Panic may be a natural reaction to the historic market turmoil we're witnessing. However, after we shake our heads in disappointment, take a deep breath, realize that the next few months, or longer, will be tough, and turn off CNBC, we must get back to work.
A few IR professionals might advise the C-suite to stay on the sidelines and wait for the markets to regain their footing, but the markets are desperate for reassurance and information now. Indeed, these difficult times demand that we step up and make sure that we are both seen and heard. Investors are rightfully flush with anxiety and are eager for a steady stream of information, especially if the companies they hold are in the vortex of the market upheaval. To their credit, for instance, the senior managers at Goldman Sachs are communicating daily with both investors and employees. In e-mails and voice mails, they are offering reassurance by providing details on how and why they don't face the same fate as Bear Stearns, Lehman Brothers, or Merrill Lynch.
These managers realize that silence creates a vacuum that will be quickly filled by others who will frame the situation to suit their own interests. If that happens, a company is automatically placed on the defensive.
Companies outside the financial services sector might also be tempted to curtail their IR program, believing that money managers will cash in as quickly as possible and sitting tight until visibility improves. That might be true for some investors, but that's not a luxury most funds managers have. Many mutual funds are required to stay invested and are busy looking for companies that could offer a possible safe haven or modest returns, returns that would not have attracted them in the past. Sectors that might have been tagged as sleepy or dull could now become the belle of the ball.
One fund manager told me last week, “Even though the markets are down more than 20% year-to-date, there are companies that have shown gains. And let's also not forget about dividend plays. I'll take what I can get. And it's these tough times when the real stars shine.”
A practical impact of the crisis will likely be the demand for further financial transparency, a desire to take a longer look under the hood of a company's balance sheet. Investors will probe to better grasp the financial exposure and potential risks a company might face.
Some public companies might see the downturn as a reason to become private, allowing them to avoid the 90-day earnings' report card and instead take steps that improve a company's operations with fewer distractions.
Despite the crisis, we need to remember that markets are cyclical. Avoid the temptation of pointing fingers and instead figure out what needs to get done to fix the mess. There will be plenty of time for finger-pointing later.
Fred Bratman is the president of Hyde Park Financial Communications. He can be reached at email@example.com.