Is Investor Relations ready for the Gen AI revolution?
23rd August 2023
How and why IR teams should be thinking about deploying Gen AI into IR programmes
The role and importance of Investor Relations has expanded significantly in recent years due to globalisation, ever increasing reporting requirements and regulation. IR has become the key conduit for companies to engage with and manage their shareholders and other stakeholders.
The industry has become used to disruption helping Boards navigate the pandemic and deal with ongoing geopolitical uncertainty and persistent inflation. To keep playing this critical intermediary role, IR teams have had to evolve and adapt to the environment around them. Gen AI represents the latest wave of disruption which IR teams will have to adapt to. There are a lot of exciting potential Gen AI use cases in IR and teams that are beginning to deploy such technologies are getting ahead of the curve and are pulling away from the competition.
While investors having been using Gen AI for some time and are using a number of tools to help inform their investment decisions, IR has hitherto been fairly traditional. There are a number of core tasks within IR that if conducted via just traditional methods can be very time consuming and yield limited results. Gen AI has the potential to revolutionise and transform IR by expediting repetitive tasks and adding a greater level of sophistication to the programme by providing access to more detailed insights and analysis, which can better inform Boards and key decision makers.
Gen AI isn’t going to replace Investor Relations Officers but will augment the function if used effectively. It can help inform the communications strategy, prepare management teams for engagement with investors and the sell side, and enable companies to stay on the front foot and be proactive rather than reactive to evolving issues.
How to start thinking about incorporating Gen AI into the IR programme
Whilst it can appear overwhelming at first, IROs should start by looking at their objectives – identify the insights you’re looking to gather and the areas where you think Gen AI can speed up repetitive tasks. Then evaluate the various tools available to potentially partner with.
One emerging trend to think about is the increasing propensity of investors using natural language processing tools to assess the tone and sentiment in management teams’ results webcasts. Investors are keen to see that management have conviction in the story, as well as assess the tone of questioning in the Q&A section. If they see large swings in sentiment from one set of results to the next, this can impact the share price.
There are developing tools that provide sentiment scores which are calculated simply by the number of positive statements vs. negative ones. IR teams should pay attention to these scores and monitor the tone and messaging within their results webcasts and statements to try to ensure they are fairly consistent from one set to the next. This doesn’t mean overegging things and underplaying any difficult issues that need to be addressed, but it does mean using techniques to improve the overall score. If the news is good, reiterate the positives and the Company’s underlying strengths. Conversely, if it is bad news, don’t overuse certain terms such as challenges.
Other Gen AI tools can now provide insights as to how your peers are talking about major topics in their webcasts and how these topics are shifting over time and in importance. These tools also enable you to summarise analyst notes and highlight any specific concerns quickly.
You can also use Gen AI to view all the questions particular analysts have asked across the peer group to help prepare management teams on what to expect at the next set of results – a process that most IR teams would do anyway, but Gen AI can be a significant time saver. Other platforms help you conduct investor perception studies at scale and engage a wider investor audience that provides a broader market view.
Identify how Gen AI is being used across your organisation
Companies have been at pains to demonstrate to investors how they are using Gen AI. Research by AlphaSense, the market intelligence platform, in April this year, found that mentions of Gen AI surged on webcasts during earnings season in Q2 . The Economist has created an early-adopters index examining how corporate America is deploying Gen AI and showed that those companies at the top are seeing a value bump and are winning over investors. According to The Economist, since the start of the year, the median share price of the top 100 has risen by 11%; for the lowest scoring quartile it has not moved at all.
IROs can play a significant role in gathering and teasing out developments on how Gen AI is being adopted across their organisation. If there are helpful case studies and developments, it is worthwhile taking these to the Board and incorporating these into investor messaging.
Be aware of its limitations and data privacy
Whilst the prospects of Gen AI are very exciting, it is also important to be aware of its limitations. Most of the mainstream platforms are in the public domain, which means the prompts used within them can be accessed by anyone. Therefore, it is important not to enter any confidential, price sensitive information into them. Further, AI chatbot’s results are in no way guaranteed to be factually accurate, so one has to fully vet and validate the information.
If you don’t embrace AI, a competitor will
IROs will continue to play a crucial role in helping and supporting Boards navigate challenging market conditions. In an era of constant disruption and uncertainty, embracing Gen AI can help gain competitive advantage.