Bahrain Bourse: IR Best Practice Guide (the Guide)
In collaboration with the Middle East Investor Relations Association (MEIRA), Bahrain Bourse (BHB) in late May 2021 launched its Investor Relations (IR) Best Practice Guide. The Guide is in line with BHB's efforts to promote best practice in Bahrain's capital market and to provide an effective blueprint for listed companies in Bahrain. It aims to highlight the integral role of the IR function stressing the role of effective IR implementation to the valuation and competitiveness of companies in the market.
IR refers to the two-way communication of relevant and necessary information between an issuer and the financial markets to enable the investment community to make informed judgments about the fair value of an issuer's securities. Whilst IR may be confused with Public Relations (PR), the BHB makes the distinction in clarifying that IR focuses on not only highlighting a company’s 'wins', but also ensuring that investors are fully and consistently informed of both 'good and bad' developments combining finance, communication and marketing to "effectively control the flow of information between an issuer, its investors and its other stakeholders".
The Guide promotes that a successful IR strategy will enable the financial market to have the most accurate snapshot of the issuer as an investment target in a concise, sufficient, and timely manner. With this aim in mind, BHB advises issuers should look to build an effective IR structure through the lens of the '5Cs':
- Commitment – from the Executive Management and Board of Directors;
- Consistency – of messaging in order to optimise effectiveness and reinforce credibility;
- Credibility – externally and internally within the company;
- Clarity – of messages to shareholder; and
Conduit – between the company and the financial markets on an ongoing basis.
Practically the Guide recommends the appointment of a dedicated Investor Relations Officer (IRO), acting as a proxy for the time constrained CEO and CFO, facilitating and informing dialogue between the Board and the wider investment community. IR does not however act in isolation and issuers are encouraged to integrate its function internally drawing on other company functions and resources to ensure its positioning as a strategic function.
The Guide provides a skeleton 'IR toolbox' for companies to build upon and adapt to cater to their vision and IR Story. Alongside the traditional and statutory requirements of keeping investors and regulators informed, BHB encourages companies to expand their platforms and modernise their means of communication in line with fast-developing technology. There is also greater focus on harnessing media and the wide-reaching Internet to communicate a clear message to a varied audience.
Social media is one such medium increasingly playing a key role in allowing businesses to directly engage with their audiences, while keeping up with the ever-evolving media trends. The Guide offers companies a strategic way of navigating through social media and using it as an effective channel of communication within the IR toolbox. The Guide recommends that having managed channels on social media allows companies to communicate with all generations of investors through the curation of company-personal and entertaining content while still ensuring that key messages are relayed to interested parties. Acknowledging the merits of utilising social media as part of a company's wider IR strategy where traditional methods may fall short, the Guide notes social media as the most effective channel of back-and-forth communication in the modern day, facilitating the ability of interested parties to react to news and connect with companies in real-time and thereby allowing IR teams to gain immediate feedback and to quickly adapt to investor needs.
While stressing the importance of ensuring compliance with regulatory standards, the Guide encourages companies to embed clear, concise and short-term social media content plans into their traditional IR strategies in order to ensure maximum engagement with and from investors.
Keeping in line with the modernisation of IR strategies, BHB further advises that companies expand their scope of information and move away from purely reporting financial information to their investors. The Guide notes, by way of example, that modern-day investors place a great deal of emphasis on understanding where their investments are placed and the importance of allocating capital for sustainable investing. As such, the Guide campaigns for the integration into regular reporting Environmental, Social and Governance (ESG) factors and whether the relevant related targets are being met.
The Guide further suggests putting into place a well-planned IR calendar to ensure, not only that regulatory requirements are met, but also to show a commitment to reporting and meeting relevant targets. It is suggested that this calendar is reviewed annually to adapt to any changes in the financial environment, investor needs, and a company's growth.
To summarise the Guide as described by Sheikh Khalifa Al Khalifa, BHB CEO, it is a most timely and relevant initiative, proposing exciting and new ways for a company to adapt their strategies to the interests of their investors and stakeholders and to the changing international standards. Ultimately, and as noted by Marwa Al-Maskati, BHB Director of Marketing and Business Development, at the recent BHD webinar launching the Guide, "It is absolutely crucial, especially now, to have in place long-term effective investor relations programmes with listed companies to foster efficiency and enable transparency between all the parties including companies, investors and analysts". The Guide provides the framework for listed entities to achieve this.