Financial and investor communications in exciting times

There is no doubt we live in exciting times, and the financial markets are certainly living up to that adage.

There is no doubt we live in exciting times, and the financial markets are certainly living up to that adage. The financial community has a lot weighing on it these days, from an epic political battle in the US that holds the debt limit and our AAA debt rating hostage, to high unemployment, to inflationary concerns in China, and a spreading sovereign debt crisis in Europe that threatens to shake the very foundation of the Eurozone financial system.

Normally, one of these issues alone might rattle investor confidence, yet the US financial markets have surged higher in the face of fear, rising 7.9% year-to-date as measured by the Dow Jones Industrial Average as of July 13. What can PR and investor relations professionals learn from this dichotomy of investor fear and financial market strength?

Well, it's difficult for me (and clearly many others!) to forecast the direction of the markets. What I can say for certain is that it is critical for companies in our globally integrated and digitally connected environment to maintain a solid, proactive IR/financial communications program to handle any unforeseen market volatility or sentiment shift. As strategic communications advisors within, or to, publicly traded companies, we need to stand ready to operate effectively in many kinds of market environments.

In comparing PR and IR, I believe both areas share the key principles of raising awareness, clearly delivering key messages, enhancing reputation/credibility, and ultimately marketing a product. In the case of IR, our product is equity and/or debt instruments. Also, and I'm generalizing here, PR tends to focus more on brand building, while the ultimate goal of IR is to protect and enhance shareholder value.

I tell clients, and prospective clients, that the function of a dedicated IR program is to realize the full and true valuation of their shares in the financial markets through strategic planning, consistent communications, and careful targeting of the correct audiences.

Investor relations can be sustained over many types of market environments. Yet the market situation at any time may require immediate responses and initiatives. Stocks can quickly be buffeted by developments centering on macroeconomic concerns, industry issues, and regulatory problems. Moreover, the financial market crisis has shaken the confidence of many investors, particularly individuals.

During weak market conditions, with scarce investor dollars, a strong IR program for a particular stock can provide the investment case that will increase the chance of that stock being chosen for purchase.

Major hallmarks of a first-rate IR program include properly managing investor and analyst expectations, establishing credibility with the investment community, and building a wide and deep institutional ownership base. Key components of the IR toolkit include investor and analyst targeting, investor road shows, analyst days, perception studies, and financial media efforts.

While the main audiences for an IR program are institutional investors and brokerage analysts, there are certainly other important groups, such as media, consumers, regulators, and industry analysts. These key constituents often interact and influence each other in dynamic ways.

As an illustration of proactive IR efforts, Cemig, the leading Brazilian power utility and a Grayling client, recently completed a three-day investor road show introducing the new chairman of the board of directors to investors and analysts in London, Boston, and New York. To raise Cemig's visibility and identify appropriate investors, Grayling conducted investor targeting, including identifying investors in these money centers that actively buy equities of Latin American companies. Grayling also secured media opportunities with CNBC Europe, CNN International, and BBC TV, among other media outlets.

Having an integrated approach to IR with media, events management, crisis management, and government affairs allows a company's clients to effectively navigate these uncertain times with confidence.

Anne McBride is Chairman of Grayling NY with more than 30 years of experience in the capital markets with responsibility and oversight for all investor relations activities undertaken in the US on behalf of both domestic and international clients.

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