In the past few years, competition between companies has increased greatly. Therefore, it is quite difficult for a company to receive investment from investors. Hence, effective and transparent communication is one of the best practices for investor relations.
Investor relations communication helps a company create an authentic and trustable relationship with its investors by sharing information and being transparent. The role of investors and communication is crucial for a company; we will learn more about it in this article.
Keep on reading to learn more about investor relations, its significance, and investor relations communication strategies! You can take the help of Imarticus Learning’s CFO course offered in collaboration with ISB to learn how to use communication and various communication tools.
What is Investor Relations?
Investor Relations, or IR, is a crucial department of a public company that falls under the Public Relations (PR) department. Most companies create an IR department before going public before launching their IPO.
The IR department directly communicates with investors regarding the company's sensitive information, which helps investors decide whether to invest in the company. Investor relations involve shareholders, the financial department, and various government organisations.
Significance of Investor Relations Communication
Building strong investor relations communication is one of the most important aspects of a public company. This helps a company to grow further and provides various advantages. Here are some important aspects of having efficient investor relations communication:
Creates Better Understanding
Investor relations communication is crucial to better understanding a company and its investors. Daily communication helps the investors understand the main object of the business, its potential, and its future progression. Regular communication allows the investors to determine if the company’s growth is fulfilling their expectations and whether they will invest in it or not.
Managing Expectations
Transparency makes it easier to establish genuine statistics with the investors. Investors expect different growth rates, while the real scenario might differ. Hence, investor relations communication is important to manage unrealistic expectations by providing investors with daily updates and insights.
Enhancing Trust
Vivid investor relations communication improves trust between a company and its investors. This helps the investors grow more confident in the company's strategies, financial position, and management team. Building a strong, trusted foundation will help a company receive more investments from its investors.
Encourages Transparency
Investors often seek transparency from companies so that they can detect any suspicious activities. Investor relations communication can build a transparent relationship between the company and its investors. This can also disclose sensitive information about the company that might hamper the reputation of the investors and their investments.
Therefore, investors often opt for companies encourage transparency and have well-defined disclosures to avoid potential risks.
Crisis Management
Investor relations communication can save a company during a crisis. The IR department directly communicates with the company's investors to explain all the steps and actions the company is taking to manage the crisis. This transparent communication increases the investors' confidence in the company’s crisis management strategies.
What are the Various Effective Communication Strategies in Investor Relations?
Numerous effective communication strategies in investor relations can help a company to raise more investments. Here are a few best practices for investor relations that a company can follow:
Daily Updates with Reports
Updating investors with the company's daily reports and actions is the best practice for investor relations. This helps a company communicate clearly with its investors. To establish transparent communication, the IR department often shares the company's financial achievements, management strategies, etc.
Qualitative and Quantitative Information
Companies should update investors with both qualitative and quantitative information. Investors are also interested in aspects of the company other than the financial factor.
Enhancing Engagement with Investors
Increasing engagement with investors via conferences or other methods is one of the most effective communication strategies in investor relations. This helps the investors clarify all their questions by discussing various aspects of the company, such as its financial growth, future strategies, crisis management plans, etc. This creates a stronger bond between a company and its investors.
Usage of Digital and Visual Aids
Using digital and visual Aida can help a company create simple charts or insights from its complex information. This helps investors comprehend the information easily.
Conclusion
Companies are trying to create strong investor relations communication in this competitive market to attract huge investor investments. Hence, they are hiring CFOs who are well-versed in investor relations communication. This creates many job vacancies for freshers with adequate knowledge of investor relations communication and various related strategies.
Imarticus Learning has launched its new Chief Financial Officer programme in collaboration with the Indian School of Business for those willing to learn more about investor relations communication. This 8-month remote programme will help inculcate the necessary skills and knowledge. Enrol in this course to grab more opportunities.
Frequently Asked Questions
What are the various investor relations engagement techniques?
Various investor relations engagement techniques include digital engagement, in-person engagement, communication strategies, targeting investors, and communication.
What is the actual role of investor relations communication?
The main role of investor relations communication is to inform the investors regarding a company's various information and actions.
How do you organise investor communication in real life?
In real life, a company can organise a seminar or webinar to which all its investors and potential investors will be invited. Then, the investors can ask the company various questions regarding its policies, strategies, potential risks, financial growth, etc.
What are the different types of communication methods?
There are four main communication methods: verbal communication, written communication, nonverbal communication, and visual communication.
