Navigating Uncertain Waters: How to Stay Afloat with Today’s Investor Relations Challenges

Investor relations and uncertainty are familiar friends. Investor relations officers (IROs) navigate uncertainty all the time, whether anticipating macro-economic trends or understanding changing investor sentiment. So, when I was asked to participate in a November 8 webinar on “navigating uncertain waters,” hosted by the National Investor Relations Institute (NIRI), I answered with an enthusiastic “Yes” because the topic is a natural extension of conversations I have with clients all the time. The conversation, hosted by Kimberly Esterkin, vice president of investor relations at ASGN Incorporated, was stimulating and fun. I was joined by Hunter Wells, AVP, investor relations at Hanover Insurance Group, and Clay Bilby, an investor relations consultant. Here are a few of the major takeaways:

AI Can Help IR

AI really dominated a good part of the conversation, as there is a good deal of curiosity and trepidation about its adoption in IR and beyond. Interestingly, only 38 percent of the webinar attendees said they use AI daily when polled. My main point was that AI is not a threat to IROs; in fact, savvy IROs can and should use AI in many ways to free them up to do more strategic things. And AI cannot do what IROs do best: build relationships with people.

For instance, AI can analyze historical data and make predictions about market trends. It excels at sentiment analysis, swiftly and accurately detecting shifts in investor sentiment. AI can take on more repetitive and data-heavy tasks, allowing IR professionals to focus on more strategic and engaging aspects of their role.

I also noted some of the other incredible ways AI can benefit IROs. Just to cite another example, AI-powered chatbots and virtual assistants can improve investor interactions. These tools can answer questions, provide financial information, and offer personalized recommendations based on individual preferences. AI can analyze news articles and other sources of information to provide real-time market insights to IR teams. This can help IR teams stay informed about market trends and react quickly to any potential issues. AI can help IR teams identify and target potential investors who are likely to be interested in their company, including activist investors.

And I’m just scratching the surface here!

All that said, IROs need to use AI responsibly and work with Legal and other stakeholders to develop clear governance around how and how not to use AI, including generative AI tools. Bottom line: use AI responsibly and remember that machines don’t build trust with investors -- IROs do.

Clay also stressed that we are in the early days of using AI, and although he voiced understandable concerns about using off-the-shelf generative AI tools such as ChatGPT, he encouraged IROs to use a model such as ChatGPT personally as often as they can in order to become more comfortable with AI.

Understanding Your Audience

Yes, investors can be inscrutable even at a time when IROs possess so many research tools to understanding the buy-side and sell-side world of investing. Hunter offered some great insight into understanding buy-side investors, especially at a time when IROs are operating under tighter budgets. She highlighted the strategy of looking at potential buy-side investors in companies beyond one’s own industry and focusing on their investment style instead of their vertical market. She focuses on attracting value-style investors. By examining the investor lists of peers in different industries, she occasionally discovers potential investors outside Hanover Insurance Group’s sector. She also stressed the importance of using one’s network to expand investment opportunities and the necessity of having a process to document interactions with buy-side investors (nothing like good-old fashioned networking! As I said, machines don’t build relationships – people do). Hanover maintains comprehensive records of discussions with investors, which recently enabled Hunter to proactively address an investor’s concerns about dividend expectations based on historical data.

On the other hand, Clay advised that when an IRO is targeting a buy-side investor, remember that most funds are looking for a company that fits a financial profile. So, first think of investors who are seeking a certain financial profile. He also stressed the importance of leveraging the time of a company’s executives to build relationships with buy-side analysts.

Here again, that undercurrent of IROs being on the front lines of building relationships with stakeholders emerged. AI won’t build that trust, but it can help an IRO with the research.

Of course, understanding one’s audience is something we specialize in at IDX – so I had a lot to say about this topic.

The main thrust of my contribution was to advise IROs to make better use of first-party data, or data that you collect from those who visit your website. It’s the most valuable data a business can collect about someone. This data can be collected via website cookies, customer surveys, registration forms, and more.

First-party data can reveal a pattern. A high volume of downloads of your information from one investor can identify an opportunity (perhaps an institutional investor wanting to take a position in a company) or even a threat (an institutional investor with a reputation for being an activist).

I shared some real-life examples from our own work. For instance, first-party data can help an IRO identify what kind of content resonates with investors. Where investors spend their time on your site is a clear barometer of their interests. We recently studied traffic on our client’s sites to identify the most popular type of ESG content, ranging from a company’s sustainability strategy to board remuneration approaches. When we break down the results for each client, we can help them understand how to tailor their ESG messaging accordingly across all their IR content.

And of course, keyword analysis can be essential to an IRO. If your website receives organic search traffic, analyze the keywords that are driving visitors to your site. This can help you understand what investors are searching for online and adjust your content and SEO strategy accordingly.

I also hearkened to the discussion about AI and related AI to first-party data. For instance, imagine an investor visits the website and wants to review the financial report from 2019. Instead of having to navigate through various sections of the website or use search functions, they can simply type a request such as, “Show me the 2019 financial report,” and a chatbot will immediately provide them with the relevant report. This solution not only significantly improves customer service by simplifying information, but it also serves as a valuable source of data on the specific types of information investors seek. By analyzing these requests, we can gain deeper insights into investor preferences and tailor our investor relations strategies accordingly.

That being said, what first-party data cannot do for an IRO is take action. The IRO still needs to act decisively with information.

ESG: The Hot Button

ESG continues to be a touchy subject for IROs, but it’s clear they need to understand how to talk about it. Hunter gave a refreshing perspective on how IROs can become conversant in discussing ESG based on her own experiences. She advised IROs to develop a clear and concise elevator pitch that summarizes your company’s ESG policies, your commitment to ESG, and how you compare to your peer group. In addition to your elevator pitch, you need to understand the standards being used to evaluate ESG reports and identify low-hanging fruit for embracing ESG, such as sharing your ESG policy statement.

For his part, Clay discussed the importance of making a company’s ESG information easily available and accessible on a company’s website. These days, doing so is table stakes as investors assess a company’s risks related to ESG. Lacking a basic ESG report is a red flag that could disqualify a company from an investor’s consideration set.

ESG, of course, is near and dear to us at IDX. We recently published The Sustainability 100 report that discusses how global businesses can build investor trust with compelling sustainability narratives. We’ve been discussing this topic a lot, so I won’t get into it here. But for more insight, I encourage you to read a blog post by my colleague Simon Gittings or download the report directly.

The Human Touch

For all our talk about technology – and it was important – the most important topic emerging from the conversation was the IRO themselves. Specifically, the importance of IROs to build trust and relationships. As businesses continue to navigate uncertain waters, IROs are critical. And fortunately, technology such as AI has become more valuable in helping them.

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