Too much talk of a downturn can be depressing. Understandably, then, many of the region's leading financial PR practitioners are keen to shrug off the last few years, looking instead to a future that promises much.
After all, a spate of scandals in the US has placed the spotlight firmly on transparent financial communications and, with the IPO market slowly rousing from its protracted slumber, agencies are cautiously optimistic about the year ahead.
"The outlook for financial PR for the year ahead is strong, particularly given the buoyant transaction market," says Diana Footitt, managing director of Greater China at Citigate Dewe Rogerson. "The outlook for investor relations (is also) looking positive, particularly as companies in Hong Kong and the PRC are increasingly recognising that maintaining effective communications with the global investment community is important in attracting international capital and building investor confidence."
Matthew Anderson, chief executive of Asia-Pacific and East Asia/Middle East at Ogilvy Public Relations Worldwide, is even more bullish, pointing out that the strong latter half of 2003 heralds excellent prospects for 2004. He also notes that while pure IPO-facing practices may have suffered in recent times, the ability to handle other financial issues, such as mergers and restructurings, has served his agency well.
"In Japan, for example, we're seeing very large stakes in Japanese companies being bought by private equity houses, who then restructure them," says Anderson. "The business of financial communications moves very quickly into the issues around restructuring, such as employee communications and regulatory issues."
Anderson's comments reflect a growing maturity on the part of the Asian financial PR sector, which is increasingly shying away from defining itself purely in terms of IPO deals. Ongoing investor relations, M&A advice and restructuring communications are all widely touted as being among agencies' core offerings. Such an approach should hardly be surprising, given the fierce price-cutting that continues to mark IPO work.
Denise Maguire, vice-president and managing director of Hill & Knowlton's Hong Kong operation, is highly critical of this price competition, and points out that agencies are the real losers here.
"We have heard of firms offering to do major IPOs for fees in the region of HK$200,000 (about US$25,000) or less," says Maguire. "This price-cutting makes no sense and is detrimental to the development of the industry - with so many companies looking to list and needing quality PR counsel, surely now is the time for PR firms to charge fees that reflect the value of what we contribute to the IPO process. If we all charge a decent fee, we will be valued more by the clients and bankers and it will enable us to grow, train our people, pay them better for what they do, and so on."
Complicating this trend further, is the tendency on the part of clients to retain an agency for the IPO and then do away with the need for external PR advice altogether, unless on an ad-hoc basis. Richard Tsang, managing director of Strategic Financial Relations, argues that less than one-third of listed Hong Kong companies retain a PR agency after listing.
"I guess that only about 25 to 30 per cent of listed Hong Kong companies have retained a consultancy," says Tsang. "The remaining 20 to 30 per cent may use consultancies on an ad hoc basis, maybe 10 per cent will use in-house (capabilities) and the others do nothing."
If Tsang's figures are accurate, and there is little to suggest they are not, it points to a worrying situation for financial PR practices.
With price pressures cutting the margins on IPO work, ongoing investor relations is the logical choice for financial practices looking to forge strong relationships with listed companies, and counter the more volatile transaction pipeline. According to Richard Barton, chief executive officer at Gavin Anderson & Company, the key is to provide a service that is significantly distinctive from a client's in-house capabilities.
"Why would a company want to pay agency rates for 'arms and legs' work that can be done in-house?" asks Barton. "The issue for consulting firms is whether they can provide genuine strategic advice based on relevant local and international experience. If we can do this, and execute the work efficiently, then we know that companies will pay."
Anderson concurs, adding, "You get a lot of prestige from the elephant (IPO) deals, but the core is really ongoing interaction with a management team. It's about being asked to offer the CEO and board members an independent view on both issues and investors, and that's where we have an ongoing role."
Footitt, for her part, argues that any claims of strong strategic advice must be reflected in the client's profit and loss column, if agencies are to win their trust.
"Our clients value strategic counsel - I guess it is just a case of proving you can make a difference to the bottom line," says Footitt.
To do this, she continues, "... the calibre and breadth of experience of a company's consultants is critical."
The need for practitioners that understand the nuances of complex financial issues, accordingly, has become particularly pronounced.
"Previous financial expertise does count ... although it is not easy to find good people, and these days fluent Mandarin is a pre-requisite as so much business is with Chinese companies," states Maguire.
Adds Leslie Fung, executive director at Manning Selvage & Lee: "(Recruitment) is quite difficult, and much easier in the US and Europe. There are not many people with the right skills, especially as clients do expect people to have some financial sector experience."
The changing face of financial PR also requires practitioners to offer clients an ever more multi-faceted understanding of the diverse stakeholder groups that clients now communicate with on a regular basis. Whereas in the past, when financial PR may have consisted solely of IPO work and relations with the financial media, today's service offerings also must include the ability to communicate with the investment community, employees, customers, NGOs and relevant regulatory authorities.
"When there is a listing or M&A, there's clearly a core financial community programme that needs to be done," asserts Anderson. "But you may need to explain the transaction benefits to employees."
Adds Barton: "What is becoming increasingly clear is that CEOs and C-suite personnel are, more than ever, expecting their PR advisors to be able to consult across the full gamut of disciplines - whether it be financial, corporate or public affairs. This is driven by two clear factors - cost and, more importantly, the fact that these areas are inextricably linked."
The increasing overlap with other areas, such as CSR and public affairs, is hard to miss. The growing clamour for more transparent financial communications, in the wake of the US corporate governance scandals, has only accelerated this process.
"Companies are more careful these days about things like selective disclosure and connected transactions, so agencies can help in terms of making sure important developments are communicated properly," says Maguire.
Footitt agrees, and also notes that an integrated communications approach is becoming more and more important in terms of attracting and retaining investors.
"Increasingly, investors look at non-financial issues when assessing a company - such as management, CSR and so on, as they all impact the bottom line," she says.
With clients keen to avoid the kind of notoriety that can ensue from poor corporate governance, crisis planning is also making something of a comeback, adds Anderson.
"Particularly strong management teams have done more (crisis planning) around things like M&A scenarios than they would have done five years ago," he states.
Both Fung and Maguire believe that this is a trend on which agencies can really capitalise, given the investment many have already made in crisis management capabilities.
"(Our) crisis and issues management and training practice is increasingly looking at helping clients with reputational issues and financial matters, not just physical crises like an oil spill or an aircrash. We help companies establish crisis plans and conduct simulations and trainings that ensure those plans can be put into practice if needed," notes Maguire.
Says Fung: "Crisis planning is definitely more important now - whereas clients used to have generic crisis plans, something unexpected now always comes up. This gives us the opportunity to help companies review their crisis guidelines and ensure that, even during crises, the message is still one of 'business as usual'."