An old clubbable profession has been forced to rethink fundamentally how it operates
Traditionally, Financial Communications has been the most narrow and old fashioned of the public relations disciplines. We had one job to do – to cultivate positive investor relations through the proper disclosure of financial results and information. It was the task of a consumer or corporate communications agency to worry about what a company actually did on a day-to-day basis.
In this simpler world, financial transactions were seen as the priority, with long term strategy and transparency playing second fiddle. How we managed the bad financial results of the moment was viewed as much more important than building or managing expectations for the future.
Given the colossal transformation of the City over the last seven years, it is an approach that no longer works. Just as the “old boy” networks of the past have been fatally undermined, the global financial crisis, the recession and a much tougher regulatory framework have altered the wider environment in which businesses operate.
Companies now have to deal with far greater media and public scepticism. Before 2008, business and finance were largely restricted to the City pages of newspapers. Now it is commonplace for them to be on the front page or leading TV news broadcasts.
No longer can it be said that a company is “only as successful as its last transaction”. Judgements are now made every day on successes and failures across all areas of its business.
This new heightened focus from traditional media, together with the rise of social media and easier access to information, has broken down barriers between shareholders, customers, employees, partners and other stakeholders. The days of being able to get away with different messages for different audiences have gone. It is not just that people talk, but that there are more channels than ever to communicate what they want to say. So they all need to hear the same consistent message.
In these high octane informational times, this requires a strong over-arching and tested integrated communications strategy. It must be understood by the entire business and shape everything a company says. A good financial communications strategy must not only ensure the correct distribution of company information when required by the regulators, but also communicate transparently all the company’s actions to all its audiences.
As the barriers between audiences disappear, it also means having the courage to use a broader range of communication avenues. Many listed companies still cower from Twitter or Facebook, which they see as a company-endorsed forum for shareholders, customers and other businesses to say exactly what they want. The truth is this conversation is going to happen, with or without a company’s participation. Companies need to have the confidence to be part of the discussion and to give their point of view.
This shift in emphasis has put reputation and corporate governance increasingly at the forefront of financial communications. It is particularly a concern for international companies attempting to list on any of the UK markets. While historically listed companies only had to negotiate the opinions of the regulators, the audiences are now far wider. The repercussions of failing to understand this change, as well as the full implications of the 2010 Bribery Act, can lead to reputational disasters.
Just look at the problems suffered by the Indonesian coal producer, formerly known as Bumi PLC, as well as the Board of the ill-fated ENRC, which suffered from alleged irregularities in the Democratic Republic of Congo. The London market is no longer an arena where international companies can pick up capital easily and return only when more is needed. Their UK audiences want transparency, honesty and integrity, nothing else.
Financial communications has never been more challenging or exciting. The days when you only sprang into action around a few set-pieces every year and could ignore everything else have gone the way of the “old boy” networks. Knowledge of financial rules and regulations remains essential but, in today’s climate, it won’t substitute for a good corporate strategy or strong consistent messaging.
Louise Mason is Portland’s Partner for Financial Communications. She is also Secretary of the Association of Mining Analysts.