Regardless of the outcome of Sino-Forest matter, the situation provides an opportunity for IR professionals and management teams to realize that too often we tend to only focus on the strengths of a company we are working with, especially when everything is rosy with great results, healthy share price and happy investors.  We can forget to think critically, ask the tough questions and identify the potential weaknesses that should be addressed or anticipated and prepare well thought out answers that aren’t dismissive. 

In short, as IR practitioners we should endeavor to think like analysts.  I recently read an article that stated Jack in the Box’s IR Carol DiRaimo is the industry’s best because “She is the world’s number one best analyst on Jack in the Box – possibly in the whole fast food restaurant industry. No wonder investors love her.”

There are a number of steps companies can take to understand potential shortcomings:

• When reaching out to analysts, institutional investors, retail brokers and investment bankers for regular feedback, don’t be satisfied with just positive responses.  Push for some constructive criticisms and for concerns regarding any potential issues.
• Don’t automatically dismiss outliers as “crackpots”.
• Conduct your own critical analysis of your Company to determine additional potential areas of vulnerability. 
• Discuss possible implications of developments in any related industry or company news.

Once the areas of potential vulnerability are identified, you can then proactively craft strategies to address and either correct or mitigate the concerns. 

We can use the Sino-Forest situation as a reminder of how fast sentiment changes and how dangerous it can be not anticipating those tough questions.  After all, today’s outlier view can be tomorrow’s prevailing investor sentiment.

- Philip Dale, Account Executive, China Group