The most recent IR Magazine Webinar, held on November 8 this year, addressed a crucial issue for IR professionals everywhere: convincing the C-suite that an investor relations department has great value for any publicly listed company.
‘The financial crisis was obviously a huge challenge,’ said moderator Neil Stewart, quoting John Andrews, former head of IR at Citigroup, who joined the firm at the height of the crisis. ‘The silver lining was that it was good for IR. The roll of reputation became paramount.’
Click here to listen to the webinar
But as economies continue to struggle and headcounts fall across investor relations departments, panelists at the IR Magazine Webinar sought to uncover what Stewart called the Holy Grail of IR: proving the value of investor relations to management and investors. What makes this such a tricky subject is that IR is so difficult to quantify: do you talk about how many conferences you’ve attended or concentrate on whether you actually secured new investment?
‘I don’t think the ‘one true measure’ really exists,’ said Beate Melten, director and global head of IR at Citi Depositary Receipt Services, and one of the webinar panelists. To really demonstrate your worth to management, Melten recommended building credibility with investors. ‘Who do investors turn to first? Do they call you? That is certainly something you can use to prove your value to management,’ she pointed out.
To turn yourself into a reliable IRO – and prove your worth to investors – is an increasingly challenging job, however. ‘Investors today are expecting much more from you,’ explained Melten. ‘You need to know about your company, you need to know about your competition, you need to know about the macro environment. The world has become much smaller; today you are in competition with every company around the globe that fits into a certain investor base.’
Fellow panelist Tim Craighead, director of Asian research & senior gaming analyst at Bloomberg, agreed. A successful IRO must have an ‘up and out’ approach, addressing both management and investors, with information flowing both ways, he said. ‘If you have your finger on the pulse, management is clearly going to be relying on you for market intelligence and market insight,’ he noted.
As well as being an expert on your own company, a deep understanding of your peers and your market will help you to predict problems, manage any issues and minimize surprises, added Craighead, all of which your investors will appreciate – as will your senior management.
These ‘best practices’ remain the same whatever situation your company is in, said Craighead. If you’re doing well, you need to know what issues your competition is facing; if you’re struggling, ‘look longer term and think about what could cause the upturn, because that’s the core of the story you want to be telling potential investors,’ he explained.
In fact, Eva Chan, chairman of HKIRA and head of IR at CC Land Holdings, suggested IROs can use a downturn to their advantage to really show their worth. Even if investors are less interested, you need to ensure analysts keep their eyes on your company, she added.
Suki Wong, head of IR at Anta Sports Products, emphasized the importance of communicating the brand and bridging the gap between management and investors, adding that managing investor expectations is one of her priorities. ‘Don’t over-promise – always tell the truth,’ she advised.
Going back to how exactly you measure the value of IR, Wong added: ‘We suggest that senior management doesn’t use the share price as the benchmark to evaluate IR effectiveness.’
This is something fellow panelists Melten and Craighead also recommended. ‘Don’t fall into the trap of allowing anyone to take the stock price as a measurement,’ said Melten. ‘The stock price relies on many things you have no control over – like the financial crisis, for instance.’
Quoting Lynn Tyson from her days at Dell, Melten added: ‘In the IR department, you should measure only what you can influence.’
Listen to the full webinar, Proving the value of IR to senior management and investors, and hear more from:
-Neil Stewart, editor-at-large, IR Magazine
-Tim Craighead, director of Asian research & senior gaming analyst, Bloomberg
-Beate Melten, director and global head of IR, Citi Depositary Receipt Services
-Suki Wong, head of IR, Anta Sports Products
-Eva Chan, chairman of HKIRA and head of IR, CC Land Holdings
By Garnet Roach