Expecting Disappointing News? 6 Tips for Managing Disclosure
The last thing any company wants is disappointing news. But it’s more than likely that your company will experience a bump in the road from time to time. Don’t let the prospect of delivering bad news rattle you. Even the best managed companies can experience a “miss.”
How you communicate that miss can have a lasting impact. Thorough preparation and a well thought out action plan is the best way to ensure things go smoothly. I asked a few of my colleagues to share their advice for the best way to deliver bad news. Here’s what they said:
- Prepare What You’re Going to Say
It’s never easy to deliver bad news. Be well prepared and craft answers ahead of time. Start by focusing on the hard questions and practicing the delivery of your responses. Maintain a positive spin, if there is one, but don’t try to cover up the disappointing news. As a sell-side analyst, I found that I gave management teams some credit when they were direct and forthright with disappointing news. Things like bad data results happen in life sciences, but management teams that tend to hold back on some of the key pieces of their message will create deeper credibility issues for themselves and their company.
– Patti Bank, Managing Director
- Manage Your Message
No management team wants to deliver bad news to the Street, and the ones that manage the process well stand to enhance their credibility among analysts and investors. The more details and context you can provide to the investment community regarding the miss, the better. If the miss was isolated to one area, segment, or geographic region, consider also giving an update on how the rest of your business performed during the period.– Mike Piccinino, Managing Director
- Do Your Due Diligence
Before disclosing disappointing news, be aware of what your peers or competitors are reporting. You may be judged based on what others have or have not disclosed. It’s also a good way to anticipate and prepare for the inevitable tough questions that follow.
– Peter Vozzo, Managing Director
- Don’t Dilute the Bad News
Prior to delivering bad news, resist the urge to talk up other good news. If, for example, a product launch isn’t going well, don’t expound on positives of another product leading up to the bad news disclosure. Stick only to the reiteration of facts. If possible, don’t underscore guidance if you think it may be lowered, although sometimes you will have to say something along the lines of “the last guidance update relayed expectations of $X in revenues.” This way investors won’t feel misled or that they were intentionally distracted by other items.
– Caroline Corner, Managing Director
- Be Transparent
The key to disappointing news is transparency, transparency, transparency. Start with a clear explanation of what happened, whether it be a failed clinical trial or a top line miss, followed by the reason(s) why. Next, investors need to know if it is just a one-time isolated phenomenon, or whether there will be a tail that continues to impact the business. Finally, explain how management will solve the root cause or alter its strategy to overcome the disappointment. A completely honest and realistic assessment is what investors need to hear so they can be confident that management has a firm grasp of the issue and how to move forward.
– Robert Uhl, Managing Director
- Maintain Visibility
Your first instinct may be to draw as little attention as possible. But burying the news or issuing it on a Friday or right before a holiday is exactly what you shouldn’t do. Things have a way of getting out. People will still see the news and it will damage your credibility if they think you tried to hide it. Put out a press release, seriously consider a public conference call, and be available for calls after the news comes out. The more visible you are, the more credibility you will retain.
– John Woolford, Managing Director
Is your team facing the prospect of bad news? Westwicke can counsel you and help you prepare your strategy for delivering difficult news. For a deeper conversation, feel free to get in touch.
ICR Westwicke is the largest healthcare focused investor relations firm in the country. We provide customized investor relations programs and independent capital markets advice to small and mid-cap healthcare companies.
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