For the 20th anniversary edition, some predictions for the next 20 years of investor relations
In the present market turmoil, few IROs can contemplate what will be happening in a week’s time, let alone after two decades. Nevertheless, to complement IR magazine’s coverage of the past 20 years, we joined forces with the IR community to have a stab at forecasting investor relations in the year 2028.
Pessimists predict doom and gloom. One IRO thinks the IR role will become redundant over time. ‘Notwithstanding the collapse of the financial system as we know it, IR will increasingly be affected by onerous fair disclosure regulations and limits to greenhouse gas emissions. Gone will be the juicy management roadshow to New York with tickets to the baseball paid for by the brokers,’ he laments.
‘In its place CEO holograms will apparate, Harry Potter-style, in upper Manhattan offices with answers to investor questions already preprogrammed at company HQ to ensure no ‘off message’ deviations. IR will become a sub-segment of IT called Avatar Programming Services. We will still get to go to the baseball, sit in business class and stay at ludicrously expensive hotels, but unfortunately it will be via our PlayStation 10.’
It’s certainly a bleak outlook, not only for budding IR professionals, but also for IR magazine itself – which gives us at least two good reasons to refute this colorful theory.
Travel plans
Even so, a couple of points cannot be ignored. Take climate change, which is already becoming an issue for some companies. Whereas IROs have traditionally focused on communicating financial performance data, all this looks set to change, according to Paul Simpson, COO of the Carbon Disclosure Project.
He anticipates mandatory disclosure of environmental, social and governance data to allow investors a better understanding of a company’s future performance. ‘With climate change impact being felt worldwide, IROs will need to understand and clearly communicate what it means for their business.’
In addition to brushing up on climate change regulation, IROs will enjoy less carbon-heavy travel. Even if solar-powered planes were – literally – to take off, advances in communication technology and rising transport costs are likely to reduce IR-related travel dramatically.
Al Loehnis of IR internet agency Investis thinks restricted travel will challenge relationship building with geographically diverse shareholder bases. ‘Globalization will be a major driver of change in IR,’ he says. ‘The balance of financial power will shift toward China and India.’
Web spinning
The only solution to being in several places at the same time – unless you’re Harry Potter, in which case you wouldn’t care about IR anyway – is technology, and massive changes in internet technology are imminent.
‘Broadband will go and in its place there will be ultra-wide bandwidth, allowing online video to go mainstream,’ says Sara Jones, head of communication services at Thomson Reuters.
The advent of Web 3.0 will allow users to modify sites through the unlocking of applications that control data. ‘Data will be freed from the confines of a financial statement and made extractable, searchable and accessible,’ says Jones, who believes XBRL will go a long way toward making Web 3.0 a reality.
XBRL is poised to revolutionize the way IR operates, by allocating computer-readable tags to individual items of financial data instead of treating them as a block of text. It permits automatic checking of information, and is capable of handling it in different languages and accounting standards.
The electronic language also eliminates tedious manual reentry and comparison, which will eventually allow instantaneous data dissemination to newswires, analysts and investors. IROs will need to be constantly on their guard.
Software hasn’t been designed for end-users of XBRL yet, but when the time comes, analysts will have numerous possibilities for devising new models to process the extra information coming their way. ‘They will spend less time on information searches and more time on looking at why the numbers are the way they are,’ comments Andrew Ling, chief technology officer for Asia-Pacific at UBS.
Ling predicts that the integration of XBRL with RIXML.org, a consortium devoted to setting standards for investment research, will arm IROs with a spectrum of forward-looking information.
If the boom in sophisticated mobile devices is anything to go by, IROs will be on call round the clock. The Apple iPhone3G and Samsung Omnia already combine phone, video player and mobile internet access in a single appliance and, according to Jones, investors will soon be demanding information 24/7.
The fundamentals of successful IR will remain unchanged. ‘It’s about helping investors make informed decisions through the delivery of a clear message about company strategy, prospects and performance,’ Loehnis points out. That said, the means by which this is achieved will change enormously.
