What are the basic principles of Interaction with Companies & Clients?

Research is gathering of information from a range of sources and then Analysis - processing of data to take decisions.

Despite the fact that the force of internet gives an analyst the capability to obtain a lot of information, it cannot become a direct interaction with companies and clients. Personal communication with management assists them to get an enhanced insight in to the vision of the company and its strategy to get hold of the desired goals.

In some cases, it is possible that the management misinform the analysts by intentionally overstate positives about business to encourage them to write positive stories to influence the market prices positively.

In some cases, managements speak negative about their business so as to discourage people from buying their stocks. For that reason, it is always advisable for analysts to cross substantiate the claims of the management former to their recommendations.

This communication with management, like any other, needs analysts to have lucidity of thoughts and paying good attention ability but there are a few additional principles that analysts must keep in thoughts while speaking to the management.

Principles Interactions between Company andClient

Pre-meeting Research:

When the management is usually open to interview with ResearchAnalysts, they must remember that these chances do not come very often and hence maximum utilisation of the opportunity has to be made.

Prior to meeting a management staff of a company, the analyst must be familiar with the company’s products, industry and also their competitors.

The financial information of the company has to be studied and also assess their previous year’s annual reports to comprehend the track of the company and whether the company has been able to achieve the goals it had planned to.

Unprejudiced Opinion::During the research, analysts must have an unprejudicedopinion and should at all times hold their independence.

Their analysis should be based on accurate information and not led by personal preference. In addition, they must make it apparent with the management to not disclose any information which is not available in the public domain.

Network:Analysts may use their network to get more contacts pertinent to the research,who would be able to offer significant insights into the company’s performance and plans.

The person who is accountable for the significant activities and understands the pulse of the company would be the most relevant contact and this person may not necessarily be from top management.

Competitors and other stakeholders of the business such as suppliers, distributors, retailers and customers can also offer consequential contribution to analysts in the research process.

Clearness of questions:

As analysts start analysing a company, there would be definite characteristic onwhich they might need more clarity.

Time management must be effectively used if analysts have a clear specific set of questions in mind.

It is sensible to go with a questionnaire to have a better understanding of the company's function and future development.

When analysts have completed with research and research report is prepared, they need to commune their findings to the clients.

There are certain strategies that an analyst could follow in their communication with clients.

They must be sensible in suggesting companies to their clients. Suggestion should be based on proofs and figures and not contain an optimistic/pessimistic/biased view on the subject company.

Communication, done through written research report, should be simple, clear and concise.

If there is any disagreement of interest (e.g. RA holds shares of the subject Companysuch information should be disclosed beforehand.)

Hypothesis, if there any, should be clearly declared in the research reports.

Abbreviations/terminologies should either be illustrate or explained deeply in simple.

The role of Research Analystis to collect data/information from diverse dependable sources, interpret the data/information and convert it into recommendations that their clients can use.

While doing so, it is expected that Research Analysts would carry out their role with highest sincerity, honesty and ethics without any partiality, following all the rules and regulations as specified by SEBI or this, it is also recommended to make use of technology like recording devices while meeting management and communicating with clients, only after taking their due consent for recording.