Communicating good news is easy, but how and when IROs deliver bad news is equally, if not more, important. There is a broad spectrum of difficult news that may have to be shared with the market, including poor financial results, cost overruns, project delays, operational upsets, onsite emergencies, and personnel issues. The fact of the matter is, no matter how you dress up any of these scenarios, the market, shareholders, media, and other stakeholders will react negatively. However, the silver lining in the grey cloud is that you can mitigate the downside.
Fact find. When the sky is falling around you, you must hunker down and figure out what you know, what you don’t and what you must find out. This isn’t a time for ‘nice to haves’. You are in the middle of a crisis and therefore you must focus on what really matters. Don’t rely on secondhand sources (such as ‘he said that she said’). Instead, go directly to the source. Also, ensure you have a seat at the table where the situation is being assessed and monitored so you have access to the details as they emerge.
Engage with the authorities. At the same time as you are fact finding, you need to consider communicating with IIROC and the TSX. The TSX has a policy on timely disclosure and according to this a company “…is required to disclose material information concerning its business and affairs forthwith upon the information becoming known to management…”. However, it isn't always that simple. For example, you may know that there has been a material event but you do not have sufficient details to write a news release as you are still scrambling to uncover the details. In such cases, communication with the authorities is critical. Pick up the phone and let them know your situation. IIROC may halt your stock until you can get your news release out but that will prepare the market for a material announcement and avoid any trading on rumours or speculations.
Pull in the experts. Depending on the crisis, you may want to consider pulling in the experts. Legal counsel is critical. You may also want to consider a communications firm that specializes in crisis communication. Let's be honest, this type of communication isn't most IROs' area of expertise. So why not bring in the experts? How you deal with the situation can have a significant impact on the market’s reaction, your company's reputation and your market capitalization. Millions of dollars are at stake so the investment in consulting fees will be worth its weight in gold.
Be honest, clear and concise. Next, it's time to write the news release and it is crucial you get this right. Be honest and use plain English. The last thing you want is for people to misinterpret your news. Clear and concise is the name of the game. I always use my Mom as the test and ask myself, “Would Mom understand what is being said?” If not, then it's time to go back to the drawing board. Be extremely careful not to fall into the trap of others’ input and technical jargon. It may sound smart, but if you can’t understand what is being said, then how will anyone else?
Provide comfort that it won’t happen again. Your communication must have four components: what happened; why it happened; how you’re dealing with it; and last but not least, you must provide assurance that you are doing everything to ensure that the problem won’t happen again. Let me repeat that: you must provide assurance that you are doing everything to ensure that the issue won’t recur. While I realize you cannot make any guarantees (and I'm not recommending that you do), you must offer the market and stakeholders confidence going forward. Consider sharing steps being taken and changes made to prevent future events of a similar nature.
Keep lines of communication open with the President. After the news release has gone out you must keep the President accessible to investors and other stakeholders. You may want to consider having your President hold a conference call or a media briefing so that everyone gets the same story at the same time. In a crisis, it is extremely important that your President steps up, faces the music and takes responsibility for what has happened. People respect you when the message comes from the top.
Dealing with a crisis is not an easy task for anyone. It can be extremely stressful as you juggle all the balls in the air. Your office will be Grand Central Station, but remember calm heads always prevail. If things seem to be spinning out of control, take a time-out. Shut the door, breathe, sit quietly or blast your favorite tune. Do what it takes to get clarity as there is a lot at stake in these situations. My final advice is – if you think twice and react once, you will successfully mitigate the downside in a crisis.
Lavonne Zdunich is a Chartered Accountant with over 20 years of finance and investor relations experience in Calgary and overseas. She is currently the Director of Investor Relations and Communications at Keyera Corp. in Calgary, Alberta.