5 Investor Relations Imperatives for 2024 and Beyond

As we approach the midway point of 2024, it's clear that things have changed for investor relations officers and their teams. Forget about passively reporting numbers. AI-savvy regulators, impact-focused investors, and the end of third-party cookies are shattering the old IRO mold. The winners in 2024 won't simply react to these changes - they'll be the ones shaping how their company navigates risk, transparency, and the evolving rules of engagement. This post is your blueprint to get ahead of the curve.

1. Discussing AI as a Risk and Growth Opportunity

With AI predicted to generate $15.7 trillion in global economic growth, its integration affects not just operational efficiencies but also introduces complex risks such as data privacy breaches and compliance issues. This is where IROs come into play. IROs must take the lead to ensure that AI usage, associated risks, and governance are communicated transparently. This enables investors to better understand how AI influences both the strategic direction and the risk profile of the company, facilitating more informed investment decisions.

Heightening the need for disclosure, legislative bodies like the EU are moving toward stricter regulations with the Artificial Intelligence Act (AIA), which carries substantial potential compliance costs. Failure to disclose AI practices could leave investors feeling uninformed and heighten the company's risk profile. Investor relations teams should proactively address AI governance, explaining who oversees AI decision-making, how the company complies with data privacy regulations, and what ethical guidelines are in place to prevent issues like the spread of misinformation.

Beyond responsible AI, a comprehensive disclosure paints a picture of strategic advantage for investors. This includes quantifying how AI contributes to financial results, such as specific cost savings examples or the percentage of revenue growth directly attributable to AI initiatives.

Outlining plans for future AI expansion, R&D budgets, or key partnerships signals the company's dedication to staying technologically competitive. By providing metrics like the improvement in customer service efficiency due to AI-powered chatbots, companies offer concrete proof of value. Finally, disclosing how AI-driven changes are managed, including employee retraining programs or the creation of new AI-focused roles, demonstrates the company's ability to navigate workforce evolution smoothly. Companies that master this level of detailed disclosure will position themselves as technologically savvy, attracting investors seeking businesses that understand the potential of AI for responsible and profitable growth.

2. Creating a Stronger Narrative Around Sustainability

IROs must take immediate charge of crafting and disseminating a powerful sustainability narrative as regulatory landscapes shift globally.

In 2023, the European Union enacted legislation that requires businesses to report publicly the impact of their operations on the environment, as well as social and governance matters. And now the United States has followed the footsteps of the EU with legislation of its own: on March 6, the Securities & Exchange Commission (SEC) passed a rule that will require large publicly traded firms to report some of their climate-related risks. The new rule is not as far-reaching as it could have been, but it's another sign that Investor Relations professionals need to report sustainability information in a clear and compelling way.

This heightened transparency requires investor relations professionals to prioritize consistent communication about their company's "E" in ESG. By emphasizing a values-aligned sustainability strategy tied to long-term business goals, they can proactively guide investor and public perceptions.

This proactive communication around sustainability is critical because reporting is becoming more than a matter of choice. The SEC's focus on direct/indirect emissions, climate-related risks, risk management, and board oversight indicates a move toward increased accountability. Investor Relations teams must not simply assemble data but articulate the company's evolving strategy clearly and consistently. This involves going beyond the 10-K to educate executives and engage with stakeholders in a way that uses compelling storytelling, visuals, and plain language to build a compelling, credible sustainability stance. Those who master proactive narrative communication now will be best positioned as stricter regulations inevitably emerge.

3. Facing Cybersecurity Threats

IROs are playing a much more important role in helping companies manage the complex issue of cybersecurity threats.

It's an understatement to say that cybersecurity crime is one of the most pressing and potentially devastating problems facing businesses. The global average cost of a data breach in 2023 was $4.45 million, a 15 percent increase over 3 years. Because of the potential risk that cybersecurity creates, the SEC has mandated stricter cybersecurity disclosure rules for publicly traded companies. IR teams must rise to the challenge of communicating complex risk postures and incident responses clearly.

Because cybersecurity threats can significantly huge financial health and investor confidence, a strong and transparent approach to cybersecurity disclosure is essential. This means IROs need to play a stronger leadership role going beyond communication. They must collaborate closely with cybersecurity teams to ensure their company's stance on cybersecurity aligns with SEC guidelines and investor expectations.

This proactive communication necessitates a shift away from mere compliance and towards embracing a comprehensive narrative on the company's cybersecurity approach. By articulating proactive risk management strategies, incident response plans, and investment decisions, investor relations can instill trust and demonstrate preparedness in the face of potential cyber threats. This level of transparency is especially critical considering the substantial costs of data breaches and the complex nature of cybersecurity compliance.

