This article was produced by ELITE Connect and originally published on the ELITE Connect platform
As an ever-evolving function, constantly responding to internal demands and external influences, IR is increasingly perceived as crucial to the success of companies’ engagement activity. But what does the C-suite think? Here, Mat Dunn, CFO at Britvic, gives his insight into the value of IR, while Patrick Bowes, head of external communications & IR at Old Mutual Group, shares the views of his C-suite.
Elite Connect: How do you think the IR function contributes to the company?
Patrick Bowes: The IR function is a key strategic pillar in all companies, providing communication with the financial markets, analysts and the media. This dialogue is aimed at furthering transparency and honesty with the markets between the investment community, senior management and the board. When effective, the IR function can allow for the efficient allocation of management’s time, reduction of funding costs and fair company valuation by the markets.
Nurturing long-term relations with stakeholders and engaging with new investment audiences is essential for the IRO. Creating awareness about the business in a world with increasing competition for investors’ money, regulatory and technological change should be at the top of the IRO’s agenda.
Mat Dunn: IR is an effective bridge between us and our owners: the shareholders. It helps us explain our strategy and performance to our shareholders but it also helps us to understand what they want from us.
EC: Have you noticed any evolution in the function, and do you expect any changes in the future?
PB: The range of expertise required from the IR function has grown throughout the years, with IROs now covering treasury, strategy and corporate finance activities, among others. This expanded set of required skills equips IR practitioners with a holistic view of the business.
In an ever-more regulated and integrated environment, particularly with the rise of Mifid II, the IR function will become more proactive in identifying investment opportunities and promoting the investment case. With major shifts taking place in both the buy side and the sell side, the IR function has become even more crucial in efforts to interact with and inform the investment community.
MD: With all of the changes proposed through Mifid II, I expect IR to be an even more critical bridge to the equity market in the future.
EC: Do you feel the IR function is valued enough externally – for example, by analysts and shareholders?
PB: Investors are becoming more vocal in demanding more transparency and disclosure. This shouldn’t come as a surprise given that in order to make good investment decisions, information and knowledge are the main inputs of the process.
The investment community as well as the public companies themselves have never been more aware of the pivotal role investor relations plays when it comes to satisfying this increasing need for information. At our company, we are trying to ensure we create and promote relationships of trust and mutual openness as the sustainable foundation of financial markets in our equity and debt instruments and the building of shareholder value for the long term. This wouldn’t be possible without the valuable input of the IR function.
MD: I feel most investors and analysts do appreciate IR and the distinctive role it plays, which is different from [the role of] executive management, but only when it is done well with insight and real business understanding.
EC: Do you have any other views to share?
PB: Global shareholders differ dramatically in their reason for investing or not in a particular stock. Our own experience has brought us to the conclusion that we can create more value by putting our businesses in the hands of their respective natural shareholder bases. Our IR insight and direct investor feedback support our internal conclusions.
MD: For IR to be an effective function, you need a team that understands and is well connected to the business. Team members also need to be excellent communicators and good at building relationships – and they definitely need a good deal of patience to deal with the nature and pressure of the role.
