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How to Manage an IR Crisis

This week we look at how to manage an IR crisis. These are unfortunately more common than might appear; some 38% of surveyed companies in the USA said they had gone through a crisis. Some recurring causes of a crisis: a big miss in earnings which causes a fundamental reassessment of the company; a restatement in earnings due to accounting errors; abrupt change in management; a hostile takeover; a macroeconomic crisis impacting the whole market.

Some of the more notable Mexican IR crisis in recent years include Grupo Mexico’s attempted hostile takeover of GAP (in which GAP prevailed, although GMexico profited from the sharp rise in GAP’s stock price); Genomma Lab’s fall from grace years back as growth rate declined due to deteriorating working capital; last year’s year fight over gas pipelines contracts which impacted Ienova; the collapse of the indebted homebuilders affecting the healthier; environmental crisis, as has happened at GMexico.

To plan for a crisis, we recommend that every company 1) Establishes an internal procedure for reacting to the most likely crises. This procedure should include strategies for contacting relevant analysts, investors, select journalists, social media and centralizing incoming concerns to direct them to appropriate spokespeople (CFO or head of IR, or Media and CFO for journalists). 2) It’s important that the CEO or CFO communicates internally what is happening, and no one bar authorized people to express views on social media. 3) With social media a conduit for misinformation, it is important to be actively tracking Twitter, LinkedIn, and other sources of information to quickly address trending developments. 4) The focus of the message should be on protecting the long-term corporate reputation, rather than the stock price. So, it’s important to be frank and direct, rather than evade the bad news.  The message should aim to describe what has happened, and what the company is doing about it so that normalcy will return soon. Given events can unfold fast, it’s important to update the message when necessary, so that the company is the source of new information, and not its critics.

Miranda-IR Team – Ana Maria Ybarra, Damian Fraser, Marimar Torreblanca.