CFOs are playing a larger role in Investor Relations than ever before — here’s how they can keep up with their new responsibilities.
Since the financial crisis, more and more institutional and private-equity investors are becoming primary shareholders. As a result of this shift, CFOs are taking on more IR responsibilities than ever before, according to Bloomberg. For example, organizations like the Columbia Banking System in Tacoma, Washington and the Nashville-based Pinnacle Financial Group have seen a surge in institutional ownership — from 57.6% in 2007 to 89% in 2016 for Columbia, while Pinnacle saw an increase from 26.1% to 67.6% over the same period of time.
This has been significant for the Investor Relations function at his bank because “[institutional] investors are much more sophisticated as to their understanding of bank operations,” explains Pinnacle CFO Harold Carpenter. They tend towards a hands-on approach, paying closer attention to the potential financial impact of out-of-industry events. As a result, they ask much more thorough and technical questions, and expect them to be answered by key decision makers — like the CFO.
Although CFOs at banks continue to focus primarily on tasks like compliance and interest rate management, nearly one in five CFOs in the sector surveyed said IR is a higher priority than it was even two years ago. This means that CFOs must now widen their focus to a larger swath of the bank’s operations, adapting their already busy schedules accordingly. According to Carpenter, “The CFO has to have a much deeper understanding of the bank’s business model and be able to communicate the key metrics that make the franchise more valuable compared to other banks.”
The ability to communicate quickly, clearly, and concisely is especially critical as far as IR management is concerned; one need only look to the communication nightmares of Twitter and Avon to understand the consequences of poor investor correspondence. When done properly, however, CFOs have a unique ability and opportunity to influence perceptions of the bank and help drive value.
Clear and immediate communication is most important during times of crisis. Before serving as the leader of Deloitte’s U.S. Strategy and Innovation division, Chris Ruggeri was the CFO of a telecommunications company whose largest factory in Taiwan was devastated by a typhoon. In an effort to proactively assuage investor concerns, Ruggeri and the vice president of investor relations called and left voicemails (at 5 a.m.) for the most important investors to keep them abreast of the development. Thanks to this approach, there was minimal effect on the company’s stock the following morning when the market opened.
Ruggeri’s story highlights the importance of being in near-constant contact with your investors — her proactive outreach averted what could otherwise have been a financial catastrophe. But maintaining such communication will prove especially difficult for CFOs with packed schedules. Technologies that facilitate the immediate, direct and transparent dissemination of information are therefore critical for CFOs, and of particular promise are mobile solutions that leverage investor communications. These provide both a simple and cost-effective solution that will not distract CFOs from their countless other important responsibilities, freeing up the most valuable of all resources: time.