The Role of Investor Relations in 2009
Posted by dna 13 on Mon, Jun 22, 2009
Investor Relations is a complex department with multiple goals, but what it really boils down to are three interrelated objectives that work together in balance; communications, building relationships, and using feedback to guide management's decisions.
1. Communications - IR works hard to achieve an effective, two-way flow of information between its public company and the investment community. Within this, there are two key needs that must be met:
- To meet the investment community's demands by delivering information in a timely and accurate manner, and
- Condition investors to being open to hearing and accepting of new information from the company on future strategic decisions.
Doing a good job on the first point helps achieve the second - companies benefit from a program of sustained communications, which builds market confidence in the company's fundamental strengths.
2. Building Relationships - Building mutually beneficial relationships with the Street is incredibly valuable to IR. The key for success in investor relations is in the second word - relations. In IR, relationships must be built on accessibility, timeliness, knowledge, reliability, and most importantly, credibility.
Credibility is a precious and fragile asset. Its loss can cause long-term, possibly irreparable damage to investor perceptions of a company and its leaders. Anything that affects the brand and reputation of a company and its management can (and will) affect the marketability and valuation of the company's securities.
Unquestionably, the best way to gain credibility within IR is consistency. Be consistent in the management's track record in delivering on commitments - walking the talk. Be consistent in your communications efforts with the Street - who are you talking to, what are you saying, and how? Lack of consistency in either operational performance or IR communications processes nearly always translates into loss of credibility, with the ensuing damage to corporate brand, management and corporate reputation, and market value.
3. Guide management decisions - As a final objective, investor relations works to help guide management decisions based on the feedback it receives from the Street. How does the Street view the company, and its strategies and initiatives to create and sustain shareholder value? Working with the first two objectives, the insight that IR has into the company's brand and reputation is invaluable in making future strategic decisions.
Nowhere is competition more intense today than in the global securities investment market - particularly for equities, where institutional and retail investors have thousands of public companies to choose from in making investment decisions. Public companies must compete for these investment dollars. They must stand out in a crowded market - they must raise their brand and reputation above the competitive noise.