This article was produced in association with ELITE Connect. It was originally published on the ELITE Connect platform.
While the IR landscape is always evolving to meet market changes, the past 12 months has been a particularly testing period. The impact of forthcoming legislation, a greater focus on ESG, the increasing importance of governance issues in general and a growth in shareholder activism have all affected IR departments worldwide.
Rather than taking each of these issues in isolation when looking to address their challenges, however, the general consensus among IR professionals at the recent annual conference of the UK’s IR Society points to a much simpler solution: IR departments should forge better communication links with their company’s various departments to ensure clarity and consistency of message.
Sandra Novakov, IR director at Citigate Dewe Rogerson, agrees, adding that factors such as calls for greater dialogue and engagement between investors and corporates through regulatory initiatives such as the Stewardship Code and the Kay Review have meant the investment decision-making process has evolved to be so much more than just looking through a financial lens.
‘Non-financial factors, including sustainability and corporate governance, are becoming increasingly important and, as such, it is now imperative for an IRO to be fully versed in more than just the financial and operational details,’ she explains. ‘Fostering close internal relationships across the company are key to achieving this, which naturally enhances the IRO’s credibility with the market.’
As an example, by building closer lines of communication with their company secretary, IROs can be better prepared for dealing with challenging governance issues. ‘The role of the IR function is essentially to provide an effective two-way communication channel,’ says John Gollifer, general manager at the IR Society. ‘Like all good communicators, IROs can only be successful and have the support and trust of their executives if they know what they’re talking about.
‘It was clear from our conference that when IROs were talking about what went wrong or what could have been done better in difficult situations, greater levels of interaction with their company secretary to ensure effective and consistent communication on governance issues would often have made a big difference.’
Similarly, Gollifer says that by working more proactively with their public relations or corporate communications teams, IROs can help to ensure a variety of different stories aren’t being conveyed to external audiences, and that consistency is maintained through all channels, helping to avoid mixed messages and communications going awry.
‘If IR and corporate communications don’t talk to one another regularly to compare notes, things will be missed when preparing the investment story and the tone and messaging won’t be the same,’ he explains. ‘It doesn’t matter how good you think you are at IR, if your communications aren’t covering the same key messages and being picked up by the media and the investment community in the same way, then it’s not effective and you run the risk, for example, of activists seeing gaps or inconsistencies in your story – and acting on these.’
Taking this one step further, Novakov also believes IROs are best placed to identify and communicate internally on any investor concerns regarding company strategy, performance or governance – in effect, acting as an ‘early warning system’ for the company. ‘Given the rise in investor activism over recent years, this has become an increasingly important part of an IRO’s role,’ she says. ‘Addressing investor concerns early on, both through effective communication and by taking any necessary pre-emptive action, can help companies to remain in control and avoid any potential conflict with investors further down the line.’
Gollifer acknowledges, however, that even the best-intentioned IRO needs the support of the powers that be to succeed. If the IR function isn’t encouraged or empowered to cut across into other areas before the investment story is formulated with management, then even the most determined of IR professionals will struggle to succeed. ‘The best IROs are those given the opportunity to develop the strongest relationships internally,’ he says. ‘With this comes credibility and recognition by the board that the IR function is a vital conduit to the investment community.’
