Tips for effective investor communication

Fostering good relations and transparency are two ways to build good investor relations.

Ernst & Young, which has regular contact with the finance leaders of its clients, has these tips, among others, for effective investor communication:

  1. Know when to disclose to the market. If a CFO is asked the same question more than three times by different investors, it’s probably time to think about communicating that message to the market more broadly.

  2. Admit when things don’t go to plan. Investors will be suspicious of a CFO whose company never seems to make a mistake. By admitting to investors when problems have occurred and explaining what actions have been taken to rectify the issue, finance leaders will earn the confidence of investors. It is also important to articulate a “Plan B”, which is what the company would do if its current strategy falls short of expectations. This shows openness and a willingness to consider alternative scenarios.

  3. Build relations with investors in good times as well as bad. During good times, when markets are stable, it is tempting to let investor relations slip down the agenda. But this is precisely the time when companies can build goodwill and ensure that investors remain committed when times are more challenging.

  4. Be transparent about sources of funding. Investors and rating agencies are critical of companies’ current disclosure on sources of funding and committed lenders. At a time when the banking sector is under stress, this is important knowledge to impart.

  5. Avoid surprises. This is the most important tip of all. Although investors will celebrate strategic choices that lead to sustainable growth, they will expect to be informed about key decisions. Making sudden changes in strategy without first laying the groundwork with investors is sure to cause problems.

Related CGMA Magazine content:

Enhancing Value Through Sustainability: Tips for the Finance Team”: Finance professionals can expect to play a bigger role in sustainability reporting, said Stephen T. Starbuck, CPA, the Americas leader for climate change and sustainability services at Ernst & Young, who offered tips for the finance team.