Before 2002, investor relations were not that important in the United States as they are today. During this time, Congress passed the Public Company Accounting Reform and Investor Protection Act. According to this act, every company involved with the stock market exchange should arrange additional reports and briefings. The US government passed the act after different corporate scandals with the purpose to protect companies from crises and prevent vague accounting.
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What is Investor Relations?
Investor relations is a strategic managerial role, played by investment professionals who evaluate and compile accurate account information for investors. They help institutional and private investors analyze and comply with the security laws mandated by the government. Also, they incorporate marketing, communication, and financial legal requirement to help investors make informed decisions. Although investor relations are a sub-category of public relations, there are significant differences between both services.
Role of Investor Relations
Investors financially support companies for operational success and achieving goals. They analyze and understand the potential of a business, before investing. In this context, an investor relations manager maintains the flow of information and communication between the company and the investors. They pinpoint the strength of a company that leads it to success and shares the investment idea with the investors on behalf of the company.
Therefore, a company’s CEO carefully chooses a compatible Investment relations officer who can build constructive relationships between a company and shareholders. The role of investor relations teams are:
- Conduct financial briefing
- Release financial information with the investors
- Organize meetings and press conferences to coordinate with the shareholders
- Analyze and handle the crisis in response to financial disclosure
- Publish reports
- Comply with safe harbor principles
- Sell and purchase company’s stock
- Boost stock performance by organizing financial events
Major Goal of Investor Relations
An investor relations officer maintains strong relationships with the investors and promotes a healthy relationship between the investor and the company. Their main focus is to boost the company’s success and growth. Here are four major goals of an investor relations officer:
1. Target Investors
Effective investor targets open new opportunities for businesses. It involves proactive engagement with investors and advanced data analytic skills. The thoughtful approach for a business would be evaluating the investors, analyzing the data, and making the right investment decisions. A business without professional help might not succeed because there are many factors involved when making the right investment decisions. That’s why businesses often hire an investor relations officer.
2. Propose Strategies and Communication
Besides communicating with the investors, investor relations involve strategic planning as well. The team analyzes the market, talks with the investor, and come up with a perfect strategy to drive companies towards success. They also analyze the risk factors involved with the investment, making it easier for business leaders to choose the right option. With investment strategy, IR officers help business owners visualize the roadmap to success with minimum risks and maximum profits.
Considering how IT officers propose strategies, business owners feel confident while making tough decisions. When it comes to investment even, small missteps can put investors in doubt. But a professional investor consistently diagnoses the conditions and modifies the plans and strategies according to the situations. In short, an investor relations manager keeps a close eye on the market trends and comes up with the finest solutions.
3. Understanding Investor Behavior
Investor relations managers determine business positions in the market and come up with better investment options. But, the critical task is evaluating the investor’s behavior and requirements. Again, this task is not possible without the help of IR managers. Since they have experience in the market, they have a clear understanding about how investors make decisions in volatile markets.
In addition, they analyze the business and advise business owners about what needs to be improved in terms of qualifying better investment options. What’s more, they share information with the business owner when they notice and behavioral changes. Investor relation managers, use the latest technology to gather data and information that help them to understand investors and come up with subtle strategies for capital allocation.
4. Build a Transparent Structure
When it comes to investor relations, transparency is vital. Well-organized businesses also tend to make wrong decisions and encounter a crisis. In these conditions, business owners should handle the situation rather than dreading. Investor relations react to each situation on a case by case basis and offer a suitable solution. They share every detail with the business owners and investors while developing a continuity plan.
When You Would Need an Investor Relations Expert?
Businesses requires investor relationships from the time they go public as a corporation. Company owners shouldn’t wait to hire investor relation experts because they might make various mistakes, especially while filling an S-1 form. The right time to think about an investor relations program is while building an IPO process. Investor relations evaluate governance outcomes and prepare the eventual release.
Furthermore, companies who want to conduct internal financial audits seek help from investor relations experts. They help businesses with both relationship-building and compliance. Most importantly, when the material changes, they handle and disclose the information with business owners and investors so they can make better decisions.
Moreover, a business requires an IR team to align strategies with financial communities. They build a consistent reputation and meet the regulatory requirements of the government and investment community. In short, if you need an investment and financial analyst, hiring an investor relations professional would arguably be the best decision.
While encountering a crisis, companies need a robust plan to share information with their regulators, employees, investors, and stakeholders. Failing to do so, might negatively reflect on the trust you built for many years. Therefore, you need an investor relations team to communicate with investors and create a continuity plan. Besides crisis, an investor relations team can also help evaluate investment opportunities and approaches the right people for business profitability.