Take-aways from webinar on ’Artificial Intelligence in Investor Relations’

IR teams are faced with an abundant amount of change these years, spanning from the significantly increase in the importance of ESG, a wave of new regulation coming from the EU and technology advances and applications – all impacting the way we go about our work. The use of AI raises many questions, including how it is being applied by investors and analysts and how it impacts the work of IR. Today, AI algorithms analyze data, interpret the words and phrases spoken by corporate executives and drive trading in company shares.

Presentation by Gary A. LaBranche is President and CEO of NIRI – DIRF counterpart in USA

We are on pioneering stages and the IR communities must debate the issues and comment on the processes and how it might influence IR going forward. The big change is that trading is being driven by algorithms built by passive investors with none-standard metrics analyzed by machines and those activities are driving decisions affecting share price and evaluation. IR are speaking the language of buy-side, but the language of financial communication is changing i.e., a fundamental shift from disclosure-based approach to a discovery-based approach. The traditional communication and disclosure have driven the share valuation, but now a pattern of data by the corporates publicly available forms the basis for news and information affecting estimates and investments. It can be production data, data on waste etc. not even available to IR of the corporation. The data machine capacity is huge and keeps improving over time driving disclosure. Internally, this discovery of relevant data should give more statistic-driven communication. It has nothing to do with the company performance; only the computer algorithms shaping the estimates.

This does not only apply for supply chain data, but machines also analyze sentiments and body language and words used by executives over time in sentiment analyses. IR should focus on the burning questions driving estimates – i.e., going from KPIs filed by the companies to data picked up by the machines. IR needs to reengineer their understanding of this development and financial communication. It is no longer enough to be masters of the message; IR must be masters of the signals and patterns and how this data is being built into valuation models which may not be driven by what the company is communicating.

Presentation by Jason Stout is Global Head of Operations at Computershare

Powering the shareholder experience with artificial intelligence does not imply a change in customer needs directly, but the sense of urgency and the complexity in general have. This development has been boosted by global events the past 18 months creating unique opportunities and challenges with adapted practices from service providers. These fields are to be adapted in a post-covid world by corporates and addressed as they are here already and have come into play. The adoption of digital channels has been accelerated by the pandemic and AI has become the norm globally servicing customers with new kinds of interaction and personalization by service providers like Computershare accelerating investor insights and actions. This includes speech analytics based on AI in multiple channels sensing sentiments and they are not requiring sophisticated systems. Interaction analytics of all spoken language, patterns of improvement, sentiments but also what you are leaving out compared to what is usually being communicated is the new norm.

How does AI really come into our space? It will NOT replace people – but it requires a transformation of organizations. Corporate insights will have to be trained in the business to adapt to what the software is doing to collect the data you want to explain. People must be moved into the circle so the technology compliments human activities and augments the customer experience.

The impact of AI on ESG will be a driving force holding essential impact as it will help sustainable investors to quickly process large amounts of data that hold essential information for ESG investing. About 30% of news reported by companies are literally written automatically by computers – so avoid words the computers think of as negative. Learn and be mindful of how computers are picking up on your information and how it is interpreted – prepare and practice. The question was raised if there had been any mistakes by AI analysis that caused market disturbances?  Not yet, people are still required to interact.

Any insight into how widely AI is used by asset managers? Is it mainly hedge funds, is it mainly algorithm-based investors or also the long-only investors?  IR is at a disadvantage as the large hedge funds and institutional investors are starting to use AI, but it is still early days. Still, it will impact IR careers going forward.

Members of DIRF can require a link to the webcast by contacting Tina at thp@dirf.dk

Link to NIRI magazine ‘Update’ with more articles on AI

Link to NIRI Think Tank Report on AI