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Investor Relations – what is it and why it is key to customer relations

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The importance of investors cannot be denied for any company, and the investor relations professional in any company focus majorly on building a relationship with the investors, which are of mutual benefit for both parties. Investor relations professionals are like a backbone for any company, and they are the main channel of communication among the company’s administration, investors and other stakeholders.

The main representation of a company to its stakeholders and investors is done through investor professionals. It’s their duty to provide accurate and transparent information on investment to all the stakeholders. Financial information is crucial for any company, and it is used to define and devise future goals and investment routes for the company.
 

How investor relations department plays a vital role in a company’s success

As we know, investor relations department has a technical, as well as intellectual job, no company can survive without its investors, and proper communication is vital between the management and the investor’s community through the IR department. Investment Relations department oversees and monitors investor’s intelligence and interest, and the disclosure of financial information in a thorough and transparent manner is crucial for any company, more than ever before. Only a well-trained and experienced investor relations officer can do the job fully; companies like PayPal, Visa, MasterCard, and Accenture, all rely on an efficient IR department for the delivery of its financial information to all interested.

The corporate world now fully relies on a well-established Investment relations department, without them the stock prices would become stagnant for any company. It is very clear that nowadays, any investor, if not provided with transparent financial information of a company, won’t consider investing and they would want to know where the company is heading, and if the investment is worthy? Therefore, an investor relations department knows all the tips and tricks of the corporate world; fund management, financing, accounting, and communication are important parts and traits of their job. Small and medium-sized companies can learn a lot, how bigger companies are using their Investment relations team, for success and progress.

A clear and concise financial report provided by the IR department means it would not only include good figures but also some bad news so that the companies that want to invest can make a sound investment choice. Investor relations presentation usually includes all of it; the good and the bad. Sending the right message across is very important, it is important to announce how the company is going to address temporary issues. Your investors would like some assurances on your part, and sending that right message is the role of the IR department. A small company can take advantage of looking at the investor relations website of a larger company and take cues of their performance and how they have been addressing issues regarding budgeting.

Companies like Intel, Amazon, eBay, and Adobe can be a good resource of inspiration for emerging tech startups or retail startups. Now, we are well-acquainted with the fact that best business practices include having well-trained investor relations professional or a team. For the long-term success of your business, and for maintaining trust and rapport in the market, the role of IR professional is crucial. Big and well-established companies now focus more and more on investor relations position than simple accountants and finance officers. The team is accountable and closely tied to the chief financial officer, to the top tier of the management and to the public relations team.

The annual report as important element in customer relations

Sure, the annual report as one key element for investor relations is an often numbers driven report. But, in almost all successful companies' reports, you will find how this business rates the importance of customer understanding. The investor, very often also a customer of the business can get valuable insights within the annual report on what enterprises are executing or planning in terms of customer relationships.

Excerpt of Amazon's 2018 annual report:

It’s critical to ask customers what they want, listen carefully to their answers, and figure out a plan to provide it thoughtfully and quickly (speed matters in business!). No business could thrive without that kind of customer obsession. But it’s also not enough. The biggest needle movers will be things that customers don’t know to ask for. We must invent on their behalf. We have to tap into our own inner imagination about what’s possible.

(Source: Amazon Annual Reports)

With SAP they have a separate chapter in their 2018 annual report named "Customers":

Approaching Our Customers with Empathy
To achieve this, SAP has implemented extensive programs to deepen our relationship with customers. Through these efforts, we reach out to our customers to ensure we understand what works well and not so well in their partnership with SAP.
Measuring customer loyalty is a part of this program, and we use the Customer Net Promoter Score (Customer NPS) as one feedback mechanism to do so.


(Source: SAP Annual Reports)

 

What is the primary job of investor relations personal?

Investor relations definition describes it as someone that is a professional in financial communication with the investors, and this effective and honest communication with the investors is what keeps them coming back, and helps in maintaining a sustainable relationship for long-term. Every major company has an investor relations IR department, and the size of the team varies for any company, it could be a single person or a team of 12 people. Major companies such as Microsoft, IBM, Google, and Ford have a prominent IR department, and these companies let the investors order an annual financial report and look up the stock prices, and other financial information. Usually, the company’s website is used to provide financial information that is relevant to the investors and stakeholders.

An investor relations manager takes care of tracking the financial information of the company and providing the relevant information in written form to the stakeholders. An IR professional must have good communications skills, both verbal and written. It is a no brainer that an IR professional must have a degree or specialization in finance and accounts. The primary role of the investor relations professional includes taking key insights from the company’s management, overseeing stock prices movement, and create the company’s annual financial report, help in building a rapport with analysts and investors, also keep the shareholders updated and provide them with accurate and transparent information regarding finances.

He/she utilizes financial tools and metrics to monitor weekly, monthly and quarterly financial reports. Effective communication is a vital part of the job, as the Investment Relations professional or manager has to give clear and concise presentations to the investors. The building of rapport and trust between the executive of the company and the investors is the major job of an IR manager. Any investor seeking company information usually contacts the IR department. Social media giant, Facebook, displays its financial information online that is relevant to the stakeholders and investors; it includes financial reports, quarterly earnings, press releases, and schedule of conferences, meetups, and events for the investors. The company’s website is regularly monitored and updated for the IR information.
It’s two-way communication, the necessary information is gathered from the investment community and conveyed to the top-tier management.

Effective ways of keeping up with your investors

J.P Morgan and Goldman Sachs are investment banking companies and rely heavily on their investor relations team for progress. Goldman Sachs had 150 years of history and reputation, regards IR as a major component of their company. Investors, shareholders, bank creditors, are important constituents of the company, and the company sustains a lasting relationship with them with the help of its PR and Investor relations department. Financial reports, press releases, and presentations are regularly updated on their website. Investor relations deck is the most important component for this company.

There are a few tried, tested and effective ways of communication with the investors:

  • Encourage dialogue with the investors, and be open about your company’s vision and mission.
  • Emailing newsletters regularly as an effective way of communication, this will be a part of your investor relations plan - to keep investors in the loop.
  • Blasting monthly emails to the investors, and it should contain all the information of the use of investment, what milestones your company has achieved and the problems it has faced.
  • Meetings are a good idea to discuss the challenges, problems, and accomplishments of your company with the investors. It may include profit and loss summary, industry news, and trends and problems to resolve.
  • Annual reports are only published by bigger companies who have been there for many years, and these financial reports are summaries of budget, expenses, achievements and other relevant news.
  • There are times to communicate with the investors on an urgent basis; if a challenge arises, something unexpected happens, yours is a startup, or your company is going through major changes and developments.


These are some of the usual and effective ways of communication that the investor relations team utilizes. Remember, investors need to be well-informed about the company’s dynamics and developments, as they are your business allies and partners, even when you face problems in your business, a good business-investor relationship can go a long way, and a sustained and long-lasting relationship with the investor is what you seek and thrive on.

Turn your investor relations to a mighty tool in your customer relationships

As investors almost always being valuable buyers and customers of the companies they are invested, it is the absolute logical step to turn your mostly numbers driven investor relations department to a customer insights tool.

Want to dig deeper? Get in touch with us.


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André Wehr
André Wehr
As a founder and entrepreneur, I experience every day how important Traction and Customer Centricity is. It makes the difference between a nice idea and a viable business.

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