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Jun 30, 2023

Supply-chain challenges, inflation and AI among IR disruptors

Adaptability, clarity and transparency described as core practices to navigate macroeconomic challenges

Supply-chain disruptions, global inflation, muted IPO and M&A activity, increased focus on companies’ sustainability agenda and artificial intelligence (AI) were all noted as IR disruptors at the UK’s IR Society Annual Conference.

Delegates at the conference in London this month heard that listed companies must be very clear about their positioning, how it’s both the same as others and different from others when facing such disruptions. The other approach was to ‘adapt your story’, with parallels drawn with the buy side.

Supply-chain disruptions, inflation and AI among IR disruptors

Companies should understand what part of the story was better to highlight at specific times that mirror changing stakeholder expectations. ‘I think focusing on basics, clarity and the key metrics is more important than ever,’ one panelist told delegates. ‘I also think [companies] need to find the right investor for [their] story.’

Attendees heard that in today’s economic environment, investors are focused on the big macro picture and it is difficult to get them to focus specifically on individual companies. In addition, the sustainability agenda had lifted people’s time horizons and encouraged them to think about backing longer-term winners.

ESG and AI challenges

ESG has become front of mind for investors, companies and IROs alike, due to increasing scrutiny and the pressures companies face from regulators.

ESG was described as ‘the changing focus of the buy side’. Describing the intricate process of ESG disclosure, how companies report on their key performance indicators, how the regulatory landscape is evolving and how rating agencies assess a company’s ESG performance, attendees heard that ‘there’s a lot of indirect communication around ESG, and the assessment process for the investor is a lot more difficult.’

Elsewhere, ESG was defined as ‘a must-have’ for companies and a key focus for investors in their decision-making process.

Supply-chain disruptions, inflation and AI among IR disruptors

As for AI, which has taken the world by storm and been a major disruptor to the IR profession, delegates were told: ‘I think we need to find a way to get the best out of it. At the end of the day, human decisions and interactions cannot be replaced.’

From an economist’s perspective, AI is having and is likely to continue to have repercussions on productivity and the workforce. It was argued that AI will be able to replace many tasks carried out by humans and increase productivity not by stealing people’s jobs, but by complementing them. It will also create more job opportunities in the long term.

But the full effect of AI will become apparent in two decades, attendees heard. ‘Typically, it takes 20 years from the moment when an innovative tool becomes operational to the moment it is massively used,’ a speaker said. ‘So we’ve got 20 years.’