25 January 2022 - 18:15
Investor Relations, a key to value creation in public companies
The importance of professionals acting as interpreters for the language spoken within the stock market and able to communicate a company’s strategic and financial direction in a clear, effective, and transparent way
Investor Relations (IR) departments hold this truth to be self-evident: having an open, clear, effective and transparent dialogue with investors is of paramount importance to gain credibility and support from capital markets and to create and manage a strong reputation. That is why it is so important to have professionals who efficiently control the flow of information between a public company, its investors, and stakeholders.
This is done with a series of aims in mind, including:
- enabling the company to achieve optimal share prices that reflect its fundamental value;
- providing investors (retail and institutional) with timely and accurate financial information;
- providing non-financial data to support company evaluations;
- complying with the rules on securities commissions and the stock exchange;
- presenting investor feedback to company management and the board of directors;
- and building capital markets that are receptive to future financing on favourable terms.
With a constantly evolving market environment as well as a dynamic regulatory and competitive landscape, Investor Relations have the critical function of making sure investors and other market participants have a full grasp of the Group’s strategic and financial direction as well as providing top management with timely and effective market feedback.
In a broad sense, an Investor Relations department makes sure that the lines of communication and information between investors and the company remain open, and acts as a portal through which investors and company executives communicate: investors, analysts, and anyone else requesting information from the company are therefore usually directed to the IR department. The department also acts as an interpreter for the language spoken within the stock market, conveying to a company’s executives how it is generally perceived by its investors.
With increased investor activism and global markets gripped by uncertainty, corporate CEOs are in growing need of a new generation of competent investor relation officers, as underlined in a study by the Harvard Business Review (HBR). The analysis states that CEOs must therefore allow officers to be proactive leaders in order to build constructive relations and help the company mitigate various risks, and give them a clear mandate to talk to investors and gain consensus on all elements of the management’s long-term strategy. This is with a view to build credibility among long-term investors and provide useful information in a timely manner.
What does an Investor Relations Manager do?
Successful Investor Relators have a firm grip on their company’s financials, strategy and operations as well as strong communication skills and, more importantly, a talent for anticipating questions and issues in order to address them effectively. Understanding how investors use their technology and data collection to influence a company’s strategy, capital allocation, incentive schemes and other issues that investors consider important to the functioning of the board is also of paramount importance. Another crucial skill consists in knowing how to find the right investors for the company and proactively cultivate and seek to engage them; last but not least, it is key to have a thorough understanding of how today’s invertors operate, while being able to master analytic models and white papers written by activists who advocate an alternative corporate portfolio scenario for the company.
In 2021, Generali was recognised among the “Most Honoured Companies” in the insurance sector in the annual ranking by Institutional Investor, the specialist magazine and independent research company in the field of international finance, and also took first place in both the “Best IR Team” and “Best IR Professionals” categories.