China’s economy is hurting and it’s worsening. This may, ironically, prove to be an opportunity for strategic communication advisors, who play a business critical role during special situations.
Expectations are that 2016 will likely see a rise in bond defaults, leading to corporate restructuring. Part of the concern is around Chinese corporates who have issued US dollar-denominated debt. A weakening Chinese yuan increases repayment costs.
The pain is compounded by the domestic revenue pressure, such as falling sales, that comes with a weakening economy. Indebted property companies are among the most at risk, according to analysts.
Focused communications during a period of restructuring, where stakeholders are tactfully informed and influenced with the right message, can make a tangible difference to the transaction outcome.
When done well, corporates, investors and advisors use communications to drive negotiations and manage expectations to secure a favourable outcome in a difficult situation.
Get it wrong, then negotiation power, reputation and settlement price all take a big hit. Strategic communications during a special situation can save millions of dollars for investors and the corporate client.
Strategic financial communications has a long history in US and Europe, where it’s a core part of managing defaults, restructurings, asset sales and litigation. Specialist, local consultancies dominate.
In China and Asia, proactive and specialist communications is a seldom used strategy with corporates in distress either trying to handle communications in-house or calling on their retained PR agency for support.
The latter often will not have the experience to plan and execute a complicated communications programme that addresses various stakeholders across multiple geographies, media platforms and languages.
This includes messaging, monitoring and managing the press, who are eager to seize upon disorganisation as evidence of a crisis that’s out of control.
Social and digital media, with specific strategies to engage, influence and inform, are crucial in China. Yet global consultancies, with traditional strengths in strategic communications, are not known for skills within digital and social media in Asia.
Given the lack of history in China around paying for strategic communications during a financial issue, in addition to the Asia-specific skills required, there are actually few consultancies today with genuine experience in the region who can manage special situations.
Even if you find a consultancy with some experience, success often rests with the individual consultants and their personalities. They are required to quickly win the trust of stakeholders so they listen and act upon the advice given.
In special situations, you are not shopping for PR brands. You are wise to buy the specialists with local capabilities and strong individual practitioners.
Those who usually hold most influence in the process are legal and financial advisors, in addition to the investors. These parties should encourage, if not insist, that corporates who face financial issues engage the right strategic communications consultants from the start.
It ultimately will help determine the finish.
Damien Ryan is the founder and managing director at Ryan Communication, an Asia specialist in strategic communications with offices in Hong Kong, Singapore and Shanghai.