Artificial Intelligence in Investor Relations: A NIRI Think Tank Report
20 August 2020
By Vanessa Hartung
The ability to connect data analytics and the changing nature of investors through artificial intelligence (AI) has attracted the attention of IROs looking for an innovative approach to winning the fight for capital. Recently, Q4 partnered with NIRI to release a comprehensive report on AI and its long-term impacts on the IR profession.
The mandate of the NIRI-appointed Think Tank on Artificial Intelligence in Investor relations was to examine these forces and issue a report card and recommendations for our community. The resulting report provides an opportunity to consider these potential impacts on the IR profession and examine how it can be implemented to ensure beneficial outcomes for all stakeholders.
A Call to Action
While the use of AI technologies in other functions, and in society more broadly, has increased in the past several years, there has not yet been widespread adoption of AI within the IR function. The Think Tank identifies this gap as a clear call to action to IR professionals. Our industry must look to develop the capabilities required to work effectively in a world where AI and automation are increasingly important.
This lag becomes even more conspicuous in the current environment. Even before the COVID-19 pandemic irrevocably altered this decade, it was already clear that AI and automation would transform the future of work in every field of human endeavor, including investor relations. The global pandemic will only accelerate this transformation as it has for remote work, virtual meetings and technology adoption overall.
This global pandemic reaffirms that the future is closer than we might think. It also confirms the need for organizations to anticipate the unexpected and accept responsibility for shaping the future. This approach also challenges every working professional to consider how very different the future could be, to confront the reality of ongoing societal transformation, and to no longer delay the decisions that must be made today to influence how the future unfolds.
AI and its Impact on IR
As described in the Think Tank Report, Artificial Intelligence, or “AI,” is essentially a predictive technology. It is the application of enormous computing power to analyze vast amounts of data to ultimately identify patterns and make predictions. The field has seen a boom over the last decade or so with the explosion of computing power and the growth of huge data sets.
One major advance resulted from researchers’ ability to demonstrate how AI could recognize images by employing more powerful computer chips and larger data sets. More recently, experts developed “natural language processing,” “machine learning” and “deep learning” systems as the platforms for many important technological advances, including, for example, the use of algorithms for cybersecurity, the review of medical images and providing clinical decision support in health care, and the continuing evolution of autonomous vehicles. The potential applications for AI-powered prediction and decision-making are vast and will likely touch every industry – including IR.
While most IR professionals are not heavy users of AI-powered tools, some of their external audiences use AI extensively, including the buy-side’s use of algorithmic trading strategies, the use of alternative data sets as an algorithmic input, machine learning and natural language tools that identify signals in the words of corporate executives and even the financial media’s shift toward “automated journalism.” Remaining at this nascent stage of AI adoption puts IR professionals at a disadvantage and highlights the need for our industry to quickly understand AI and its implications.
Capitalizing on the AI Opportunity
Artificial intelligence is reshaping investor relations in fundamental ways. Recognizing AI’s impact on valuation and investment decisions will change everything from strategy development, communications, and how we advise the Board and management. It will also require a deeper understanding of the capital markets.
To remain indispensable contributors to corporate success in this new context, the report advises that IR professionals:
· Understand and adapt to how AI is being used in external audiences and use that to inform how to interact with these parties and anticipate their reactions;
· Centralize external communications to tightly manage specific word usage and overall messaging as they become a trackable lexicon to feed AI-automated trading algorithms;
· Determine how to use and benefit from AI internally to increase productivity and explore bringing a data and tech orientation to IR functions; and
· Proceed down the automation path responsibly and ethically.
Automation presents an opportunity to boost the value of IR through a focus on the higher value elements of the function. Considering how quickly the IR profession adapted to the significant changes necessitated by the COVID-19 pandemic, IR professionals are clearly adaptable and resilient. IROs who can similarly adapt to and embrace this new opportunity can solidify their key role as capital markets experts, and strategic counselors to the C-suite now and in the future.
For additional insights and next steps, download the report here.