The best way to tackle the unknown is to prepare for it, IR experts agree
As we head into the second quarter of 2024, many companies are bracing themselves for a year defined by change.
With important elections expected in the US, the UK, the EU and many other regions, experts estimate that almost half (49 percent) of the developed world is electing a leader over the next 12 months. Meanwhile, ongoing inflationary pressures – and regulatory responses – are still being felt in many economies, as are the impacts of developing technology.
All of this poses a challenge for IROs, who must not only reflect the changing market in their communications with investors, but also be prepared for seismic shifts within their own organization. As was discussed at a recent IR Magazine Webinar held in partnership with Q4, however, it is in such times that the IR function can demonstrate its true value.
A quick poll of the webinar audience found that 42 percent thought market volatility was the key challenge they would face this year, followed by 31 percent who said increasing constraints on their resources would be important.
On a macro level, preparation is the single-best way IROs can protect themselves, said Jamie Stanton, director of investor relations at Q4.
‘When I speak to clients, it’s really just planning for the upcoming year and all the different possible outcomes, whether that’s Fed decisions or elections,’ he explained. He added that ongoing market volatility was a concern, as was the role of smaller-cap companies in any recovery. ‘IR teams need to be prepared for the changes they can control, developing gameplans for various scenarios,’ he said. ‘It’s about taking control of what you can control’.
Debbie Hancock, former senior vice president of IR at Hasbro, said there were unforeseeable ways in which changing macro forces had impacted her company and the expectations of investors.
‘With a changing political environment and an election cycle, we started to hear from investors looking at the impact of US-China relations and potential tariffs,’ she said. ‘The toy industry is interesting because the majority of manufacturing is done in China – although we’re looking to diversify that – so we’re starting to get questions about what that exposure means.’
Crucially, Hancock added, you may not need to have all the answers at your fingertips. ‘I don’t think anyone has an answer for what this change means, because we don’t know any of the variables,’ she explained. ‘One thing you can do is have good disclosure and transparency around the data points people need to assess the risk, and then provide the context to understand that data.’
Maintaining strong lines of communication and knowing where to find particular information are paramount, the webinar panelists agreed, as is the need for scenario planning. For Hancock, who has had to navigate the integration of a brand new management team – including a new head of IR – as well as a new corporate strategy, the key has been to build credibility.
Stanton added that it is best to use management or board members sparingly, and that part of a strong preparation strategy is to know ‘when to turn the faucet’ of various internal experts.
Shivani Kak, head of investor relations at Moody’s, said key to her approach was to ‘create a culture of consistent learning and awareness’ among her colleagues. ‘My team is expected to be aware of any macroeconomic event happening anywhere in the world and to understand what impact that might have on the issuance markets in any given week or month,’ she said.
‘We’ve seen that geopolitical events can overshadow your results in any given quarter. Even if you’ve had a phenomenal year, it may not be reflected in your share price if there’s a really bad inflation reading on the same day as your earnings.’
For Stanton, volatility is not necessarily a bad word. ‘It can be an opportunity to get large, attractive holders into your stock,’ he explained, adding that looking for large movements in peer companies was a great way to spot a chance to capture them.
Throwing the idea of ‘change’ over to the longer term, the use of AI was something the panelists agreed was increasingly becoming part of an IRO’s toolkit. Stanton said uses included the simple – summarizing meeting notes – to more intricate targeting applications, including analyzing potential shareholders and their associated data in real time.
Kak said her team was using it to be better prepared for meetings. ‘We use a generative AI tool to provide insights on key questions analysts and investors are raising so we know how to position our answers on certain topics,’ she revealed, adding that she had the benefit of having an internal AI platform at Moody’s.
Another key tool for Kak has been a listening campaign: learning from analysts and investors about the key metrics and data they want to get hold of to make investment decisions and prioritizing this in the material Moody’s puts out. This can build crucial flexibility into disclosures, she and Hancock agreed, and means you can meet the needs of differing investors.
Looking to the future, the panel advised the webinar audience to try to take that listening ethos forward into whatever uncertainty awaits. For Hancock, the best IROs will be those who can understand what their key communications goals and objectives are for the year, and stay consistent.
‘Use the data to have a plan,’ Stanton added. ‘If something new comes out in technology, you want to be the one who hears about it and uses it first.’
‘It’s about being prepared to pivot and be agile, and acknowledging that you have to shift to meet the market conditions,’ Kak summarized. ‘And never give up on learning! It’s a constant process.’
Hancock’s final advice was a little more grounded: ‘Make sure you sleep, eat well and have some time for yourself.’
