Adapting Investor Relations to the Challenges of the Pandemic Era and Beyond
The Importance of IR in Response to an Unprecedented Challenge
Thinking back to the end of 2019, when the report of the first cases of Covid-19 came out, it seems like a world away from us today. What used to be normal changed drastically as the virus went on to have a global impact, and the results continue to unfold even now.
Beyond its effects on the lives and health of those infected, the virus and the responses to it have affected all other aspects of life as well, including the economy. Indeed, no business has passed through this period without having experienced a profound change of one kind or another.
Some of these consequences have been downright astonishing. In fact, while so many enterprises in a wide range of sectors have suffered dire losses, some, especially those involving e-commerce, have experienced unprecedented growth. Now, a variety of reasons can explain an individual company’s performance through the crisis, and a lot has to do with the particular industry itself. For obvious reasons, the travel industry was hit hard. However, one thing that has been made clear through it all is that managing expectations through the pandemic has been a key factor in navigating through the storm. And while the storm continues to rattle markets and curtail investment, the benefits of good IR can be a decisive factor in survival.
Communication with investors and the ability of Investor Relations departments and firms to rise to the challenges of the changing times have proven a dynamic part of business survival strategies. In this unforeseen situation, which is new to us all, adaptation has played a crucial role in IR’s successes. As we are nearly two years into the pandemic, let’s take stock of what IR has done, and has learned to do, for the clients who need them now more than ever.
Technology Providing Innovation in Uncertain Times
In the search for hard data regarding the effects of the global pandemic response on the IR industry and those who work in it, a survey of IR personnel, investors and analysts was conducted during the second quarter of 2020. The study revealed that the most profound change in the practice of business involved the increase of virtual methods of communication at the expense of in-person meetings. With travel restrictions and lockdowns in place, many professionals found themselves working from home and unable to attend meetings or conferences.
Beyond leaning more heavily than ever on phones and email, video conferencing platforms such as Zoom and Microsoft Teams quickly came to dominate interpersonal communications.
Through technology, a room in the home became the office. As before, meetings could be held throughout the day. Occasional after-hours discussions could even be more easily endured from home. The challenge remained that meetings could no longer be held in an office setting. Companies had to quickly set up the infrastructure for it. And employees who had never worked from home before had to develop the skills and discipline to do it well. However, instead of every teleconference being a window into our personal lives, the VDO chat applications improved by allowing a choice of backgrounds to appear behind your head in the view you present to your colleagues during the meeting. Of course, this was an appreciated factor in maintaining professionalism during the crisis.
Travel restrictions, especially between countries, also presented an obstacle which technology was able to work around with chat and meeting apps. Its success seems to differ by region. Interestingly, respondents in Asia found being grounded more of a hardship than their counterparts in Europe and North America. While the causes are still unexamined, as vaccination becomes more widespread and countries begin to consider re-opening their borders, the situation concerning travel is likely to once again undergo change.
An Increased Role for IR
From a market perspective, COVID-19 has ushered in a new period of market volatility, greater than that experienced in 2008 and earlier crises. As mentioned above, a few businesses experienced record growth. Most others have suffered record losses.
Apart from the actual losses and gains, market anxiety continues to exert its influence over both executives and investors. Now more than ever, Investor Relations have emerged as a critical component of a successful business profile. Experts suggest that the increased importance of IR is likely to remain a feature of any new business model that emerges from the pandemic period.
One fact helps prove how important Investor Relations are becoming to companies. It is simply that, in the midst of so much downsizing going on nowadays, with hardworking individuals seeing their salary reduced to some percentage of what it was, and some even put on leave without pay, those employed in IR report an increase in personnel and workloads, mostly where managing communication is concerned.
Adopting new technologies to stay connected has been highlighted as of key value to the success of these efforts. Remote communication is also likely to remain a prevalent feature of post-pandemic business practices.
Advice for Effective IR Management
Beyond effective cost management, reliable and consistent communications with investors are now a necessary part of survival.
Steven Adams of Gartner, a Connecticut-based technology consulting firm, offers some advice for IR personnel. Do not rush information to your investors, he says. Be confident in the value and accuracy of your data. Revisions are to be expected but too many, especially within a short time frame, may result in a loss of investor confidence.
Also, everyone understands that no analyst can predict a precise outcome, especially given the unpredictability of the current situation. One way of dealing with this is by using ranges or a minimum value. In this way reports can be issued which offer both the flexibility needed for the times as well as realistic expectations for investors. It is important to keep information concise and relevant. Acknowledge the challenges affecting performance but don’t belabor them. If you can’t be upbeat, be succinct.
Adams also identifies some key areas where IR has excelled in the face of previous crises. Creating a crisis response team and issuing public statements are indispensable parts of a first response. Consistent messaging across an enterprise as well as close monitoring of the supply chain situation help to ensure stability and avert surprises. Regular updates to keep investors informed boost confidence and sooth anxiety.
An Uncertain Forecast
As we enter the final quarter of 2021, markets are in a forgiving mood. After a year and a half, they have come to accept the new realities imposed by the COVID-19 pandemic. But markets are perhaps focused now more than ever on business fundamentals. How well did a business weather the pandemic? Can it generate cash? Is a new business model taking hold? Again, adaptation is what market analysts and investors are looking for. An emphasis on IR not only enables companies to promote their adaptive strategies, it is in itself a reassuring sign for investors in this uncertain period.
And it may be that the pandemic has a few more acts in store for us. Looming shortages seem likely to usher in another stormy period for the economy. Whatever might lie ahead, effective management of IR will continue to hold the key for survival through an extended period of market fluctuation.
Responding to Uncertainty with Decision
We have to remember that the COVID-19 pandemic is an uncontrollable event. As such, much of its impact on business simply must be accepted as an unavoidable reality. But businesses do have control over how they respond to the crisis as well as how they communicate their intentions to their investors. By managing IR communications effectively, a business can have at least some influence over the behavior of investors. The business has an opportunity of keeping a finger on the pulse of how investors think and act.
On an up-note, more than two thirds of companies surveyed report that they have fared better through the pandemic than they had thought possible at its onset. In many cases, effective management of investor confidence through use of innovative IR practices adopting the latest technological developments had proved decisive.
The practice of businesses taking on IR consultation and services is likely to remain a new standard in post-pandemic business models.
In the near future and beyond, IR will likely play the key role it has developed over the course of this pandemic. And from there, as we say, the sky’s the limit.