Even though the market went up last Friday, with unemployment and food lines growing by the day and COVID-19 persisting, it’s clear we’re in a crisis. If anyone’s ever questioned the importance of a crisis response planning exercise, you might want to give them a copy of a recent study from State Street. And, when crisis strikes, pull the PR team in and make sure the public hears about all the good things the company is doing.
The study shows how a company’s response to the COVID-19 pandemic impacts stock performance and institutional money flow — a good case study of the positive effects of crisis planning and response. State Street’s website provides this intro:
COVID-19 has forced companies to respond swiftly to the pandemic and highlight their resilience to investors. Exploring how their actions affect stock performance, we found that companies seen as protecting employees and securing their supply chain experienced higher institutional money flows and less negative returns, especially when those practices garnered significant public attention. Firms that most prominently re-purposed their operations to provide in-demand solutions to the crisis experienced a significant positive impact on returns. This evidence challenges the notion that shareholder and employee interests are in conflict. It also suggests that corporate disclosure and media coverage play a significant role in how corporate responses to crisis management decisions could influence investor behavior and impact stock performance.
-Lynn Jokela, TheCorporateCounsel.net May 11, 2020