International financial communications
Category: Business in Great Britain
‘It is very vulgar to talk about one’s business. Only people like stockbrokers do that, and then merely at dinner parties.’ – Oscar Wilde
There was a time when Oscar Wilde was right, a time when talking about one’s business was viewed as inappropriate or vulgar. However, recent commotion over transparency, disclosure requirements and Sarbanes Oxley has prompted wholesale changes in international business practices and etiquette. Not only is it no longer vulgar for company managers to talk about their business, the market demands it.
As a result, companies increasingly have to pay attention to the ways in which they communicate with their stakeholders. In fact, those who allocate insufficient resources to developing and implementing a sound communications strategy, do so at their peril. For companies who are publicly traded, or even those that simply depend on external finance, carefully planned and executed financial communications are essential.
It can’t be haphazard. Gaining attention of international investors, financiers and journalists is not always easy — particularly for emerging markets companies, who don’t always carry the same weight as their global counterparts.
Gaining Global Recognition — Trials of a Small Fish in a Big Pond
There is no denying that companies from Russia, Ukraine, other FSU countries and the Baltic States face something of an uphill battle when it comes to attracting the attention of London and its financial institutions. Firstly, these companies not only face competition from within their own region, but also from other emerging markets such as China, India and Brazil.
Secondly, with the notable exception of the major natural resources groups, the majority of companies coming out of the FSU looking for finance are relatively small in comparison with their global industry peers. Companies are often overlooked by banks and investors purely on account of their size, not to mention the perceived risks of exposure to emerging European markets. For the same reason, international media coverage can be hard to come by.
So how can companies overcome these obstacles? Experience shows that it is insufficient simply to send out press releases to the media, or company statements to analysts and investors. The approach needs to be more creative and more aggressive.
Become a spokesperson for the industry, rather than simply the company
Take, as an example, the Russian retail sector. To be frank, even a comparatively large and successful Russian retail company will struggle to generate international interest on its own. However, the retail sector as a whole is internationally regarded as a major growth area in Russia and one that could offer impressive returns on investment for many years to come. The CEO of a retail company will stand a much better chance of getting international coverage by positioning himself as an authoritative source of information on the sector as a whole (which carries global appeal), rather than merely a spokesperson for his company (the global appeal of which is more limited).
Understand and capitalise on the company’s — or country’s — advantages
As competition for international funds escalates, so does the need for companies to think carefully about their competitive advantages when they approach potential investors. For example, the number of investments made on valuation grounds alone is decreasing, while the appetite for growth stocks is increasing. This is an area where many FSU and Baltic companies — particularly those in the consumer sectors — should capitalise. There has been a marked increase recently in the number of international investors looking for the best play on the region’s consumer growth.
Ken Baksh, portfolio manager with the Strategic East European Fund, points out that “institutional investors are increasingly looking to tilt their asset distribution towards the consumer sector. Apart from the obvious growth potential to be imparted by an expanding, wealthier consumer society in Russia, a number of companies in this area do not suffer from the same political, corporate governance or ‘Soviet baggage’ that may weigh more on traditional ‘old’ Russian companies.”
The commitment of senior management — key to making financial communications
work
Independent communications advisors can play an important role in supporting and making more effective a company’s communications strategy. However no independent consultant can or should replace senior management in communicating the company’s core mission and strategic outlook.
Analysts and investors require access to senior management, particularly at the level of CEO and CFO. This is especially true for public companies or companies that are close to a public listing. Often, senior managers have to make themselves available for several weeks per year to satisfy investor demand.
Managing expectations — another fundamental aspect of financial communications
It is imperative for companies to manage the expectations of the markets and its stakeholders. All too often, companies paint an overly rosy picture of their prospects in an attempt to impress. However, this strategy is at best risky, and at times disastrous. Serious followers of any company will be aware of the risks and challenges that lie ahead. It is the responsibility of a company’s senior management not only to acknowledge the risks, but also to explain what measures are being taken to address them. A denial approach will immediately undermine potential investors’ confidence.
Investor relations — pre and post-IPO
It is a common mistake to think that a company does not need to have an active investor relations and outreach programme until after it goes public. In reality, companies that plan to IPO in the future can benefit greatly by liaising with the investment community from an early stage. Investors can provide invaluable feedback on the type of products in which they would be interested. They can also help a company to assess the way it is perceived in the market, and enable the company to redress any concerns, before it is too late.
Accessing these investors is of course another matter. Fund managers have a limited amount of time to devote to any company — particularly small, private companies. For this reason, companies should use all resources available to them, from their broker to investor relations advisors, so as to access and develop relationships with as broad an investor base as possible. Time spent soliciting the opinions of a range of investors can potentially have extremely positive implications for a company’s share value and liquidity.
Developing a financial communications strategy — practical considerations
▼ Corporate Website: An informative and well designed website will play a vital role in a company’s overall communications effort, particularly when it comes to reaching smaller, private investors. Key Contact Database: Companies should compile and maintain an extensive database of key contacts; including investors, analysts and media. By doing this, a company can better regulate its communications with all major stakeholders.
▼ Company Presentations: In addition to showing company financials and drivers, presentations should also reflect wider determinants for their company’s growth, including general market trends, industry dynamics, and strategic growth plans. Senior managers giving the presentations must be selected carefully on the basis of knowledge and presentation skills. If necessary, companies should invest in special training.
▼ Media Monitoring: The impact of media reporting on a company can be enormous. For this reason, it is essential that companies have an effective media monitoring system in place. This will enable them to get maximum value from positive reports and to respond effectively to any negative reports.
▼ Media Training: Dealing with the media and using them effectively to convey key messages is a skill, which can be taught. Any company that wishes to be in the public eye must ensure that all of its senior managers are well versed in dealing with the media, and should consider undergoing media training.
TOM BLACKWELL, The PBN Company, London