community.
- Build relationship with investors in good as well as bad times.
The particular situation a company is in, good or bad, is basically irrelevant. Investor relations let analysts, for the sake of goodwill and trust, know where the problem is and what the company is doing to solve the problem. What matters is how investor relations positions the message and how CEOs or CFOs deliver it. In good times, especially when markets are stable, it is about exuding the confidence in convincingly telling the true story to the investment and financial community, and peaking the credibility in moment of (challenges) difficulties.
- Be open about sources of funding.
Whereas investors and rating agencies are critical of your companies’ current disclosure on sources of funding, other companies are increasingly competing for investors as traders are for customers, all looking for the best terms on capital. At a time when the banking sector is under stress, there are myriad ways of getting funding and this is important knowledge to impart. You must meet the right money manager to invest, contact or cultivate only a handful of analysts and tell the story in a very transparently convincing manner.
- Be consistent with investment criteria.
The financial and investment community want to know where the company is heading, how it intends to get there and what the obstacles and opportunities along the way are. Investors like predictability, so it helps for you to maintain discipline over the criteria for making investment decisions. A clear and consistent risk appetite and thresholds for investment give investors certainty about how your company reaches its decisions. If investors and analysts sense that your company lacks a coherent, viable strategy, they will withhold their recommendation and decision.
- Expose investors to detail market strategy information.
At most companies, the CEO and CFO handle the bulk of investor relations. But by giving analysts and investors access to information and a broader group, including the board and local, rapid-growth market management, your companies can build greater trust and confidence among the investor and financial community and demonstrate the quality of the company’s management, in that the company’s top executives are always addressing and explaining in detail where the turnaround is and where there is problem.
- Consider the local competition.
Obtaining capital on attractive terms is a highly competitive global business. In many rapid-growth markets, local companies are growing in stature and ambition. To compete effectively for scarce capital, your companies will need to articulate to investors a clear set of advantages over their local peers or their plans on how they plan to compete.
- Highlight Your “Plan B.”
It helps when management makes a statement about what it plans to do during the down turn or when the strategy fails. Both investors and companies’ executives always hope that the strategy will prove sound. But in some cases, it may fall short of expectations. Always, you must understand that the financial and investment community are willing to give your company the benefit of the doubt if it has a clearly articulated plan, in case of a shortfall, which shows openness and a willingness to consider alternative scenarios