In order to understand Investor Relations (IR), we must first define Public Relations (PR). PR refers to the art of managing how others see, feel and perceive an individual, brand or company (Chen 2021). PR personnel are frequently responsible for crafting and maintaining a corporation’s image. PR involves managing a company’s reputation in the eyes of clients as well. PR for corporations, most notably publicly traded companies will focus on and maintain a positive corporate image while handling shareholder inquiries. Under Public Relations falls Corporate Communication.
Under corporate communication falls Investor Relations. Investor Relations (IR) combines finance, communication and marketing to relatively control the flow of information between a public company, it’s investors and its stakeholders (corporate finance institute). Investors play a vital and major role in the growth of a company. For this reason, it is important for companies to nurture and maintain strong, transparent relationships with investors. This is where the investor relations sector of a company comes into play.
Why do companies build their Investor Relations (IR) sector? It is important for business to communicate effectively and honestly with investors. This is because many companies have got investors that have not only aided them to take flight, but also continue to back them through operational success. The size of the IR team varies from company to company.
The following are the goals of Investor Relations
To enable the company to achieve the optimum share price that reflects the fundamental value of the company.
Representing the company to investors and representing investors to the company .
Providing financial information to investors in a timely and accurate way.
Providing non-financial data to support company valuations.
Observing the rules of securities commissions and stock exchanges.
Presenting Investor feedback to company management and the brand.
Investor Relations when dealing with Wall Street
Investor Relations refers to the face of a company in capital markets. Investors and Shareholders by default view the CEO or CFO as the face of a company. However, when dissected into and psychoanalysed, the IR is usually in the middle of the inner workings of publicly traded companies. The IR department is often the medium from which the word from wall street comes in and the portal through which the company communicates back.
Investor Relations as a communication tool
The IR department acts as a translator for the language spoken by Wall Street. The IR conveys messages to company executives on how the company is doing how the company is doing/viewed by Wall Street and its investors. IR helps to bring to light what the investor community might see as assets or flaws. Aside from this, the IR department helps to communicate what needs to be changed, what the company does not understand, and what will drive the value of shares, based on predicted and current investor needs and tastes.
The IR department acts as a portal through which corporate communications talkies place. Investors, analysts, potential clients and anybody else with a request or demand for information from a corporation are usually directed to the IR. Whatever the IR is capable of assigning elsewhere, passing off or passing down, it will do so without having to involve the higher ups. This is essential in the avoidance of information overload towards executives.
Finally, the company values, interests, positions and answers to be replied to Wall Street are formulated in the suitable stock market language that involves concepts such as profit margins, earnings per share and dividends.
In conclusion, the IR department keeps the lines of communication open between a company and its investors. When it comes to shareholder engagement, IR is responsible for spearheading and answering questions to investors plus the stock market in the common language of finance and stocks.
CHEN., 2021. PUBIC RELATIONS [online]. [25/03/2021]. Available from: https://www.investopedia.com/terms/p/public-relations-pr.asp
CFI., 2021.THE ROLE OF INVESTOR RELATIONS. [online]. [25/03/2021]. Available from: https://corporatefinanceinstitute.com/resources/careers/jobs/role-of-investor-relations-ir/
©Keren Obara Mar 2021
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