Why businesses need an investor relations officer

An investor relations officer is a specialist charged with communicating with the company’s investor base. PHOTO | SHUTTERSTOCK

A few days ago Kenya was plunged into total darkness. Most parts of the country were left without electricity after a generator (or is it grid) failure.

Kenya Power, the electricity distributor, was on the receiving end as angry consumers lamented over the protracted power outage.

Enterprises equally complained over lost business. Against this gush of vitriol and fury, Kenya Power still managed to speak to its clientele giving reassurances and plans through its social media.

However, throughout this period, they forgot to speak to an important group of people — the shareholders. And this is where the role of investor relations officer (IRO) comes in.

Let’s start with who is an IRO. This is a specialist charged with communicating with the company’s investor base.

That might include explaining how a firm plans to handle a challenging episode or laying out a company’s growth strategy.

Often, they must do this in a short time — cutting the fluff out of presentations and getting right to what the investor audience cares about most: accurate and up-to-date information.

A typical IRO will seek to build constructive relationships throughout the shareholder base to help the company mitigate various risks such as a shareholder revolt.

One operates from a clear mandate to curate investor dialogue and get buy-in around all of the elements of management’s long-term strategy.

The best IROs will know how to find the right investors for the company and proactively cultivate them and try to get them on board.

Why is an IRO important? They have the potential to significantly raise a company’s profile in the financial markets if backed by the right business performance.

For small-cap companies at the Nairobi Securities Exchange, the IRO role is crucial. This is because, compared to their larger capital market competitors, small companies have a smaller budget and fewer staff, while at the same time having multiple responsibilities, such as additional corporate communications.

Nevertheless, these companies have to comply with the same capital market obligations as larger companies — mandatory reporting, corporate governance, annual and semi-annual reports, capital market compliance, etc.

And, as if all this were not difficult enough for the responsible IROs to realise, small companies also have to fight much harder for attention in the capital market.

Will an IRO work for all businesses? No. If the IRO is not part of a unified board and C-suite investor planning group, then any company should forget to build credibility with long-term investors.

If the markets are gripped by uncertainty and fear, then no amount of relationship-building will save the day. If the regulator restricts what companies can and can’t do when it comes to communicating with investors online, then the IRO role becomes severely limited.

At the same time, if the IRO cannot convince investors why a specific corporate strategy will unlock shareholder value to attract and keep long-term investors, then it’s a waste of time.

That notwithstanding, IROs can help shape business strategies taking cognisance of investors’ views and impact of the strategies on investors.

With public relations officers securing one end of the communication channel, companies will need IROs to secure the other end.

Mwanyasi is the MD Canaan Capital.