Date posted: 22/05/2018 4 min read

Three golden rules for investor relations

Practical tips for CFOs who manage investor relations.

In Brief

  • When it comes to investor relations, it’s essential that CFOs understand and comply with the regulatory requirements.
  • If bad news needs to be reported, it pays to be proactive and prepare in advance.
  • Smaller organisations may be short on guidance, but a lot can be learned from how larger companies approach investor relations.

Unlike large listed companies, smaller organisations don’t usually have a big team dedicated to investor relations. Instead, the responsibility often falls to the CFO – and it’s not for the faint-hearted.

Investor relations requires you to communicate with the investment community and stakeholders about the strategy and performance of your organisation. “It’s a completely different mindset to communicating numbers internally,” says Lincoln Tong FCA, Finance Director at payroll solutions firm ADP Australia and New Zealand. 

“With investor relations, you need to provide the market with enough information to make informed investment decisions or business decisions about your organisation. 

“Most CFOs are time-poor, but this is one area where you cannot afford to cut corners. You need to dedicate time to prepare messages and numbers carefully, especially if your business is ASX or NZX listed.”

For anyone new to investor relations, Tong recommends the Chartered Accountants ANZ Business Insight guide written by expert chartered accountants. In particular, he highlights three golden rules for investor relations: 

Related: Business Insight guide to investor relations

Nigel Underwood FCA and Frank Newman FCA share lots more advice and practical tips in their Business Insight guide to investor relations.

1. Be 100% clear on regulatory requirements

Investor relations is subject to rules about continuous disclosure and equal access to information. CFOs need to ensure the ASX listing rules or NZX listing rules are followed to the letter. If in doubt, says Tong, seek guidance and support.

“It may be prudent to seek guidance either from an external communications professional and/or someone familiar with the markets, because you have to get your messaging right. Equally, it’s important that you have a strong finance team to support you. That will give you confidence in the numbers and also frees you up to spend more time around messaging, what the numbers mean and what sort of commentary you need to provide.” 

2. Don’t hide the bad news

Nobody likes being the bearer of bad news but, when it comes to investor relations, there is no point avoiding it. Investors are smart people and their job is to interrogate the numbers and ask probing questions. If business performance is below par, says Tong, then the best approach is to be proactive – disclose the information and demonstrate what is being done to address it.

“When you’re preparing an announcement, put yourself in the shoes of the investors,” suggests Tong. “What questions would you ask? What would be your biggest concern? What assurances would you be looking for?”

If you have answers prepared in advance, it will make your task easier when questions are raised by the market. “It also means your answers will be consistent and accurate,” says Tong. 

Related: More resources for members working in business

Read a wide selection of Business Insight guides written by members working in business. These practical papers tackle many of the challenges commonly faced by finance teams and finance managers.

3. Don’t reinvent the wheel

If you work in a smaller organisation, you may be short of in-house best practice guidance and resources. However, there is nothing to stop you looking at investor relations sections of websites belonging to larger companies. Pick a company that is admired within the investor community and read their policies, presentations and approach to investor relations.“So long as you respect copyright, you can learn a lot from the big end of town,” says Tong. “There is so much work that has already been done by large companies and a lot of knowledge that is publicly available. It’s no different to any other form of best practice in business. Reading other companies’ investor relations policies and presentations can inspire new ideas and approaches for your own organisation.”

This article is informed by insights from Lincoln Tong FCA, Nigel Underwood FCA and Frank Newman FCA.

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