Why AI Communications Is an Investor Relations Priority

Unlock the risks and rewards of AI for businesses. Explore economic growth impact, legal challenges, and transparency guidelines. Learn from leading companies like Vodafone and Meta.

AI presents high risk and reward to any business. PwC reckons that AI will generate $15.7 trillion in global economic growth. But generative AI in particular presents some risky businesses for companies, exposing them to potential legal liability if their gen AI tools violate copyright, as well as potential data privacy breaches. It wasn’t long ago that Samsung banned its employees from using ChatGPT over concerns about privacy lapses. Which raises the question: how much should businesses be reporting about how they use AI to power their futures?

I’m not talking about the ethics of AI (although I certainly have thoughts about that) – I’m referring to the fiduciary perspective, meaning what businesses are bound to share with investors. In that regard, the signs are certainly pointing in the direction of businesses treating AI like they do sustainability – a hot-button topic that exposes them to risk if managed poorly, and reward if managed well. Consider some of these factors:

Legislators Are Pushing Toward Disclosure

Around the world, governments are making it clear that they want more transparency from businesses in how they use AI. To cite one example: the EU Artificial Intelligence Act (AIA) is a proposed regulation that aims to establish a harmonized legal framework for AI in the European Union (EU). The proposed Act includes several transparency requirements that would apply to businesses that develop, deploy, or use AI, including information about AI’s capabilities and limitations, such as the types of data it is trained on, the decisions it can make, and the potential risks of using the system. According to the Center for Data Innovation, the EU AIA could cost the European economy €31 billion.

Investors Care

Do investors care about how businesses use AI? Yes, they do, according to PwC’s latest Global Investor Survey. Sixty-one percent of investors say companies’ faster adoption of AI is very or extremely important in their investing decisions, and 77 percent say that reporting on the use and deployment of new and emerging technologies such as AI is important or very important to their investment analysis. In particular, they’re concerned about how much AI exposes a company’s risks in data security/privacy, lack of governance/process controls, the spread of disinformation, and compounding bias and discrimination.

What Should Companies Disclose?

A reasonable investor relations officer might well ask what exactly they should be disclosing about such a fast-moving technology. In fact, I’ll add one more: what do they seek to gain by disclosing? This second question, I think, is just as vital and should help answer you first. The fact of the matter is this: a company can demonstrate vision by sharing with all its stakeholders how it develops and uses AI. In fact, some are doing so already:

Vodafone publishes a downloadable AI Framework that sets out its approach to working with AI technologies and outlines how the company intends to develop and employ it in a responsible manner across its global business.
Meta publishes five pillars of responsible AI (a topic that has gained much currency since the launch of ChatGPT) addressing areas such as privacy and security and transparency.
AstraZeneca publishes a page that delves into the ways its scientists are using AI in critical areas such as the discovery and delivery of new medicines.

Typically businesses are at the stage of disclosing how they use AI fairly and responsibly. Responsible AI is important, but as investors cry out for more data and governments pressure businesses to be more transparent, I think AI disclosure will evolve well beyond issues of governance and fairness.

Guidelines for Disclosure

What would an ideal AI disclosure page on a website cover?

Risk Management

I think, first of all, the risk management aspects:

Transparency: provide clear information about how AI is being used in the company. This includes the scope of AI applications, the data it processes, and its impact on the company’s operations and strategies.
Governance: who makes decisions about the use of AI, and how? Anyone who doubts the importance of governance should take a close look at OpenAI’s near-implosion over its governance problems.
Compliance and ethics: ensure that all AI applications comply with relevant laws and regulations, especially those related to data privacy and protection. Also, disclose the ethical considerations and guidelines the company follows in its use of AI.
Risk management: discuss the risks associated with AI, including operational, reputational, and cybersecurity risks. Explain the measures taken to mitigate these risks.

The Investment Case

But it’s also important that companies report how AI relates to profitable growth – the really interesting stuff that can and should articulate a strong investment case:

Impact on financial performance: clearly articulate how the use of AI affects the company’s financial performance. This might include cost savings, efficiency improvements, revenue growth, or any investment in AI technology.
Future strategy: share how AI fits into the company’s long-term strategy. This includes potential expansion of AI applications, investment in research and development, and any strategic partnerships related to AI.
Performance metrics: provide specific metrics or key performance indicators (KPIs) that demonstrate the effectiveness and impact of AI applications on the company’s operations.
Employee and stakeholder engagement: discuss how the implementation of AI affects employees and other stakeholders. Include training initiatives, changes in workforce composition, and how the company is managing these transitions.
Innovation and development: highlight any innovative AI projects or developments and their potential market impact. This showcases the company’s commitment to staying at the forefront of technology.

In my experience, AI is no different than any other emerging trend in one important way: investor relations teams that get out in front of this issue and take steps now to address it will win. They’ll court new investors and build trust with their current ones by demonstrating insight into a far-reaching trend, and by connecting AI to what matters most: profitable growth.

Simon Gittings is Head of IR and Corporate Communications at IDX.

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