The Cost of a Poor Communications Strategy

No one knows exactly how much poor communication costs businesses, industries, and governments each year, but estimates suggest billions all around the world. Malaysia is not exempt from this phenomenon, as in 2021 itself there have been several high-profile corporate cases involving Public-Listed Companies that had resulted in drastic share price selloffs even though the veracity of the allegations has not been proven yet. 

Poorly-worded or inefficient emails, careless reading or listening to instructions, documents that go unread due to poor design, hastily presenting inaccurate information, sloppy proofreading, ill and unprepared responses to media queries — all these examples result in inevitable costs. The problem is that these costs aren’t usually included on the corporate balance sheet at the end of each year, so often the problem remains unsolved.

The waste caused by imprecisely worded regulations or instructions, confusing emails, long-winded memos, poorly written speeches, hasty or impulsive responses to media and other examples of poor communication is not as easily identified as the losses caused by a fire or a flood. 

But the losses are just as real—in reduced productivity, inefficiency, lost business and the worst of all – a loss of reputation. Warren Buffet once famously quoted, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll want to do things differently in your company.

The following “case study” that happened in Malaysia this year shows how poor communications can have real world costs and consequences

Case 1: Management’s poor response to audit dispute resulted in share price collapse 

The share price of Company X, an oil and gas conglomerate in Malaysia took a dive after its board of directors was informed by its external auditors on some matters pertaining to statutory audit. In response to that, Company X said it would be appointing an independent firm to commence a special independent review on the matters. In addition, the company will go ahead with the motion to change its external auditor despite calls from various parties to stop it from doing so. Lastly, Company X was adamant that it had not done anything wrong despite the evidence presented. Its management was continuously in denial and brushed away all allegations that was presented by its external auditor in the media interviews that were conducted after the issue surfaced. 

The poor initial communication and responses by management to an extremely deep-seated corporate issue has resulted in the share price of Company X taking a huge dive weeks after the issue first arose. Instead of mitigating the concerns that had been brought up, management had exacerbated the issue by being completely out of touch with its media responses. Its continuous denial of the issue and counter accusations had led to its integrity being questioned as more negative speculations arose over time. 

What was the communications team of Company X doing at that time? Did it even have a communications team? Or perhaps the company did not even have a crisis communication plan in place…We will never know that for sure. But this case study has demonstrated to us on how easy it is for even established and large companies to lose investors’ confidence due to a poor communications strategy. 

Today, the issue remains unsolved, and Company X had lost over 70% in market capitalisation since the revelation of the audit queries.