Avoiding The Quarterly Trap

As the earnings season approaches, companies invariably confront a familiar trap: the pressure to satisfy investors’ expectations for precise financial projections. But if seeking to quantify the future financial impact from shifts in the business environment has always been hazardous, it is particularly treacherous at present.

The economic narrative resembles a rollercoaster with hot themes climbing and plummeting within a matter of days, if not hours. News alerts about dizzying trade restrictions, the end of US exceptionalism, a defense-led European Renaissance, AI’s transformative powers, multi-partite wars, oil price swings, or unfathomable political action such as the OBBBA flash up on screens, promising global disruption.

And I think to myself/What a wonderful world.

Under such circumstances, seeking to meet investor demand for instant quantification can backfire, as illustrated by the first-quarter tariff commentaries. Numerous firms offered rapid-fire assessments of potential financial impacts. Yet, the estimates were quickly overtaken by events: exceptions were announced, grace periods were negotiated, and retaliatory measures evolved. Furthermore, the gradual appreciation of second- and third-order effects highlighted the enormous complexity of making financial forecasts. Estimates that initially reassured the market soon looked irrelevant and even misguided.

And I think to myself/What a wonderful world.

Successful leadership depends less on lucky predictions and more on reflexes, agility, and disciplined pauses that prevent opinions and decisions from being made too quickly.

So, here is an idea: rather than seeking to substitute complexity with oversimplified, speculative financial quantification, publicly listed firms could use interactions with investors to demonstrate how uncertainty is recognized, monitored, and managed.

Indeed, presenting the frameworks and processes in place for structured decision-making would arguably align closely with how sophisticated investors assess a company’s management resilience and quality. This approach suggests that IR materials include selected aspects of a firm’s corporate governance set-up.

By disclosing and discussing how a firm identifies and focuses on the most material business issues, how it gathers data and intelligence, how it accounts for relevant stakeholders’ views, how it implements scenario planning, and how it taps a deep and diverse network of experts (including the chairperson and, subject to protocol, other non-executive directors as sparring partners), it would offer investors a valuable glimpse into the strength of their governance structure. It would reassure the financial markets that top executives, while inevitably lonely, are not alone in judgment.

Ultimately, markets prize lucidity over clairvoyance.

Yes, I think to myself/What a wonderful world/Oh, yes.