The Impact of Technology on Investor Relations
Five years ago, Tau Media’s founder and Managing Partner, Jess Holland, wrote an article on the role and relevance of Investor Relations (IR) in the future. Fast forward to the present moment and there is no doubt that the function of IR has evolved to become one of the most critical elements in a company’s investor and marketing strategy. While this transformation was already in motion, the impacts of Covid certainly fast tracked the transformation of digital and analytics in IR. Have a read below to find out how IR has changed over the last five years and what we can expect to see in the future.
Introduction
The role and relevance of investor relations (IR) has significantly changed over the past few decades. The ever-growing speed of technological advancement has been a key driver of this evolution. Historically, investor relations was a reactive industry that responded to market fluctuations as they arose. Today, investor relations officers (IROs) are able to predict events before they arise, and access a larger investment community through the use of technology. As we enter into, what is now being termed, “the fourth industrial revolution”, companies are arming themselves for digital change, and investor relations is no different.
Digitisation
While digitisation of IR was previously uncharted territory, it is now here to stay. Company websites and online business reports are now standard practise, and the use of digital distribution channels for company investor communications has become indispensable. Even the traditional face-to-face shareholder meetings are being challenged by an increased demand for webcasts and entirely virtual events. Other innovations such as social media, data analytics, financial technology platforms and even artificial intelligence have further revolutionised the industry. And still, improving technologies are creating a raft of change and new opportunities in IR.
Whereas traditionally, IR teams reported numbers to their management teams as static set points throughout the year. Today, financial models are updated in real time, giving IR teams the ability to report fluctuating numbers to their board. With investors having access to so many avenues of information about companies, IROs are now expected to have detailed knowledge and understanding at their fingertips.[1]
This paradigm shift in the industry from ‘reactive’ to ‘proactive’ means that IR needs to consistently be in tune with the pulse of their industry and market sentiment. In order to stay relevant and earn the trust of the investment community, IROs must understand the impact of events and industry drivers that present both opportunities and risks for their business.[2] In other words, IROs will become experts in their sector, requiring a broad knowledge of industry-related change
[1] Bloomberg “Investor Relations, A vital Role”
[2] Bloomberg “Investor Relations, A vital Role”
The key advantage of social media is that it enables organisations to have more control of their information environment. It presents an opportunity for IROs to broadly and rapidly get information in front of their audiences. Through a carefully constructed strategic plan, social media has the ability to cost effectively reinforce a company’s key massages, measurably promote a company’s brand recognition and loyalty, push traffic to a company’s website and spur media coverage.
These tools are so powerful that even the President of the United States, Donald Trump, admitted on CBS news “The fact that I have such power in terms of numbers with Facebook, Twitter, Instagram, etc…I think it helped me win all of these races where they’re spending much more money than I spent.”[1}
[1] www.cbsnews.com/news/60-minutes-donald-trump-family-melania-ivanka-lesley-stahl
Innovations in Investor Relations
With an influx of information available to investors, IROs are busier than ever. Innovation is paramount to the survival and relevance of IR. It is for this reason that many believe big data and artificial intelligence will be the main drivers influencing investor relations in the near future. As a consequence, issuers need to know more about investors, and data analytics can deliver information on a large scale.
Big Data
Looking forward, it appears the biggest evolution in the investor relations industry is upon us. Data analytics, specifically, is transforming operational and strategic IR. It enables IROs to better understand what investors are looking at so that they can tailor their investor communications pieces to better target their audience.
Data analytics determines and measures interest from specific regions making investor targeting more effective by improving roadshows and possibly accessing new institutions and analysts that previously were not on their radar. In this way, IR is being transformed from a qualitative to quantitative function,