Debunking Myths in Financial Communications

By Andrew Mwangi

In the communications industry, practitioners are expected to be masters of multiple sectors and become experts in the fields their clients operate in. This is the only way to not only provide value to our clients, but also develop our capabilities. One area that for the longest time has been a challenging one is the financial communications arena. From the myriad of numbers involved to the complexity of translating them into material that can easily be understood by audiences, communication practitioners have had to learn and unlearn various practices and beliefs. That has led to myths arising from within the public relations fraternity, which need to be addressed and dispelled for more effective communication.

1.??????? The Power of Narrative Over Numbers

The first, and most common misconception, is that financial communication is all about the numbers. That belief directly contradicts the core of our field, which is the power of storytelling. Our duty as communicators is to interrogate the numbers presented to us and identify the unifying narrative that can build a compelling story, which has the audience at heart. Only then shall we have effectively communicated. Whilst financial data is crucial, the narrative around the data is equally important. Be it a bank or a fintech, they all impact individuals and communities so that must be the story that we tell.

2.??????? All publicity is good publicity

The age-old adage of all publicity is good publicity could not be further from the truth when it comes to financial communications. Negative news or poorly handled communications can have a significant impact on a company's reputation, stock price, and investor confidence. Communicators must carefully manage and communicate financial information to avoid misunderstandings and maintain trust, which again ties into finding the story behind the numbers. That carefully crafted narrative will safeguard against the potential pitfalls of negative publicity.

3.??????? Crisis communication is only reactive

This belief is not exclusive to financial communications but can have a catastrophic effect from a financial communications perspective – and ties in well with the previous myth. Crisis communications must always be planned in advance and that comes with proper preparation and identifying potential issues before they become a crisis. Working with numbers and the potential interpretations can result in different conclusions being drawn – hence the need for clear communication and, once again, a carefully crafted narrative. Additionally, the expanding nexus between technology and finance has increased the potential crisis touch points because it increases the cybersecurity risks for a consumer base that is still learning how to best interact with new solutions and protect themselves from fraud. A communicator must prepare for all these eventualities to lessen the blow for their client if any of these scenarios arise.

4.??????? Once the Message is Out, the Job is Done

The final myth is that once the message is out, the job is done. Key to remember is that people are at the heart of the stories we tell as communicators and that means that you must continue to tell their stories for the numbers to make sense. Without the sustained drumbeat of stories, you lose out on the added impact. When it comes to communication, the goal is to communicate to the heart, rather than the mind as your audience will always remember how your brand – even one in the financial space – makes them feel.

The collapse of Lehman Brothers in 2008 is a prime example of the critical need for strategic storytelling, transparency, and proactive crisis management in financial communications. Ignoring early signs of distress in the housing market and failing to communicate transparently about the risks associated with mortgage-backed securities led to a catastrophic loss of investor confidence. This, coupled with Lehman's inability to adapt its strategy, resulted in the largest bankruptcy filing in U.S. history and sparked a global financial crisis. This case underscores the disastrous consequences of reactive crisis communication and highlights the importance of planning and transparency.

By the time Lehman acknowledged its precarious position, it was too late for remedial action. This case illustrates the imperative for financial firms to plan for crises in advance, identifying potential issues and preparing clear, transparent communication strategies.

While numerous myths pervade the field of financial communications, recognizing and addressing these misconceptions is key to mastering effective communication strategies. The essence of financial communications lies in storytelling, the careful management of publicity, proactive crisis preparation, and sustained audience engagement. By focusing on these areas, communicators can transcend the numbers, crafting narratives that truly resonate with their audience and successfully navigate the complexities of the financial landscape.