As technology stocks become increasingly vulnerable in the current economic downturn, a survey produced by Deloitte & Touche revealed companies are failing to provide investors with enough risk information. The knowledge gap has made investors especially jittery in the wake of the attacks and recent dotcom crashes.
Deloitte partner Malcolm McCaig said: ‘If there’s a gap in understanding between the investor and the company then investors will not be as confident. In fact they may jump to the wrong conclusion about what risk is being controlled.
‘In the current economic environment there is very much an increased need to build investor confidence.’
In the recent survey conducted on the audience of the quarterly techMARK review, Deloittes found one in four companies believe their investors do not know about their risk management process.
About half of the companies, represented mostly by their FDs, regard their risk management process as ‘rudimentary’.
McCaig said: ‘What this highlights is a problem in the relationship between high-tech companies and investors.’
He continued that investors are uneasy and it is not enough just to manage the business, FDs must also ‘manage uncertainty.’
He added that this is especially important to a fast paced technology sector reliant on innovation and taking risks. Investors in this sector are more likely to sell their shares if companies fail to make their risk management strategy clear.
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