40 years: Capital markets and investor relations
In this video, Ronan sets the groundwork for understanding investor relations, from how it developed in the 1950’s with the aim of attracting individual investors to a company’s shares, to what it means for financial professionals today. He also explains the investors and other stakeholders keen to know more about a company’s performance and, therefore, who IR needs to take into consideration.
In this video, Ronan sets the groundwork for understanding investor relations, from how it developed in the 1950’s with the aim of attracting individual investors to a company’s shares, to what it means for financial professionals today. He also explains the investors and other stakeholders keen to know more about a company’s performance and, therefore, who IR needs to take into consideration.
Investor Relations (IR) was born from the aim of attracting individual investors to invest in a company’s shares. The IR function over the past few decades has seen an evolution from just being communication specialists to finance professionals. IR is now an integral part of a company that is even referred to as the face of the company.
Key learning objectives:
Understand the history and evolution of IR
Comprehend the functions performed by IR
Identify the skills needed to be a good IR professional
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The change of the US market from private shareholders to professional investors had shifted the focus of IR professionals from being communications specialists to finance professionals. The evolution of IR also saw the need to collate, interpret and understand shareholder patterns and behaviours. IR has now become established as the face of the company.
Investor Relations (IR) is the communication of information and insight between a company and its investors, existing or potential. IR facilitates a two-way communications process as it presents market feedback to the board. IR requires tact and diplomacy and the ability to read people, steer and guide conversations and react to unexpected developments. Additionally, an IR professional should be able to think on their feet and to deal with situations as diverse or challenging environments. The IR takes responsibility for consistent and accurate messaging across all market facing teams and strategically positioning the company with all stakeholders which include existing shareholders, debt investors, buy side and sell side analysts, brokers, ratings agencies, government and regulatory authorities, customers, employees and the financial press.
Large entities have a defined IR strategy which specifies the two-way communication approach, interaction with senior management, and identification of specific objectives. Regarding positioning of IR, businesses consider:
The Head of IR is responsible for appropriately positioning business and proper allocation of relationship responsibilities. IR needs to stay closely connected to the finance function but also to the treasury, communications and marketing, compliance and legal areas.
Any competent IR professional should have strong communication, relationship building, and finance skill sets in equal measure, along with tact and diplomacy, as well as the ability to deal with adverse market environments. An IR function is a prerequisite for public companies and for those with debt funding programmes. IR is also important for companies ahead of an IPO as IR identifies and speaks to potential investors. IR is significant for those seeking to raise additional equity and for companies aiming to issue debt in the bond market. IR also plays an important role for asset managers, as they regularly report to their clients.
This video is now available for free. It is also part of a premium, accredited video course. Sign up for a 14-day free trial to watch more.