Business leaders are increasingly approaching transparency as a business-critical goal.
The word ‘transparent’ has quickly become a part of mainstream investor-relations vocabulary, with relevant synonyms being ‘easily understood’, ‘very clear’, ‘frank’ and ‘candid’. Business transparency is the process of being open, honest, and straightforward about various company operations.
Transparent companies share information relating to performance, small business revenue, internal processes, sourcing, pricing, and business values. The reason is simple: less information means less certainty for investors.
One of the biggest mistakes business leaders make is to refrain from shining a spotlight on challenges when communicating with investors. Clearly, the objective in this kind of situation is to either preserve reputation, or delay reality. However, shying away from a problem or challenge ultimately destroys reputation.
Below are seven ways companies can challenge themselves to always be transparent, and why they are important:
- It pays to be transparent
Evidence suggests that the market gives a higher value to companies that are upfront with investors. Transparency pays, and companies with fuller disclosure win more trust from investors. Relevant and reliable information means less risk to investors and thus a lower cost of capital, which naturally translates into higher valuations. Companies that share the key metrics and performance indicators that investors consider important are more valuable than those companies that keep information to themselves.
- It establishes core values
Think about how you would want to be treated and make that an essential part of your business. You most likely want everyone to act with integrity and honour. Be consistent with those values for every part of your business.
- It builds credibility and trust
Transparency establishes trust over anything else. The more straightforward you are, the faster you and your partners become comfortable with one another. The most profound indicator of integrity and respect is the willingness to reveal the ‘uncomfortable’ things. The generated trust then leads to expedited resolution, a win for all involved. A good idea, for example would be to send out a regular update to your entire investor base with most of your metrics – regardless of whether they’re good or bad, to further nurture this trust.
- It promotes good investment decisions on the part of investors
Investors need information to make good investment decisions. In this regard, this includes disclosure of various types of information, including descriptions of a company’s business, its board and management, and financial and operating data, both historical and forward-looking.
- It emphasises cohesiveness
When confronted with a problem or a challenge you don’t have an immediate solution to, bring it to your investors’ attention. Stating the issue saves everyone a lot of time and positively channels everyone’s energy. Plus, the benefits are worth it: more time spent discussing the actual issues, and less time dancing around them means more cohesion among the company’s leadership and investors.
- It maximises the probability of timeously overcoming challenges
The more known the challenges are, the higher the probability that you will receive a helping hand. When you are able to lean on other intelligent people you are able to accomplish so much more. Transparency capitalises on every single opportunity and strives to squash every challenge as quickly as possible. And it’s a two-way street – if investors know you operate on an aggressively transparent basis, it will force them to operate at their best too. Company leadership and lead investors should take time to meet often (even if it’s virtual) to touch on the most burning of issues and get to the bottom of them.
- It builds rapport and encourages engagement
Stakeholders need a way to make sure that their voices are heard. Traditionally, the primary opportunity for investors to communicate with directors and management was once a year at an annual meeting.
One innovation that has the potential to increase engagement is the use of digital forums. An online discussion forum, for example, provides additional business value. Business leaders and investors can collaborate and connect more effectively and have a place to capture and track new ideas. An online platform for conversation can assist organisations to enhance effective communication and is a core tool for the escalation of questions and feedback.
Ensuring that investors have full and easy access to information and understand the risks and opportunities before they make their decisions ensures a relationship based on trust and respect — which in turn, makes these relationships stronger and longer lasting.
PR | Re:public realises the importance of nurturing and sustaining this interaction through virtual roadshows or dedicated webinars. Contact us to find out how PR | Re:public can help boost your investor relations.
