The role of PR in a downgraded economy

As political leaders deal with growing investor fears that the country may relapse into another recession, PR agencies have seen a short-term uptick in corporate client activity related to navigating economic volatility.

After Standard & Poor's downgraded the US credit rating for the first time last week, President Barack Obama held a press conference in which he declared, “We've always been, and always will be, a triple-A country.” But the message did little to reassure investors or stem a massive sell-off of US stocks this past Monday, which marked Wall Street's worst day since the 2008 financial crisis.

As political leaders deal with growing investor fears that the country may relapse into another recession, PR agencies have seen a short-term uptick in corporate client activity related to navigating economic volatility, a number of agency leaders told PRWeek.

“Companies are re-evaluating their assumptions for the third and fourth quarters, which now may be too optimistic,” said Rob Flaherty, senior partner and president of Ketchum. “As a result, we've seen an uptick in the number of meetings with clients to talk about what they will be saying to analysts, as well as employees, for the rest of the year.”

Flaherty said there is an opportunity for companies to become the voice of reason, given that the investor panic over the last 10 days is not entirely rational considering that corporate earnings have been reasonably strong.

“While there are some root causes for the current economic trouble, it is a very different story from what happened in 2008,” he explained. “I think the ability to tell that story in an articulate way – and to make sure people see it as different than 2008 – is a part of what leaders need to do now.”

Given strong quarterly results, he said leaders can also demonstrate their commitment to their businesses by reinvesting in them and communicating the value of that reinvestment.

“Everything is less expensive right now; interest rates are lower, so acquisitions, for example, don't cost as much,” Flaherty added. “So there is an opportunity for companies to say, ‘We can gain share in relation to our competitors and build our business for the future.'”

Claire Koeneman, EVP and financial communications leader for Hill & Knowlton, said her agency has seen a surge in clients looking for guidance in this market.

“What we've been saying is, ‘If your [corporate] story didn't change, then don't change it,'” she explained. “We've also counselled clients to remain transparent and continue reaching out to stakeholders.”

Koeneman said she has seen an increase in the number of companies issuing mid-quarter updates. Rather than help reduce market volatility, these updates can be a good way for companies to demonstrate transparency.

“Companies have become more bullish in terms of reporting where they are at more frequently,” she said. “You don't want to put paper out for the sake of putting paper out. But if you have done something noteworthy, such as some refinancing or raised VC funding, those are all interesting updates that can be communicated in a quick release.”

Gene Marbach, group VP at Makovsky & Company, said the knee-jerk reaction by some publicly-traded companies has been to cut IR budgets for fear that investors may no longer be receptive to investment opportunities. But he said companies need to recognize that investors are always interested in good stocks at reasonable valuations.

Given the debt crisis, companies also need to know that investors may become more concerned about corporate debt.

“We now live in a very debt-conscious world, so I think you're going to start seeing more companies talk about the strength of their balance sheets and the fact that they have deleveraged,” Marbach told PRWeek. “They'll want to allay investor concerns, even if they're at the subconscious level, about their ability to handle their debt.”

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