I may be biased, but in today’s competitive and transparent financial markets, I firmly believe having an Investor Relations (IR) department is essential for every listed company. Whether a company is a multinational corporation or a small-cap, the role of an IR team is crucial in effectively communicating with investors, analysts, and the broader capital markets community. The IR department serves as a bridge between the company and its shareholders, ensuring that information is conveyed clearly and consistently to maintain investor confidence. A well-structured IR function can help manage market expectations, improve stock liquidity, and foster trust, which is vital for long-term success.
That said, for some companies (e.g. small-caps), maintaining a dedicated IR department may not be the most efficient way of addressing this, from both a budget perspective but also they may not require the full-time constant, hands-on presence that larger firms need to manage their investor communications.
Often in this situation, the function is wrapped into another role or even handled directly by the CFO. While it may be tempting to assign IR duties to someone as part of their day-to-day responsibilities, IR is a specialised function. When added to someone’s existing role, there’s a risk that IR efforts will become inconsistent or reactive, rather than proactive and strategic. The individual may lack the time, focus, or expertise required to address investor concerns promptly, manage shareholder expectations, or keep up with regulatory requirements. Additionally, spreading someone too thin can lead to missed opportunities for engaging with potential investors or cultivating relationships with existing shareholders, potentially impacting the company’s market perception and access to capital. Not to mention potential impacts on their wellbeing.
As a solution, small-cap companies are increasingly turning to outsourced IR services. Outsourced IR firms (like IR-connect, of course) provide the expertise and resources required to flexibly manage the IR function.
Businesses that outsource their IR can experience the following benefits:
- Expertise and Insights: The most obvious benefit is that it provides access to deep expertise from experienced professionals who understand market dynamics and investor behaviour. An outsourced IRO can leverage their specialised skills, insights, and experience gained across a variety of companies and sectors. They can also offer a fresh perspective for the Board.
- Flexibility and Cost Efficiency: Reduces the need for a full-time in-house IR team, saving on salaries, benefits, and training costs. On demand access can also be more cost-effective, as it can be scaled up or down based on the company’s needs. Easily adjust the level of service as needed, whether ramping up during earnings seasons or scaling back during quieter periods, using an outsourcer can lessen pressure on internal teams by taking on some of the heavy lifting.
- Focus on Core Activities: Frees up internal resources, allowing management and other employees to concentrate on their ‘day job’.
- Enhanced Engagement: Access to extensive networks in both the buy-side and sell-side professionals with established relationships with investors and analysts, leading to improved communication and engagement. Ability to tap into global networks and outreach capabilities to attract a diverse investor base.
- Data and Analytics: Familiar with advanced tools and analytics for better insights into investor sentiment and market trends.
- Crisis Management: Bring previous experience of, and expertise in preparing for and handling, crises or sensitive situations. This helps to maintain investor confidence and reduce the risk of negative impact on the corporate reputation.
- Regulatory Compliance: Understanding of proper systems and processes, as well as legal and regulatory requirements, reducing non-compliance risk.
- Innovation and Best Practices: Exposure to industry best practices and innovative approaches to IR strategy and execution.
If you’re interested in finding out more about how outsourcing the IR function could work for your company, please do get in touch.
IR-connect 