Profit downgrade management
If not well-managed, a profit downgrade will erode investors' confidence and the value of the organisation. However, it is not just investors who are affected by profit downgrade. Financiers, regulators, customers, suppliers and employees are some of the critical stakeholders who must be actively managed prior to and during a profit downgrade.
Purpose
With downgrade events usually unravelling in a matter of days, the demands on directors and executives to respond to the event itself and the myriad of stakeholders are immense.
Profit downgrades are emotive and complex and it is usually an unfamiliar scenario for the board and its executives. Downgrades can lead to bad decisions and could unwittingly drag down more than just investors.
Deloitte has developed a programme to assist boards and executive teams manage the process of a profit downgrade and proactively manage the causes of the downgrade.
The Deloitte Approach
Our approach focuses on both prevention and response as follows:
- Manage the initial profit guidance
- Manage the process of establishing whether an event is allowed to be disclosed
- Support realism to ensure if the Company goes to the market with a downgrade, only go once
- Ensure key market messages are supported by fact and action
- Anticipate how the announcement will impact key stakeholders
- Manage regulator response
- Assist in the CEO and CFO question and answer preparation
- Implement turnaround plans to rapidly address performance issues