2019 Is A Year of Uncertainty. Be Prepared By Being Transparent

By January 7, 2019 April 3rd, 2019 Corporates
Uncertainty in the markets: Brexit, Elections, Stocks

The beauty of a new year is the ability to start afresh. With it comes new hope, opportunities, and developments. However, as with everything new, the final outcome can be uncertain.

In its first issue for 2019, The Economist listed out a few impending events with uncertain outcomes around the world. We highlight some below.

Brexit

Everyone is still guessing whether there will be a deal or not. Or whether there will be a second referendum, or simply no Brexit at all! At this juncture, picking at flower petals to ascertain whether “he loves me” or “loves me not”, would deliver a more certain outcome.

Elections

Several countries have national elections this year – India and Indonesia, for example. If votes swing in an unexpected direction, and they might, it could mean changes for businesses depending on which party comes to power. This has implications that extend well beyond these countries’ borders and the companies that are based there. They, and those that interact with them, will potentially have to adapt to new realities.  

Economic Activity & Stock Markets

There is continued uncertainty about the global economy and the stock markets, as well. Is China slowing down? Will the American stock market be impacted?

Let’s talk about an event that took place at the very start of this year.

On 2 January, Apple CEO Tim Cook announced revised estimates and lower revenue guidance for the company. He attributed these changes primarily to greater-than-expected economic deceleration in Greater China. Furthermore, iPhone sales in China were lower than expected. Apple’s stock dropped by 9 percent on the back of this news.

There are several ways to interpret this announcement. For one, management played down the sequential decline in revenue in Greater China and only mentioned the year-on-year growth in their press release communication in Q2 2018, similarly with Q3 2018.

Although they made this information available to investors and analysts through the supplemental data disclosure, did they address that they are prepared for a potential outcome where the now “expected” revenue contribution from Greater China ceases to contribute in the same manner?

The other stance is that they did well in their communication to release preliminary results ahead of time and prepare investors for what is to come in their upcoming results. Even though other positive factors have been announced, such as the 19 percent increase in non-iPhone categories, there has been little communication about how they will plan for further unexpected events such as these.

The ripple effect sent markets into a tailspin as investors were concerned that other companies in their portfolio were potentially exposed to the debatable slowing growth in China.

What should these affected companies do?

There are several aspects as listed above that might impact your company or companies related to yours, affecting you by association. Even if you can’t predict the outcome, it’s important to communicate to investors and analysts that you are thinking about potential events and have contingency plans in place.  

Corporate investor relations teams can be as transparent as they come with stakeholders, but there will be some events that you just might not be able to foresee.

Should the unexpected occur, catching a company off-guard, the least they can do is be accessible to investors and analysts. Smartkarma’s Global Investor Relations Directory allows for investors to reach you and understand how you have prepared for the year ahead.

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