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The Making of Better Stockholder Relations

By Enam Obiosio
Many shareholders world over are interested in the financial progress of corporations or companies in which they have invested their funds.

Thousands of individuals who are planning to invest in industry shares are eager for 

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10 Essential Responsibilities Of Investor Relations (IR) Practitioners Enam Obiosio A few months ago, I published a story on the responsibility for shareholder relations. I have here taken it upon myself to discuss this again in an all-encompassing manner, however in brief as I itemize the responsibilities. There are many activities involved in preparing a company or any other business organisation for effective dialogue with its major stakeholders, to achieve its objectives. In the same vein there are many specialists driving the activities, and among them is an investor relations officer or practitioner. In order to shed some light on the above concern, it is absolutely apt to first look at the definition of investor relations as a strategic function or practice. Without attempting very many definitions, investor relations, according to National Investor Relations Institute (NIRI), is “a strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company's securities ...” This definition for now can be considered a globally acceptable one. The question therefore has always been: What do investor relations practitioners do? A lot of people, even those who are obviously supposed to know, would often ask this same question, leaving a few people to battle with providing the answers. A colleague once said, “I have lost track of how many times I have tried to explain what I do to some of my friends. Some of my explanation they get, but some of it, they do not. What they do know is that there is more than enough work keeping me very busy, and that there is rarely for me such a thing as a boring day.” In the light of all this, below are 10 essential responsibilities of an investor relations practitioner: 1. Interfacing with investor community. It is the primary responsibility of IR practitioner to engage with the investor community and develop and maintain effective relationships with research analysts, institutional investors, and retail brokers. The relationship building between these market participants and the company is of utmost importance. The engagement can occur via various means, whether it is over the phone or conference call, or through in person meetings, road shows or investor conferences. What is important is that the IR practitioner is responsive, understands disclosure rules, and can effectively communicate operational and financial performance. 2. Facilitate access to management While investors and analysts like speaking with the IR department in the early stages of research and information gathering, they will later want to speak with other members within the management – in particular the CEO and CFO. This can sometimes be challenging for the IR practitioner because, as the gatekeeper responsible for handling these requests, he must manage both the time of the company’s executive team and the expectations of shareholders and potential investors. 3. Investor targeting and Shareholder identification Targeting investors who have demonstrated investing philosophies that are aligned with the company’s investment profile can help build a supportive shareholder base that is interested in long-term value creation. Also, an important duty of IR practitioner is identifying the company’s shareholders and targeting the ideal investors for the company. Knowing who the company’s shareholders are allows the IR practitioner to understand the investment objectives and have more sincere and productive conversations. The IR practitioner may also discover that some of the shareholders have other motives and have purchased the company’s shares for reasons other than long-term capital appreciation. 4. Considering competitive and market analysis The analysis when completed by an IR department is often used to support the CFO and CEO by providing ad-hoc strategic, financial, competitive, and market study analyses. It is, therefore, the responsibility of an IR practitioner to keep taps on how the company is performing compared with its peers in terms of operational, financial, and market metrics and performance. In addition, IR practitioner should keep track of industry standards and benchmarks as to how IR and communications is practiced. This means that there is quite a bit of quantitative and qualitative data to gather, so the IR department should be well equipped to manage and analyze the data. 5. Developing a captivating value proposition with key messaging The value proposition and messaging may be used across various communications materials. Like many other aspects of IR duties, the development of a compelling value proposition and key messaging does not happen in a vacuum. IR practitioner must work with its internal functional and business partners to build a powerful proposition and messaging that considers strategic objectives, IR objectives and other key stakeholder groups. 6. Developing disclosure materials and investor communications There are several tools and required documents that IR practitioner uses to communicate with the investor community. Investor communications tools and materials include quarterly and annual reports, investor presentations, brochures, and the IR website, to name just a few. Once again, in order to ensure consistency, IR practitioner’s responsibility of coordination and oversight is very important. Often, these materials are developed with support from finance, communications, and legal departments as well as with the revenue-generating businesses. Developing and updating these materials is time-intensive and requires constant monitoring for potential changes and updates. 7. Plan and implement investor events IR practitioner generally oversee the entire quarterly earnings process including logistics, the preparation of press releases, presentations, scripts, question and answer (Q&A), supplementary schedules, and follow-up calls with institutional analysts and stockholders. He must also plan other investor events such as investor days and Annual General Meetings (AGMs), and work closely with brokers to plan non-deal road shows. Sometimes, however, companies do not use a broker to plan a road show, so the entire responsibility falls on the IR practitioner. 8. Financial media relations The IR practitioner must understand that his executives need to be well versed in the company’s public disclosure and key messaging to effectively communicate with the media and to keep themselves on the right side of securities law. Many IR practitioners write financial news releases, such as the quarterly earnings release, manage questions and requests from financial media and help executives prepare for interviews with the financial media. 9. Advisory and executive training As the IR practitioner, one of your responsibilities may be to advise CEO, CFO, and other members of the executive team on strategic matters of shareholder and stakeholder communication. Additionally, the IR practitioner should coach the executives on how to communicate and interact during meetings with and presentations to investors. Words, tone and body language should be observed and evaluated. Training is essential for external spokespeople. Given the strict regulatory rules regarding Regulation Fair Disclosure (Reg.FD) in Nigeria and other countries, spokespeople of the company must be informed as to what constitutes public disclosure and the risks and penalties associated with selective disclosure. 10. Feedback and strategic input to management and board One of the top responsibilities of IR practitioner is engagement with the investor community. Shareholders are very frank about their thoughts on a company’s results, strategy and disclosure. It is essential to gather feedback and ensure that it gets to the management and the board as it were. Tracking the feedback facilitates proper dialogue to occur between the company and the investor community, it informs management and the board on strategy and decision-making, and it allows the company to potentially make both tactical and strategic improvements in how it communicates with investors and other stakeholders. Investors are smart and well-informed market participants. Do not ignore their feedback as it can serve you and your company well in achieving long-term objectives. In conclusion, and as a matter of fact, IR practitioner’s responsibility can be an intense and demanding role with its many engagements.

Editorial

Dear Readers, we welcome you all to the maiden edition of our monthly publication, Investor Relations (IR) Nigeria. Launched this year, precisely in February 2017, IR Magazine Nigeria is the only exclusive IR information platform in the country that focuses on the interface between...Read More...

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