It’s an all-hands-on-deck moment for IR teams attempting to navigate the post-Brexit marketplace.
Friday, June 24th, the UK has officially voted to exit the E.U., with significant ramifications for global markets. Immediately following the ‘Brexit’ vote, the Dow Jones plunged 500 points, according to CNN, the S&P 500 slid nearly 3% (Reuters), and across the water, European markets pitched downward 7% (CNBC). And while Brexit may not inflict permanent damage to the world’s long-term economic stability, as Yahoo! suggests, it’s certainly made a significant impact in the short term. For IR teams looking to firm up investor relationships, the name of the game is proactive damage control.
Leading Up to Brexit
Britain’s In/Out referendum was promised as a central tenet of Prime Minister David Cameron’s re-election campaign, as the New York Times reports. As leader of the failed “Remain” camp, Cameron announced plans to resign shortly after the final vote was tallied. Now, the UK faces the formidable task of negotiating favorable exit terms with the E.U.
U.K. and international investors anticipated the decision with concern in the months leading up to Brexit; holdings in London’s FTSE 100 and 250 fell by 3.5% from May 2015, and dropped by more than 7% for smaller cap markets, according to IR Magazine.
Strangely, U.S. investors appeared unphased by the potential implications of the referendum, and actually increased their U.K. holdings prior to the vote — which may have contributed to the current market turmoil. Given that many experts have predicted that an E.U. exit could shrink the U.K.’s economy by more than 2%, according to fundstrategy — along with many Britons’ apparent ambivalence about the move — many believed that Brexit simply wouldn’t happen. But, by a slim 52-48 margin, it did.
Forming a Plan Amid Crisis
For IR professionals, the coming weeks may be turbulent. Investor Relations Society (IRS) polling prior to the vote found that 88% of UK and international fund managers believed that Brexit would have a negative short-term impact on the economy, and 64% planned to sell or reduce their U.K. equities in the event of an exit vote. The IRS General Manager John Gollifer remarked that, with so much likely market movement, the strategy of IR should be “fundamentally about creating a dialogue between companies and the investment community.”
In such an uncertain time, maintaining open and proactive dialogue with investors is absolutely vital to protect a company’s valuation from market panic. Stakeholders will no doubt be checking their phones constantly for developments, which means that IR teams need to use every tool at their disposal to regulate the story being told via mobile and social media platforms. Technologies such as mobile push notifications from IR apps, video content on social media, and even corporate live-streaming can all help IR professionals to both assuage fears and broadcast corporate plans for bouncing back.
It may be a time before we truly understand the impact of Brexit on British and global markets, but unfortunately, IR professionals won’t be afforded such a luxury. Brexit may be a tough pill to swallow for the investor community, but the more quickly IR begins to pick up the pieces, the better position they’ll be in to ride any high tides — or weather any storms — that may follow.
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