As the credit crisis evolves into the new normal, credit has become tighter and one outcome investors and regulators will almost certainly demand is more transparency into the strategy and crucially, the underlying operating and financial performance of companies.
Investors are increasingly aware of the impact that procurement and the supply chain can have on overall company performance in supporting growth, managing risk and increasing earnings and are therefore looking for company executives to demonstrate how they are addressing these issues in their business plans. CPOs need to carve out a regular role for procurement to address investor concerns.
The goal of successful investor relations is to maximise the share price by developing relationships between the organisation and the investment community that are based on credibility, consistency and trust. Toyota will no doubt be planning how to best restore these qualities with the media and capital markets alike in the wake of their current crisis.
So, in today’s economy where uncertainty is greater than ever, there will be an even greater demand to satisfy the transparency requirements of the investment community. This is likely to mean:
1. There will be more demand for pro-activity and responsiveness to investors
2. The growing power and influence of investors will put pressure on companies to manage their investor relations efforts more effectively
3. The more credible the information presented, the more confident the investment community, due to reduced exposure to risks
Investors will penalise those companies they perceive as:
1. Presenting poor quality of information by driving up the cost of capital in the form of a higher risk premium, reducing the company’s share price
2. Having poor investor relations, corporate governance and communications who threaten shareholder value
3. Failing to execute credible strategies in key business performance areas
Investors will pay a premium for:
1. Proactive investor relations
2. Open communications with organized factual materials in a presentable format
3. Demonstrated expertise in executing key areas impacting overall company performance
Stay tuned for Part 1 when I discuss what procurement’s role in investor relationships means for the CEO and CFO.