All CFOs play a role in investor relations at varying levels depending on company attributes (private vs. public, startup vs. enterprise). In private companies, and particularly for startups, the CEO and/or Founder might be the primary point person leading these relationships, with the CFO also involved as the point person for financial questions and updates. As a company grows, particularly in the case of public companies, investor relations are increasingly the bailiwick of the Chief Financial Officer, often with the Investor Relations (IR) function reporting to the CFO. According to the 2018 Global Survey of CFOs from McKinsey, almost half (46%) of CFOs were the key point person for investor relations among the firms surveyed, a marked increase from 2016 (33%).

As a CFO, whether you are focused on buy-side or sell-side investor relations, the following advice for CFOs who wish to optimize these important relationships still applies.

CFOs Adding Value in IR: Major Areas of Opportunity

The Chief Financial Officer is in a unique position to be particularly valuable when it comes to strengthening and nurturing investor relationships.

Here are several examples of how CFOs can leverage their roles to be a value-added player with the CEO and board when it comes to IR:

  1. Identify the most strategic investor targets for both recruiting new investors (funding/financings) and board members.
  2. Identify the key questions prospective investors will ask of the management team (in road shows, pitch presentations, interviews/one-on-ones) and craft investor narratives in advance of those pivotal meetings. Work with the IR team and/or CMO to extend the company’s story to regulatory filings, pitch decks, press releases, investor communications, etc.
  3. Service the very different needs of prospective, new, and legacy investors. For example, prospective investors might concentrate more on market size, competitive risks, and valuation assessments, while legacy investors may focus more on dilution risks and potential exit opportunities. Manage ongoing performance reporting and communications with investors in partnership with the CEO and board.
  4. Quantify the impact of all new strategic initiatives for different investor audiences along with downside and upside risks.
  5. Create business models allowing for scenario testing and evaluation. Forecast performance and assess risks and opportunities.
  6. Recommend company KPIs.

In my experience, investors come with very different needs and with their own unique styles. One size definitely doesn’t fit all. A skilled CFO will quickly size up how each of these relationships should be launched, nurtured, and supported over time to maximize the company’s return on that relationship investment”

Here are five recommendations for best practices when it comes to investor relations and the CFO:

Build Trust and Credibility 

With all relationships it’s important to first establish a level of trust with a new party.  This is especially important when you are asking someone to make an investment in your company. For the CFO, this comes down to effectively articulating your financial acumen and understanding of the business. You must also clearly be the independent voice in the C-suite, impartial and fact-based. A strong CFO will also establish themselves early on with investors as both a consistent and transparent source of information, whether the news they are reporting is good, or not. This is a good practice for all companies but also required by SEC Fair Disclosure regulations for public companies. Building your credibility takes time of course but you should use every meeting, every interaction to strategically enhance trust and credibility with a new investor.

Likability Matters (Even for the CFO)

Another area worth mentioning is the “likability” factor. Investors have valuable information which a CFO can tap into including networks, industry-insider or competitive information or access to sources of capital. But as we all know, information and capital flow more freely towards people who are both trusted and liked. CFOs should take the time to figure out what makes their investors “tick,” what they care the most about, and how they like to be communicated with.

Leadership: Knowledge and Innovation

A strong leader will also be knowledgeable and creative when it comes to both spotting problems earlier and finding new solutions, proactively. Impressing investors in this way will lead to stronger relations. A productive way to deepen relationships with investors is by demonstrating this ability together with the CEO as your partner. This is particularly key during board interactions, but it can also be useful with legacy investors.

Tailored and Customized Communications

A fourth area of importance is making sure that as the CFO you know the best way to meet the communication needs of investors. These communications need to be regular, at times frequent, and using a consistent format which the investor understands and can easily digest. Often less is more, but not in the case of all investors. You need to present your case at the right level of detail, using the right formats and leveraging technology wherever possible. And you need to be clear about what you want the investor to do with that information (FYI, act, follow up etc.).

Proactive Crisis Management

The last area of opportunity for CFOs seeking to build strong investor relationships is one which may appear less frequently but is nonetheless very important. CFOs are invaluable players in all moments of crisis at a company, and as my colleague Ken Chow notes, as such, they need to act more like wartime leaders and less like leaders in times of peace. They need to be the calm, rational and constructive “parent” in the room, armed with helpful ideas and solid strategies for managing whatever crisis is at hand. Their communications with investors during these moments are golden opportunities to positively impact the company and to shine, which investors will later remember once more tranquil times return.

CFOs must increasingly be change-agents across the enterprise, driving success through stronger relationships, whether that be with cross functional colleagues, board members and investors, or third-party suppliers and partners. Experienced CFOs know to prioritize investors as a key strategic audience and take the time necessary to build on these relationships and nurture them for more successful outcomes. If you need assistance with investor relations – at whatever stage of development at your company, let us know at FLG. We’re happy to help.

Chris Cook

Chris Cook joined FLG in 2018 with over 25 years of public-company finance and management executive experience. She has been recognized as a respected leader, team builder and mentor, and a sought-after financial advisor to line management teams at financial institutions ranging from $200 million to $300 billion in assets….Read More