Top 4 CFO Priorities for 2H23 IR Programs: Taking the Macro Environment Head On
While certainly true that headwinds like inflation or interest rates are not new phenomena, there’s no arguing that macroeconomic conditions have challenged CFOs on multiple dimensions. With concerns about economic risk and rising debt expense, how CFOs want to engage with and message to investors is going to look a little different than usual across the second half of 2023.
Indeed, many CFOs are driving a new agenda for their investor relations teams. And most notably, they are more formally and proactively building strategic plans to address and mitigate macro headwinds rather than simply reacting in real-time.
Here are the top four emerging priorities we see among CFOs for the remainder of 2023 along with some messaging tips and advice for investor relations teams:
1. Underscore financial strength and flexibility
State Street’s Investor Confidence Index places investor confidence today in line with its lowest point in 2021. Collapses in the banking industry during 1Q, on top of ongoing broader macroeconomic challenges, have clearly taken a big toll on investor confidence and investors will need enhanced reassurance regarding companies’ financial viability, particularly in the case that the market takes a further negative turn.
In response, CFOs are focused on emphasizing the company’s balance sheet health, liquidity, and credit health. In the event of either a recession or a liquidity shortage, these factors become incredibly important to investors. And while CFOs are not yet drawing down credit revolvers or pausing dividends and buybacks, they are keen to relay to investors that their business can withstand market turmoil if and when needed.
2. Set the stage for the future
The current and anticipated market headwinds will undoubtedly slow some businesses down. But the best CFOs know how to accelerate out of turns to spur more rapid growth as conditions normalize. To set themselves up for success, these CFOs are investing in the business—CapEx, SG&A, and R&D in particular. Given a muted M&A environment, companies will be pivoting their focus from strategic, external investments to more incremental, internal investments, combined with balance sheet strengthening.
All of this funnels down to a need for investor relations officers (IROs) to relay a future-oriented story. Specifically, IROs will need to connect the dots for investors to explicitly convey how investments in today’s fixed assets or today’s people will ultimately drive tomorrow’s growth. This is an especially difficult strategic communications task, considering no one knows quite when markets will stabilize. But effective IROs will focus their stories on agility and preparedness to move quickly when the right opportunities present themselves.
3. Ground priorities and messaging in long-term shareholder value
With the rapid changes that 2023 has brought to date and will continue to bring, corporate leaders—and CFOs especially—are juggling a lot of priorities. They’re trying to protect the balance sheet, enhance profitability, expand cash flow, and the list goes on. With so much happening internally, the external message to shareholders can get very complex very quickly. And portfolio managers know to be skeptical of a company with too many irons in the fire.
But CFOs are more focused on valuations right now than they have been in a long time, and this means that IROs must develop a strong message that cuts through the noise for investors. This is usually easier said than done, especially as a company’s financial focuses may change from quarter to quarter depending on market conditions. As a result, the best thing IROs can do is ground their message in the prioritization of generating long-term shareholder value. This allows companies to make short-term tweaks in investments without necessarily driving myopia among shareholders, ultimately mitigating near-term risks while keeping aim on more distant targets.
4. Plan for more in-person roadshows and events in more places
Most companies returned to in-person meetings in 2022, but this summer marks the first full “roadshow season” since 2019 during which CFOs and IR teams will be on the road. While many investors and analysts have become accustomed to the ease and convenience of virtual meetings, CFOs are encouraging IROs to secure more face-to-face meetings. In-person interactions enable better connections and stronger conversations, which can make a difference for a portfolio manager who may be on the fence.
Further, CFOs are increasingly prioritizing investor roadshows over conferences. They are too frequently finding the same faces at the same conferences each year. In an effort to diversify their meetings and, subsequently, their shareholder bases, CFOs are eager to do more one-on-one targeted meetings. The most innovative CFOs are taking this a step further to engage investors through creative, one-off events like facility tours, product demonstrations, and tradeshows, all of which give stakeholders more than one reason to actively participate in the conversation.
Be the voice investors need to hear now
To relay a balanced, credible story to investors that pierces through the distractions of a challenging macro environment and builds stakeholder confidence in an uncertain future is a tall order. But it can be accomplished with clear, concise, and assured messaging that puts the focus on the right points. Give us a call to learn more about our experience helping companies develop compelling investment narratives in previous economic downturns. And find out how we can help you get your messaging right for right now.