Trustworthy, transparent and fair communication between a firm and its stakeholders can have a major impact on the value and reputation of a firm. Scott Tominaga underlines that investor relation plays a crucial gate keeping role amidst this communication mix. They balance the external informational needs of the finance and investment department with the requirements of the company board and management team. Investor relations largely combine the aspects of marketing, communication and finance to competently control the flow of information between a firm, its investors and its stakeholders.
Investors are extremely vital for any company, no matter their size, scale or industry. Hence, it is important for businesses to communicate consistently and effectively with the investors. Scott Tominaga mentions that it usually is the investor relation department of a firm that keeps the lines of communication and information open between investors and the company. A company should ideally treat investors as valuable resources and advocates of the firm. They are a member of the company team, and hence must be kept informed of its vital developments.
There are several cases where executives approach investors only when a company needs more money, but so should not happen. Doing so would only result in the investors losing their trust in the company, and ultimately opting out. Proper investor relations are important to avoid such an eventuality. The professionals working under this department focus on establishing consistent investor communications and build positive relationships with them. By developing such relationships, companies can also get the opportunity to benefit from the contacts and experience an investor may have. If an investor is pleased with a company, they are more likely to make connections with others who can help the particular business to further grow, develop and enjoy additional resources.
Scott Tominaga mentions that there are multiple benefits to ensuring good investor relations and communication. Here are some of them:
- Force accountability: Investor relations and communication practices, such as monthly and quarterly reports of the company, will keep the executives of the firm accountable to themselves and to investors.
- Encourage evaluation: The diverse reporting components coming under investor relations make sure that the company executives are consistently evaluating themselves and the business.
- Leverage relationships: Robust investor relations make it more likely that an investor shall be able to identify the potential areas of partnerships, growth and new business angles. Businesses can benefit quite a bit when their investors act as active advocates and help their connections to ensure the further development of the business.
- Secure new investors: A record of strong investor communication and a documented history of performance of the firm, which ideally are underlined in the investor relation reports can be quite effective in attracting new investors.
Both growing and well-established companies need to have a proper investor relation strategy in place that helps their business to progress towards further growth and development.