According to The Economist ‘AI’ is the word of the year 2023 and you see it used all over. But what is media hype and how will it affect the IR-industry? DIRF has taken a closer look at what has been written on the subject the past year in its country of origin.
From NIRI quarterly magazine ‘IR Update’ – spring and fall 2023
Artificial Intelligence in Investor Relations Practice
The use of Artificial Intelligence, or “AI”, has the potential to significantly change the practice of IR. AI is already having an impact, from how we communicate with investors to how our companies are valued by the financial community. IR professionals will need to adapt to a rapidly changing environment as the use of AI gains wider adoption.
Artificial Intelligence – Humans are still in charge, spring 2023
The early days of AI are fraught with uncertainty. But given the right parameters it has strong potential to help investor relations professionals.
It is tempting to ask large language models to write things. But that is often a too simple solution and probably also plagiarism. And what about ethics? IROs will soon be able to infuse the personality traits of CEOs and CFOs into LLMs, and voila, all those earnings news release quotes and scripts will sing like the actual C-suite. We are not there yet and there is also the regulatory side of AI or the lack thereof. Almost every single iteration of AI technology is unchartered territory [though EU’s AI Act is imminent]. But most importantly, the potential benefits of AI in IR are endless, and IROs are incorporating it into their daily workflow.
It is just a matter of time before AI platforms are helping IROs with proactive sentiment analysis as well as PowerPoint presentations. Imagine using AI to parse two dozen sell-side notes, while distilling the most compelling information when preparing for an investor day, non-deal roadshow or earnings report.
What are the implications of AI on the future of IR?
- Automation is enhancing demand for more advanced technological skills as people increasingly interact with AI.
- Certain skill categories, such as data entry and processing, are less in demand.
- Significant organizational changes are made to address AI needs and skill shifts in workers to stay competitive. Continuous learning for cross-functional and team based work on the rise.
- Competition for high-skill workers is increasing.
So, the single biggest influence of AI on IR will be the multiplier effect on an IRO’s output. This will help generate more value with other initiatives.
Companies are training AI tools on multiple sources of data that contain information about sectors, industry, capital markets, politics, economics and the investment community, in addition to interaction with investors and the market at large. Such tools can be designed to provide IROs or investor information at the point of need.
Most IROs are already swamped with daily tasks, which leaves very little time to lean into the power of AI. So now is an ideal time to lean into the power of AI. But it is important to note that AI is not a substitute for human interaction and expertise, and companies should use it as a tool to complement their existing practices rather than replacing them entirely.
The best advice is to make sure you have AI-informed and AI-advanced partners in your network because today’s AI tools are already ancient news. They are set to be transformed in unimaginable ways.
The biggest challenge is the fact there is no accountability or transparency for where AI or LLMs are deriving information. Until there is “interpretability” or definable reasons why a certain AI platform provides certain forms of information, it is difficult to have trust and faith in these platforms.
List of considerations
- Understand the limitations of AI
- Verify the data
- Use AI as a tool, not a replacement
- Do not prompt AI platforms with material information that hasn’t been publicly disclosed.
Potential danges of using AI for IR:
- Lack of transparency
- Bias
- Misinterpretations
- Cybersecurity risks
- Overreliance
AI in Practice – Insights from Seasoned IR Professionals – fall 2023
In the fall NIRI ran a survey that found that 37% of IROs are using AI. The top uses are drafting scripts, summarizing research and administrative tasks. Benefits include simplification of complex topics, generating new ideas and saving time. Many IROs see further benefits in targeting, sentiment analysis, developing Q&A documents and more. But caution is advised as many AI programs are not secure and IROs are encouraged to use enterprise versions of AI programs that include security features to protect privacy.
The article further includes various examples of employment of AI to various tasks such as comparing ESG Reports and conducting sentiment analysis among others. Read the full article and learn what generative artificial intelligence can do for IR. Four IR professionals share insights and specific examples.