Thursday, January 27, 2011

Should Media Relations be combined with Investor Relations?

Investment relations (IR) is the amalgamation of communications, building relationships and guiding management in taking the final decision. Essentially it is a strategic responsibility to enable effective communication between the company, financial community and the public which finally contributes to company’s securities achieving fair valuation. Usually an IR department or person reports to the Chief Financial Officer (CFO) or the treasurer. In some organizations, IR is managed by public relations or corporate communications department and is called “financial public relations” or “financial communications”.

The investor relations deal with handling inquiries from shareholders, investors, or anyone interested in company’s stock or financial statements. The IR also has a vital role in crises management such as changes in management, industrial damage etc. Investor relations has the responsibility of managing perceptions of the investors and deals with any information about the company that may affect the stock price or earnings of the company. It is important for the company to attract the investors because they are the only source of capital for the company and increased investor interest leads to increase in the stock price of the company.

An IR department is the only department which has interaction with the stock market. Earnings releases, earnings forecasts, annual and quarterly reports and most press releases, are all part of investor relations and the responsibility of the investor relations officer or department. Previously IR used to just focus on release of financial information but now the trend has changed and almost everything issued by the company is the responsibility of the IR department. This change is partly due to increased regulatory requirement and also because it’s been seen that whatever the company does or would eventually do, will affect the profits or the stock price of the company.

On the other hand, Media relations (MR) refers to working with media in order to disseminate information to the public about an organization’s mission, policies, practices etc. in a credible manner. Working with media on behalf of an organization helps the company to create awareness amongst chosen set of audiences, both small and large set of audiences. Media also encourages two way communications.

The relationship between an organization and news media is very crucial as the story pitched to the media is under their control totally and the journalists will publish the stories which interest their audiences. Media relations services include: Financial and business media, trade media programs, market commentary, online media programs, regional media programs etc.

Looking at these two separate functions (IR and MR) from the purview of them being the subsets of the concept of Public Relations (PR), while there are spaces of commonalities between the two, there are also exist differences.

In terms of the common touch points, both investor and media relations deal with the influencer community that includes the likes of financial/equity analysts, industry analysts, journalists, bloggers etc. Further, both investor and media relations use the same flavour of information to showcase to the influencer community, there are key differences in how this information is served to the two different sets of audience. While the IR department predominantly uses financial data points and strategy to engage with equity analysts and other similar end-users, the Media Relations uses company and product strategy to influence journalists, bloggers, etc.

Further, a revolution is taking place in how organizations are communicating with their audience using social media platforms. While Media Relations has for long pioneered the use of social media to communicate with its respective set of influencer community, the investor relations officers are also actively making use of these tools to enable a two-way communication between the company, the financial community, and other constituents.

In conclusion, while in theory its near-ideal to combine the two PR functions discussed above, there are differences between them that deem organizations to treat them as two separate entities. Maintaining them as separate groups, PR heads can look at using innovative ways of sharing resources within these teams – while this will help curb costs, it’ll also save the team the effort and time taken to train two separate resources on nearly the same aspects of the business.

Many organizations today have successfully adopted this model and are investing in a common pool of resources that function as the backbone to the different PR functions. Clearly, impetus is on maximizing utilization of resources with standardized skills coupled with specialists leading each of the separate units within the PR department.

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