As private equity has matured over the past decade and expanded, so too, have the communication responsibilities that investor relations professionals must manage for their general partners. The rise of social media, increased compliance requirements, and a growing array of media platforms have created new communication responsibilities for the industry’s IR professionals.
Whereas reputation management with a general partner’s investors was once the core function of private equity IR specialists, the need to manage a whole new set of external communication capabilities has become a requirement for the private equity IR industry in the 21st Century. Information that IR pros used to share quarterly with limited partners now often needs to be communicated in a matter of minutes to stay ahead of 24-hour digital media.
Social media has also changed the risk management equation for IR specialists, creating greater potential for unintended pitfalls and highlighting the importance of having the right communication plans in place to better manage potential risks. With the convergence of private life on public display, what may have once been a private photo of a celebration may find itself onto a social platform where thousands of people, reporters or even a limited partner may be able to view it.
“You have to anticipate the problems that come with being more public. The reality is that social media sticks, you can’t control it, and it never goes away,” said our CEO, Alex Stanton, at a Capital Roundtable event in New York earlier this year that explored the risks, opportunities, and need for better communication planning among investor relations.
“What we see as a best practice is a much more integrated approach to communications, which means IR people have to develop some different skill sets around external communication that they don’t necessarily have currently,” he added.
Indeed. Having the skills and right resources in place, or using an external public relations advisor as an extension of your team, have become more important amid calls by LPs for greater transparency and greater media focus on the industry. Additionally, because limited partners are pushing for greater accountability and transparency, it’s critical that IR professionals develop a thoughtful and long-term strategy for managing the reputational risks that can come with social media.
The first step in that direction is establishing a uniform policy for all employees, from senior partners to associate level staff, that outlines how the organization should use social media and the behavior expected from employees’ personal accounts. A comprehensive communications plan can also come in handy when a crisis arises that has the potential to challenge a firm’s reputation and its standing with investors. Having an action plan in place before an issue arises may well be the key to preventing a public black eye.
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