We have previously written about the importance of undertaking investor relations. Here, we look at why you might want to consider engaging an agency to assist you with investor relations.
When marketing your business to investors, you can opt for in-house investor relations expertise, you can look to outsourcing to a specialist communication agency with investor relations expertise or you can use a blend of the two. Managing and controlling external opinion about your business can often be the difference between success and failure, with significant upside potential if communication strategies are implemented successfully.
Here are five compelling reasons to opt for an agency.
A consultancy’s prime focus is communication and stakeholder relations. Through focusing on specific tasks and skills, the agency develops considerable expertise that is hard to replicate in-house. Through deeply focusing on its activities, the consultancy is able to improve its specialist knowledge and enhance its abilities. In addition, a company which needs to build in-house capacity risks losing focus on its primary business.
2. Improved communication and greater trust
An investor relations consultancy can manage expectations proactively through ensuring consistency of message and ongoing communication. This results in better stakeholder relations and improved interaction. Trust is built between the entities when there is greater information flow and improved quality and integrity of disclosure. And establishing and maintaining trust is one of the key issues that face corporate executives. Trust means more accurate pricing of a company’s shares and it means more stable and confident investors. Greater transparency leads to less disruptive investors and better relationships.
3. External perspective
A consultancy has the ability to step back and view a situation from the outside, providing an independent point of view, the ability to “see the wood from the trees” as well as looking holistically at the business and the work that it does. It’s easy to get tunnel-vision when working within a company. It can be challenging for employees to view things differently or objectively, to raise new ideas or concerns from the inside, especially if they might fear for their jobs.
4. Leverage relationships
With an intense knowledge of and relationships with the media, an external consultancy will be able to leverage those relationships across different clients. A specialist agency is able to identify and engage with the most appropriate media for a particular story and knows how to manage the media.
In our consultancy, for example, we find that the media often approaches us to source input for an article or a spokesperson for an interview because we have a range of clients. We effectively become a one-stop shop for the media, obtaining content from a variety of sources for them.
For the equivalent of – or even less than – a modestly paid employee, a client has access to an entire team that can move the needle on important projects. Each team member brings different skills and backgrounds to the table and an agency will provide strategic input, planning and management skills. This, together with innovation and fresh insights, can be secured for the business at a far lower cost than could be achieved in-house.
There are, of course, also benefits to maintaining in-house capabilities and often the most successful campaigns are the result of bringing together a strong internal team and a great agency. While this may not always be an option, especially for a smaller company, having a quality, professional agency on board is the best option.
We’d love to have your thoughts on the internal/agency debate.
We can take two important lessons from the December 2017 Steinhoff accounting scandal.
1. When a crisis hits, the results can be sudden and spectacular
Warren Buffett is widely quoted as saying: “It takes 20 years to build a reputation and five minutes to ruin it.” There is no such thing as overnight success, but there certainly is overnight failure.
In the case of Steinhoff, the company was in the making for 50 years. It had reached the Top 40 on the Johannesburg Stock Exchange, making it one of the 40 largest market cap shares on the bourse. The price peaked at over R95 in 2016. From November that year to October 2017, it traded in a relatively narrow band between R60 and R70.
In November 2017, it broke below R60 but the real damage came during December 2017. The share began the month on R55.81, lost R10 in two days and then plunged 61% the following day. In the first five trading days of the month, the Steinhoff share price fell 89%. And it has yet to recover.
Once a crisis takes hold, the reputational damage can be swift and ruthless.
2. You can’t communicate enough
Alec Hogg put it succinctly when looking at the disaster, saying that “… when a crisis hits, you simply cannot over-communicate. Steinhoff’s response has been an almost perfect inversion. Since detonating that sparsely worded bomb last Wednesday, the company has issued just two short statements. In the two previous months it had published eight strong denials of allegations which now appear to be true.”
He’s quite correct. When a business (or any other entity) is in a crisis, the first thing that needs to be done is to communicate with stakeholders. This is Crisis Communication 101. Silence merely creates a void in which speculation becomes rife and once that happens, it becomes increasingly hard to separate the facts from the fiction. The “fake news” phenomenon likes nothing more than a lack of information in which to breed. Even a month after the crisis broke, the board did little to clarify or elaborate on the situation for stakeholders, resulting in the share price languishing at about 5% of its peak for the month.
Preserve your reputation
Reputations are precious and need to be managed. Negative headlines can – and do – impact the bottom line. Take some time to review your reputation management practices and incorporate issue management protocols, procedures and guidelines within them.
What other lessons does this crisis offer us?
Economist, data scientist, communicator and fascinated by the world around us.