3 minute read 10 Jun 2020
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Why investor calls should go beyond the fiscal impact of COVID-19

By EY Americas

Multidisciplinary professional services organization

3 minute read 10 Jun 2020

Earnings calls offer companies an opportunity to report how they are building human, customer and societal value during the crisis.

What are investors looking for in upcoming quarterly conference calls? How should companies report on COVID-19-impacted financial results and paint some sort of picture for the road ahead, all while balancing the profound business shocks?

Clearly, investors are hoping for transparency into the true financial impact of what has been a very difficult quarter for most companies. Investors are expected to closely compare companies to their peers in the sector. Because the pandemic appeared earlier in Asia, some multinational companies might be able to loosely project impacts for the rest of the world.

At the moment, investors can accept uncertainty. Taking a measured approach to talking about the remainder of 2020 and beyond can be helpful. For instance, companies might forecast short-term business impact with some level of certainty and medium-term impact with much less certainty.

As for long-term projections (2021 and beyond), companies may report that expectations have not been adjusted at all because there is no solid data to indicate the length of the disruption and the resulting impacts. As more data becomes available in the upcoming weeks and months, long-term outlooks can be better assessed and reported to investors.

The long-term value of any business has always been driven by far more than the financial.

Beyond the financial

The long-term value of any business has historically been driven by far more than its reported financial results. In upcoming conference calls, companies have the opportunity to provide an honest assessment of the fiscal impacts of the crisis and to highlight how they have fortified and perhaps even bolstered human, customer, and societal value.

Human value: Many companies took significant steps to protect the safety and well-being of their workforce as the crisis emerged. Some firms adopted work-from-home strategies even before government mandates and most companies continue to take significant steps to protect the safety and well-being of their workforce as the crises lingers. Varying by sector, companies are employing a range of other procedures to protect their people. It could be beneficial for investors to understand, perhaps directly from a human resources executive, what those steps entail.

There has long been a correlation between actively attending to and measuring and reporting on human capital deployment and financial results. The value of a protected, safe, loyal and motivated workforce can create enterprise value over the long term through increased productivity, lower turnover, and thus improved labor costs.

Customer value: Once their workforces were deemed safe, many companies engaged with customers to help them navigate the crisis in unexpected or creative ways. This strengthens customer relationships, both individually and in the aggregate.

In upcoming conference calls, it might make sense for a business unit leader to share an innovative approach that helped solve a customer dilemma. These creative actions highlight innovation, boost brand value, and build trust between the company and its customer base. This will inevitably enhance long-term value as the crisis wanes.

Societal value: Many companies have, throughout the crisis, given back to the community. Donations of time, materials and/or money all fortify a firm’s societal value. Societal value is long-term value, as these communities include both current and future employees and customers. Investor conference calls are an appropriate venue for quickly highlighting these efforts.

Measuring value

While these tips can help with imminent quarterly conference calls, over time companies will increasingly need to provide investors specific metrics and other data for each of these value-generating pillars. Robust reporting in these areas, especially how they relate to the company’s overall corporate purpose and mission, can help companies further justify their valuations and meet the increasing demand by investors for environmental, social and governance data.

Summary

Beyond the fiscal impact of COVID-19, earnings calls can be a step toward more robust reporting on human, customer and societal value. This can help justify corporate valuations and meet the increasing demand by investors for environmental, social and governance data.

About this article

By EY Americas

Multidisciplinary professional services organization