The Ultimate Guide to Digital Investor Communications #1

Part 1 of 5: Global challenges of IR teams

In today’s digital age, a company’s online presence and digital communications play a critical role in their success. In that context, digital investor comms have become increasingly important for companies looking to effectively communicate with their financial stakeholders in order to promote confidence and trust, leading to increased investment and a higher valuation of the company’s stock. Moreover, a positive reputation with investors can also enhance a company’s brand image to potential customers, partners, and employees. Additionally, strong investor communications also helps in the process of access to capital.

In this comprehensive guide to Digital Investor Relations, we will discuss the changing digital landscape and how investor relations tools and platform can benefit companies looking to increase efficiency. We will give some examples how these tools can be optimally used to build and maintain positive relationships with a company’s stakeholders.?

The benefits of effective investor relations campaigns are clear. However, today, there are many factors that have substantial impact on the execution of investor relations work. These are some of the most impactful issues that IR teams and companies have to deal with when publishing their regulated releases and news:

• With the rise of regulations such as the General Data Protection Regulation (GDPR) and the Securities and Exchange Commission’s (SEC) proxy voting rules, companies need to be aware of the latest regulatory requirements and ensure that their IR practices are in compliance.
• MIFID II has had a significant impact on investor relations. It requires companies to provide more comprehensive and transparent information, which can be challenging to gather and communicate effectively. Additionally, the standardization of reporting requirements can be complex and time-consuming to implement, particularly for companies that operate across multiple jurisdictions or have complex ownership structures. MIFID compliance can require significant resources, including training and technology investments.
• Environmental, social, and governance (ESG) issues are becoming increasingly important to investors, who are demanding greater transparency and accountability in these areas. Companies are evaluated by investors on their reporting on these topics, thus adopting robust ESG reporting presents an opportunity for businesses to enhance their reputation, attract socially responsible investors and drive long-term sustainable growth.
• Growing tensions between major global powers, trade wars and political instability in some regions are creating uncertainty in the business environment. Companies need to be prepared to address geopolitical risks in their IR strategies to reassure investors and maintain their confidence.
• Some investors have become more focused on short-term financial results, which can put pressure on companies to prioritize short-term gains over long-term sustainability. IR teams need to ensure that they are communicating the company’s long-term strategy effectively to counterbalance this trend, while staying agile and on top of current affairs as well.

In order to succeed in this complex environment, companies need to stay up-to-date with the latest developments. By adopting innovative strategies and technology, they can ensure to communicate consistently and effectively with their stakeholders.

Changing Investor Relations landscape

Besides being affected by general global developments, the investor relations landscape itself has also drastically changed in the past decades and is still experiencing a period of rapid transformation. Messages that once followed a predictable route from press release, to journalist or (retail) investors, to print publication are now being spread instantly through multiple -mostly digital- channels. In fact, digital communications were ranked as the most important form of communications from a company.

A report published by London Stock Exchange Issuer Services states that 93% of respondents indicated the website to be the go-to channel used to engage with investors. And indeed, 81% of investors stated that they made a recommendation or decision after initially sourcing information on digital or social media, and 88% have investigated a company based on information posted on digital or social media (source: 2023 Digital Investor Survey Brunswick Group).

As a result, the role of the traditional IRO is changing. There is a shift from simply explaining corporate strategy and practices, to proactively communicating and explaining why the strategy is best positioned to unlock shareholder value and therefore attract and keep long-term investors. To support the company in mitigating various risks, it is now imperative for them to take on a proactive leadership role and cultivate positive relationships with shareholders. In other words, IR departments need to autonomously add more value to the organization.

The success of this strategy might be measured by looking at how often one of the company’s key messages is mentioned in an article that mentions them.

As communication channels become ever faster and more fragmented, traditional media outlets struggle to maintain pace with the rapid digital dissemination of news. Since the rise of social channels and other internet-based communications methods, we have seen a substantial increase in content and a steady decrease of the journalistic corps.

Even though earned media conversion should still be a top priority, the idea of every company being a media company has been gaining ground within IR comms tactics. Today, many corporate communications departments have also adopted an ‘owned media’ strategy to include direct audiences. Hence the consolidation within the wire industry and the fact market regulators have approved social media channels as a manner to disclose and disseminate a public company’s news.

The news cycle as we once knew it, is no longer applicable. Earned media is a powerful channel, but the guaranteed conversion of a financial release by a formal media outlet is no longer a given part of the process. The press release no longer has the earned media conversion hit-rate it once had; thousands are being sent every day and many wire terminals lead a lonely life as users on the receiving end have declined. Just like in general PR, Investor Relations is also affected by the fact that the traditional media landscape has changed and an array of fragmented digital channels have also become the go-to place for news.

And last but definitely not least: the upcoming impact of AI on investor relations. The impact will be substantial and should not be underestimated. Where many people might just think of AI as a tool to work more efficiently, the possibilities are endless. However, when it comes to investor relations, the use of these tools can pose many risks. See my article: Artificial Intelligence's Influence on Investor Communications.

Using AI to quickly find information is great and convenient. Having your press release written via ChatGPT is easy, but (besides the lack of authenticity that can be expected from AI writing tools) it also means your content is already out there before you want it to be. And how about technology that can recognize sentiment during AGM and analyst calls? For more information and considerations on the use of AI tools in investor relations, read the interview with me in IR Magazine.

In order to create a level playing field amongst investors, listed companies are rightly required to ensure timely and complete dissemination of their news in such a way that it needs to be publicly accessible to all. In addition to the growing number of issuers, fully digitized investor communications, and fragmented online channels, IR professionals have no choice but to adopt technology like investor relations communication tools in order to get the word out and cultivate investor attention and trust.

Other articles in this series:

Part 2 of 5: Taking on the Challenges with Digital Solutions

If you have any questions concerning this article or would like to reach out to me to discuss your organisation's IR workflow, feel free to send?me?a LinkedIn invite. I am more than happy to connect. My views are my own.