IR technology: Stepping up a gear

If you see a fax number on someone’s business card these days, your eyebrows may begin to rise. While not completely out of use, the fax machine is more and more a conspicuous anomaly in any office that continues to house one. Back in the late 1980s, however, when IR Magazine first rolled off the presses, this piece of kit played a central role in the lives of IROs. ‘Believe it or not, the earnings release would basically go out via fax,’ says Mickey Foster, vice president of IR at FedEx and a 35-year industry veteran.

The contrast with today’s world couldn’t be more stark. In 2018, IR professionals count on websites, webcasts, email, blogs, video, social media, CRM systems, apps and more to get their message across. For professional communicators, the last 30 years have delivered an abundance of tools to achieve their goals.

But technology has also put up barriers. Over the same period, humans have taken a back seat in many aspects of the capital markets, leaving smarter, faster and cheaper machines to get the work done. Furthermore, buying and selling has increasingly shifted to opaque trading platforms. The audience for IR is shrinking and fragmenting. Thankfully, the next wave of IR technology may offer some solutions.

Looking back over the last 30 years, IROs point to a few key developments that truly and irreversibly altered the profession. Greg Secord, vice president of IR at OpenText, saw one of these changes before most.

In the 1990s, his office in Waterloo, Ontario sat across the parking lot from one of the first mobile device makers. The standardized use of smartphones ushered in a new era of responsiveness, says Secord. ‘Everything changed when everyone in the financial district started carrying one,’ he explains. ‘That’s when the true efficiency of email and messaging started to be realized. Suddenly everybody was stepping up in response time.’

These devices also brought a new, rather harsh type of feedback for IROs. ‘Smartphones became a new type of distraction,’ Secord continues. ‘In an investor meeting you would instantly know if you were losing people’s attention because they would go to their device.’

Along with mobile devices and email, IROs underline the huge change that came from broadcasting results and making information available online. ‘You

don’t have to go to presentations in the City and sit there and watch it – you can watch it on your screen whenever you want to watch it,’ says Catherine James, a consultant at Tulchan who previously led IR at Diageo. ‘All of these things have massively changed the way people pick up information.’

IR advances

If information gathering has become easier for investors and analysts, the same can be said for IR professionals. ‘Today, IROs can essentially look at the same dashboard a portfolio manager or analyst would be looking at,’ says Secord. ‘These are powerful tools, and having this technology at our fingertips has empowered IR to keep pace with market and industry experts.’

Adam Frederick, senior vice president of intelligence at Q4, agrees. The delivery of more accurate and timely information has been a ‘key technological change,’ he says, allowing people to ‘shift away from the traditional corporate communications-focused IRO to much more of a strategic, market/finance-oriented position.’

Few would disagree that new technology has offered phenomenal advantages to IR. But it can take a while for those in the industry to feel comfortable using new tools or channels to convey their message. And rightly so: individuals who handle price-sensitive information must be careful about what tech they put their faith in and, over the years, the approach of IR teams toward adopting new technology could be described as cautious. Secord says the important issue is to discern which new technologies offer true value for IR departments. ‘Are IR practitioners fearful of new technology?’ he asks. ‘I don’t think so. But as an IRO you have to ask: how is this tool helping my team reach our overall strategic objectives?’

A company’s willingness to try new technology has often been driven by its industry. Tech companies are, unsurprisingly, among the most adventurous. Google, for example, once used an application to let analysts vote on which question should be asked next during the earnings call. Netflix has experimented with video earnings calls, while Dell was a pioneer of the investor relations blog.

‘You can have a different perspective on different technologies depending on your particular industry,’ notes Secord. ‘For instance, if you have a consumer brand and your marketing department is very focused on social media, it makes sense to pay attention to it. It may make sense to leverage it.’

Tech issues

While technological change has brought many benefits to IR, the impact on financial markets has not always been in the profession’s favor. One issue is the emergence of new trading platforms where investors can buy and sell with greater anonymity.

Ricardo Jiménez, head of IR at Spanish multinational Ferrovial, conducted a study to investigate how much of his company’s trading was taking place away from traditional stock exchanges. ‘We realized that more than 50 percent of the real volume was being traded in something where we didn’t have any visibility – that is, all these alternative platforms. More and more, we are losing control of who owns our stock,’ he says.

IROs also fret over the growth of computer-driven trading, which has ballooned in popularity and today accounts for the majority of daily trades in the stock market. The negative impacts for IR range from more volatility to the expansion of passive investing. On recent roadshows to Europe and the US, Jiménez found key offices had closed, with the money turned over to index funds. ‘The business model of investor relations is about to change, or has already changed,’ he states. ‘I cannot speak to a computer or a passive fund.’

Bigger data

Technology is making markets harder, not easier, to understand – but perhaps the next wave of IR tools will redress the balance. Technology firms are bringing to market big-data services that promise to offer detailed insights into institutional investor behavior. This should help IROs predict market movements and plan their communication strategies with greater precision.

‘Today, using the newest technologies such as artificial intelligence (AI) and machine learning, IR-focused workflow solutions are able to digest and analyze staggering amounts of data per minute, and in the process produce very sophisticated and highly actionable intelligence,’ says Frederick. ‘As an example, by using AI we are now able to proactively monitor for – and identify – activist shareholders buying shares in the open market.’

In addition, IR firms want to make that data easier to consume. ‘There are so many datasets IROs have to look at. It’s taking that to the next level,’ says Kristen Pross, chief product officer for corporate services at Nasdaq. ‘So you get alerts that are smarter and can tell you what’s going on without you having to read the email.

‘We live in an on-demand culture where you can hire a car in two minutes, and you don’t have to take out your credit card or cash, or any of the things we’ve grown accustomed to over the last 30 years. The same thing that is expected as consumers, we expect that from our work life.’

For Secord, big data is not just a tool for IROs but also a new subject area they need to master. As more and more big data becomes available, IROs must guide investors to the most relevant information.

‘Sources of public data can be massive, and sometimes overwhelming to any research process,’ he explains. ‘In the future, investors will have powerful AI tools and will be looking for patterns within big data that are company or industry-specific. This AI analysis will likely form part of how the research process evolves.’

While the basic tenets of IR remain the same as 30 years ago, the tools used by IROs have already evolved beyond recognition. On balance, most view the impact of technology as positive, helping the industry go about its work with greater efficiency and effectiveness. There is little nostalgia for the fax machines, carousel slides and spiral-bound books of past decades.

For IR professionals today, the problem may be that there are too many options. Given all the different ways in which you might get your message across, how do you decide which ones to use with the little time you have available? James urges IR teams to stay positive about new technology: ‘The thing people need to remember is that you don’t need to be frightened of it. It’s not managing you – you’re managing it.’

This article was published in the winter 2018 issue of IR Magazine – the 30th anniversary issue of IR Magazine