What contribution does financial public relations make to the success of a company?

Some would argue that there is only one – albeit crude – measure of the success of financial public relations: share price or bond price or credit rating. There is no doubt that the majority of financial communications activity is aimed at creating more demand for shares in a particular company. Stimulate more buyers than sellers and share prices tend to rise.

There seems to be no reason why financial public relations should not be regarded as public relations support for a simple financial product – an equity stake in a company. However, although short-term success in increasing a share price may be welcome, ensuring that the City and City journalists have a clearer understanding of a company’s strategy is far more important. The real contribution that good corporate and financial public relations makes to a company is in gaining a clear understanding among financial audiences – what a company does, what it is trying to achieve and then making sure everyone knows when it meets or beats those objectives.

Keeping a company well understood and well thought of can only make a positive contribution to its share price performance. A company’s reputation also helps determine what a company can do: acquisitions, disposals, mergers, share issues. All major changes, whether of strategy, management or simply style, become more acceptable or even possible because of the market’s confidence in a company. In particular, this means confidence in its management and in its financial strength. It is in these areas that much of the hard work of financial public relations and its achievements is concentrated.

If we take the example of a business joining a stock market, good financial public relations is essential to a company’s ability to float and to cope with the intense public scrutiny of its activity and in particular of those who manage the business.

Alongside this, financial public relations has a role to play when a company does nor achieve its objectives. Whether perceived failure is due to external factors, a need for more time, failure to manage expectation or simply getting it badly wrong, clear explanation of what is to be done to put the situation right is a far better response than hiding behind closed doors and refusing to talk.

Managing expectations is clearly a key part of avoiding the perception of failure. However, the rules and regulations surrounding the dissemination of information about a publicly quoted company have made the whole area of managing expectations a public relations minefield.