The pandemic and other large-scale events over the past two years have significantly changed the landscape in which companies operate. As differentiating themselves from competitors has become increasingly important for companies, IROs face increasing pressures to meet internal demands and respond to external influences.
It is part of the IR role to help C-suite executives be fully prepared for engagement with potential investors. According to a new survey from Irwin, however, the lack of efficiency and alignment between the C-suite and IR teams remains a top concern.
More than 30 percent of C-suite executives feel unprepared for investor interaction, with nearly 90 percent of them spending up to one quarter of their time on IR instead of focusing on ‘more strategic work’.
This is according to the State of IR report, which collates data from more than 100 companies in the US and Canada.
For IROs, C-suite engagement is a constant difficulty, most prevalent at larger companies. The data shows that 25 percent of investor relations professionals at mid and large-cap companies agree that C-suite engagement will be the most significant obstacle in 2023. This compares with 15 percent of IROs who express the same concern at micro-cap companies and just 8 percent at small-cap firms.
‘In a previous study we conducted with buy-side investors, we also found that a staggering 89.5 percent feel issuers do not do enough due diligence in understanding who they are and what they are looking for before meeting with them,’ says Irwin’s CEO David Whyte in an interview with IR Magazine.
‘With that in mind, an IRO must be proactive about research before management interacts with an investor. IROs must do their due diligence on the investor, digging into its company, holdings, style, past interactions and other key variables such as mandates, objectives and assets under management [in order] to prepare [the C-suite].’
Top three challenges
Looking ahead, Irwin’s survey finds that the top concern for next year is finding new investors for the company: 85 percent of IROs and 83 percent of C-level executives believe attracting new investors is a struggle amplified by the current market’s conditions.
The second-biggest concern is efficiency and alignment between management and IR teams. ‘Outside of micro and small-cap companies, we find the average IRO uses two to five digital tools to run the IR program,’ says Whyte.
‘This number increases to more than five for 25 percent of IROs at large-cap companies. With so many different tools, it becomes harder to work efficiently and leaves limited time to focus on strategic initiatives. Instead, IROs spend more time navigating the tech stack and trying to surface actionable insights from fragmented solutions. In 2023, IROs must streamline their digital toolset to increase access to critical data, improve business continuity and save time.’
The other major hurdle for IROs is obtaining a strategic seat at the table. Investor relations professionals must be strategic partners to the C-suite and the board and spend more time on ensuring management is ready for investors’ engagement, notes Whyte. If that is achieved, C-level executives would be able to spend more time on ‘driving key business results’, ‘innovation’ and ‘customer and employee experience’.
To further highlight the disconnect between IROs and the C-suite, the research finds that effective storytelling and controlling the cost of capital are also top worries – though it depends on who you ask.
Half of IROs surveyed say ‘sharing the company story’ is a top concern but it doesn’t seem to worry many C-level executives. Conversely, while reducing the cost of capital is the main focus for the C-suite, the issue doesn’t make it to the top five areas of concern for IR teams.
Whyte suggests three areas of focus for IROs to sharpen messaging and manage the changing dynamics of investor engagement:
- Be transparent about the risks and weaknesses of your business to build trust and rapport
- Craft a compelling company narrative. It’s more important than ever to differentiate your company and convey your purpose and economic value to investors. Data is only one part of the picture here and investors are also interested in the human elements of your company
- Use technology to gather intelligence and save time on more administrative tasks. This will allow IROs to reinvest their time in activities that produce greater outputs, such as nurturing strategic investor and shareholder relationships and driving shareholder value.
‘Staying proactive is the number one piece of advice I give to IROs. Proactivity is the most critical variable that determines success in investor relations,’ says Whyte.
‘Regarding investor targeting, focus on raising allies, not just money. Long-term, partnership-oriented investors will always allow you to grow faster and more efficiently. It requires much more upfront and consistent work, but the payoff is well worth the effort.’