Challenges for IROs in 2016
This article was produced in association with ELITE Connect. It was originally published on the ELITE Connect platform.
There’s no doubt the IR industry is ever-evolving, but 2016 is poised to be a particularly transformative year in terms of responding to market instability, continuing budget cuts and, crucially, regulatory reform.
The approaching introduction of MiFID II is an area for all IROs to focus on, despite the continuing uncertainty as to when it will actually come into force. The challenges of this introduction will be two-fold: first, the impact will be felt on the ease with which investors have access to chief executives and chief financial officers as payment rules for corporate access tighten up.
The second issue is research. All IROs wants analysts to be writing about them, making it easy for investors to find out about their company, but the MiFID II introduction carries with it the risk that smaller companies will be squeezed from the agenda with analysts concentrating on larger issuers.
IROs should start focusing now on how to deal with these effects, according to Adam Phillips, head of IR at Halfords. ‘The future may see IROs having to work more proactively to secure the interest of investors and make contact with them without relying on a third party,’ he says.
‘IROs will also need to ensure their company information is as clear and easily accessible as possible to combat the potential impact of regulatory change on research. Now is the time to start planning how to effectively deal with these changes to avoid being caught out by the new regulations.’
The cutting of budgets is an ongoing challenge for IROs, especially when it comes to the issue of travel, according to Sue Scholes, chair of the UK’s IR Society. ‘One challenge for the IR industry in 2016 is how to implement technology effectively to counteract the budget cuts investors are making,’ she explains.
‘For example, in some cases potential American investors are more reluctant to jump on a plane to Europe to meet with a chief executive to discuss prospective investment. IROs need to be making effective use of the latest in technology – from social media to webinars and, especially, videoconferencing – to allow their CEOs to engage with investors remotely.’
Scholes also points to volatility in markets as a challenge that will continue into 2016, stemming from geopolitical uncertainty and a slowdown in growth in countries such as China. She comments that, at times like this, good investor relations practices become even more important. IROs need to remain concise and focused in their communications and be proactive in building strong relationships with existing and potential shareholders.
‘My message to IROs is to be clear on what your investment proposition is, and then to focus on communicating it consistently as widely and effectively as possible,’ Scholes continues. ‘And ‒ very importantly ‒ not to panic!’