Investor relations officers, empowered by technology and collaboration, stand uniquely positioned to address these challenges. The intelligent use of generative AI and engagement with cybersecurity professionals can support investor relations in creating compelling, consistent, and timely disclosures that adhere to SEC guidelines. For example, a good gen AI tool can scan complex SEC documents stipulating reporting requirements and create, faster and more accurately than a person - a templatized format for reporting.

Such proactive communication strategies enhance a company's reputation, protect shareholder value, and build resilience against rapidly evolving cyber threats.

4. Owning ESG

Businesses (especially in America) are stumbling their way through the tangled world of discussing their practices with environmental sustainability, and governance (ESG) issues. Some are even trying to avoid using the term ESG in their public communications. That's because of the negative sentiment around ESG created mostly by politically motivated parties. But ESG is not going away. Businesses need to come to terms with ESG. They need to stop using double speak to discuss ESG because investors won't stand for poorly communicated ESG strategies. And IROs are being challenged to lead the way to a sensible, well-articulated approach to ESG reporting.

ESG may be a contentious term in some circles, but the underlying principles remain crucial for responsible business practices and long-term success. Attempts to rebrand or downplay ESG commitments, particularly in light of heightened investor interest and regulatory scrutiny, pose significant risks. Instead of playing a semantic shell game, businesses must embrace transparency and demonstrate their dedication to sustainability, ethical practices, and strong governance. Hiding from ESG terminology will erode trust and ultimately undermine a company's ability to communicate effectively with investors focused on long-term value creation.

Investors are savvier than ever, recognizing that genuine ESG efforts translate into reduced risk, operational efficiency, and a more resilient bottom line. It's time for businesses to reject the temptation to tiptoe around the term ESG and instead utilize it as a tool to tell a compelling story. This involves clearly defining ESG goals, embedding them throughout the organization, and reporting on progress with verifiable metrics. By taking these actions, companies will not only meet investor demands but also build a more responsible and sustainable future.

Businesses must recognize that the war over ESG terminology is, in essence, a distraction. The fundamentals of creating long-term value while addressing environmental, social, and governance concerns are non-negotiable. Proactively addressing ESG risks and opportunities is a strategic imperative. Companies that shy away from open and honest ESG dialogue risk alienating investors, damaging their reputation, and ultimately hindering their own success. The time for gamesmanship is over; businesses need to confidently own their ESG narrative and demonstrate their commitment to a better, more sustainable future.

5. Taking First-Party Data to Another Level

Google is laying down the law in 2024 and finally doing away with third-party cookies - and IROs should rejoice. That's because the demise of third-party cookies is forcing them to unleash the power of an untapped asset: first-party data. First-data is like gold. It's the information that investors offer to businesses, and yet for years IROs have not been harnessing its value as well as they could to create more personalized investor relations outreach. But IROs are finally recognizing the true value of their own first-party data, investing in better acquisition and data management strategies. This can lead to deeper investor insights, more personalized experiences and highly integrated outreach. But they need more creative approaches to do that - going beyond the basics of "who is visiting my site" but also asking more detailed questions such as:

• Where are they spending their time on the website?
• How often do they visit?
• How long are they staying on the places they visit?

Consider ESG content. As noted in this post, to assess how well businesses manage the risk of ESG, investors are demanding consistent ESG data and narrative to support their investment decision-making. 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.

Consider also the fundamental question of who is visiting your site. When investors willingly share their names and company affiliations by filling out lead forms to obtain more details about a company, they create an opportunity for the IRO to get more granular information about who is interested in the company. This is especially true when first-party data reveals a pattern, say, a high volume of requests coming from the same investor. This data can identify an opportunity (perhaps an institutional investor wanting to take a position in a company) or a threat (an institutional investor with a reputation for being an activist). This data gives the IRO an important advantage: the ability to be proactive.

This kind of analysis can help IROs on two levels:

• Strategic: better first-party data is helping forward-thinking IROs adapt their IR outreach planning by creating more accurate profiles of investor segments today and tomorrow. This enables them to address the needs of both current and emerging investors.
• Tactical: real-time first-party data makes it possible for IROs to preparate more effectively for events such as earnings calls and annual investor days. By knowing who is visiting a site and where they're spending their time, and IRO can anticipate any issues that might be ready to bubble to the surface during an investor briefing or call - especially if that first-party data is compared against real-time sentiment from social media.

But IROs need to level up the software packages they use to delve into. Fortunately, tools are evolving to help them, including services offered by IDX.

At IDX, we help IROs navigate through challenges on a daily basis. Our combination of strategic counsel and bespoke IR data analytics help us stand out from the rest while providing you with the actionable insights you need to create value. Sound interesting? Visit our website to learn more about our Corporation Comms and IR solutions.

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