Studies have shown the extent of damage that can be done to a brand when it lacks quality relationships with its investors and other stakeholders. Hence, many organizations see reasons in allocating much resources to their investors relation unit to enable them develop capacity to allay the fears of their shareholders and maintain their trust.
What is Investor Relations and who is an Investor Relations Manager?
Investors Relations is an aspect of corporate management that deals with management of investors’ complaints, values, interests or preferences and ensuring that there is no communication asymmetry between the company and the investors or shareholders.
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Therefore, an Investors Relations Manager is someone who has acquired training and experiences in interacting with investors in a way that continues to promote the investors’ confidence in the overall performance of the Organisation.
Investor Relations Manager is expected to have some basic skills. These skills include the following:
Communication and listening skills.
An Investor Relations Manager must be able to communicate in clear terms the circumstances of the business to the investor such that the investor will not feel neglected in the day-to-day
running of the business. Regular communication with the investors is very
important because they are the source of capital that runs the business and they have the right to know much about where they are investing their money into.
More importantly, the Investors Relations Manager must be a good listener. He must be patient and adept enough to aggregate and convert the contributions, complaints, worries and fears of the investors into well defined solutions that drive growth in the company and promote the confidence of the investors in the brand.
Emotional Intelligence.
Empathy is a core emotional intelligence that is quintessential to Investors Relations. Investors are fundamentally inquisitive. Even under the safest condition, most investors want to hear from someone within the system to hone their confidence. And as key stakeholders, Investors have the inclination and the right to seek a sense of belonging, ownership and relevance in the organisation. Thus, the IR manager must always appraise the investors from this perspective.
Social Intelligence. The IR manager must have some reasonable level of social intelligence to get along with the investors.
System Knowledge.
The IR manager must have the competence or cognitive ability to understand the complex web of the socio-economic system and the impact this has on the business. Investors are often alarmed by external factors that may pose a threat to their investment. Thus, the IR manager must be able to provide cogent explanations that satisfy the worries or anxieties of the investors.
For instance, the COVID-19 pandemic triggered fears in most investors in the country and across the world. Under such a situation, a good IR manager would be able to understand and explain the impact of the pandemic on the economic landscape and what measures the company is putting in place to cushion the effect, especially on the investors. This will promote more confidence in the investors.
Generic Objectives of IR
The Investment Relations have four generic objectives and functions. These objectives and functions include:
Eliminating friction. Proactive engagement of investors eliminates information asymmetry or gaps between the company and the investors, and this reduces the friction that can arise when differing perspectives or objectives are not understood or aligned. Hence, engagements avert distracting efforts to prevent hostile takeovers.
Independent Perspective/Intelligence. Having constructive dialogue with investors and effective aggregation of the viewpoints or ideas of the investors can enhance a company’s performance and create a competitive edge for the company.
Early Signal of Tension. Active engagements with investors help to extract investors’ feedback which can provide early warning signals on a potential issue.
Mutual Trust and Support. Effective communication promotes mutual trust which provides a strong support and advocacy base that can be crucial in both good and bad times.
The foregoing generic objectives and functions of the IR promote operational excellence, easy access to capital and growth opportunities, stock liquidity and optimal valuation for the company.
To examine how efficient and effective the IR, of a business is, the manager needs to ask and satisfactorily answer the following questions:
How often are we engaging with our Investors?Engagement with investors should be as frequent as possible. Key investors should have the chance to dialogue with the CEO at least once every year. Other investors should also get to meet with principal officers if not the CEO at least once a year.
Is our current process of engagement reactive or proactive? We need to be proactive. The IR officer or manager must have strong foresight to be able to prepare the Investors against future happenings.
What are our Investors preferences? We need to have data of our investors that want to liquidate their investments, those that want to cash out and those that want to reinvest their ROI. This will give us insight into our client loyalty level.
What is the response rate to information requests? Create platforms that allow investors to swiftly respond to us, and also enable us to respond to their requests or complaints in real time.
Are we consistent with our approach of engagement with Investors?
We must be consistent in our approach. Consistency fosters trust and confidence.
How is our response like, defensive or clarifying? The people at the back-end must have social, emotional and system intelligence to be able respond to and satisfy investors’ complaints, contributions, fears and worries.
How do we tell our story, half full or half empty? We need to be strategic on how we tell our stories. We cannot go all out. In as much as we need to carry the investors along, we have the obligation to protect the system from possible attacks. Thus, our Investors Relations officers should have sufficient knowledge in information handling and management. We must define the need to know, good to know, and no need to know for the investors.
What communication channel is being used, and which serves the company best?