CFA Society Sri Lanka rewards consistent and transparent investor relations practices

Best Investor Relations Award Committee Chairperson Nishendra Herat, CFA

Now marking its 12th year, the CFA Society Sri Lanka Capital Market Awards is to be held on 24 June, at Cinnamon Life at City of Dreams. The CFA Society Sri Lanka Capital Market Awards sets the standard for local capital market players, and the Best Investor Relations award is among six accolades conferred at this year’s event. It is also one of two award categories presented at the inaugural CFA Society Capital Market Awards in 2012, reflecting the importance given to Investor Relations (IR) services by CFA Society Sri Lanka.

The objective of the Best Investor Relations award is to recognise companies that practice active investor relations to communicate interactively with the investor community and encourage best practices.

Commenting on the improvement in IR services, Best Investor Relations Award Committee Chairperson Nishendra Herat, CFA, notes that there is an increased interest among listed entities to engage in IR activities, especially post-pandemic. More companies are making an effort to provide better transparency, and we have seen better use of digital platforms to hold more frequent and structured engagements, with many making their analyst forums and briefings available online, thereby enabling a larger viewership.

“Furthermore, given the strong interest demonstrated by small-cap companies, we present the IR award to this segment as a means of encouraging and supporting their ongoing engagement. While large-cap companies have a broader investor base, small-cap companies arguably have more to gain from a strong IR function in terms of attracting new investors,” he adds.

When it comes to the importance of IR as a service, Herat notes that, “With Sri Lanka being classified as a frontier market, the availability of accurate and timely information will help build trust, improve investor sentiment regarding the companies, while also drawing increased interest from foreign investors.”

He continues: “Sound IR practices can help to improve investor sentiment of companies over the long run. Effective investor relations build confidence, and confidence can shape perceptions, manage market expectations, and influence how investors project future potential.”

Sri Lanka has experienced a number of significant socioeconomic events, including the COVID-19 pandemic and an economic crisis. Herat is of the view that a well-established IR function ensuring timely, accurate, and empathetic communication can help maintain investor confidence during adverse events, whilst helping to manage misinformation, reduce panic, and reinforce the company’s credibility. 

“The manner in which companies engage with investors during a time of crisis leaves a lasting impression,” he affirms.

According to Herat, as a key area for improvement, listed companies should publish details of upcoming investor briefings and earnings calls on their websites and social media channels to encourage wider participation. He points out that companies should consider holding investor forums/webinars for major company events, such as M&A, to provide investors with more clarity. Moreover, he expresses concern that certain companies continue to only engage with a selected investor community, with little information being disseminated to the broader investor groups.

Herat further opines: “It would be encouraging to see strong investor relations activities during both positive and adverse economic conditions. Most companies look at reactive communication, but instead, should provide regular updates to avoid surprises. It would also be beneficial to include a message from key management on the short-to-medium-term outlook of performance for the benefit of investors.”

He asserts that the buy-in and active involvement of the senior leadership in adopting a strong IR culture is imperative, which is clearly seen in the case of companies recognised by the CFA Society Sri Lanka Capital Market Awards.

“This ensures that efforts towards investor communication are top-down driven and aligned with the strategy of the company. Active involvement of the leadership allows for more authentic and effective communication,” Herat maintains.

With respect to the CFA Society Sri Lanka Capital Market Awards, he says IR teams are able to benchmark themselves against other companies, adding: “The awards encourage companies to align themselves with best practices and elevate their standards. Looking beyond individual entities, the wider goal is to contribute to a more mature and investor-friendly market by encouraging quality, transparency, and fairness in disclosure.” 

Meanwhile, his advice to listed entities just beginning to formalise IR efforts or thinking of doing so is to start with the basics: “You don’t need the most sophisticated tools right away; just a genuine commitment to building trust. Quality and transparency of information are key, irrespective of whether it’s good or bad news. Investors value clarity and consistency of information shared.”