A coming of age for the IRO
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Today, fintech finds itself very much in vogue as a component of the modern financial vernacular in the world of finance. Yet fintech is often perceived in an overly narrow manner as merely mobile payment technology that makes our trips to Starbucks seamless, and our lending and advisory services increasingly automated due to advances in artificial intelligence. While the consumer element gets the most attention in the media, there are huge institutional uses of fintech, too. For investor relations officers, it’s important to understand what institutional investors are using and how to stay a step ahead with new technology.
Perhaps the area of finance most affected by advances made though technological innovation is the proverbial pipeline through which information is disseminated and collected in public markets. This is the domain controlled by IROs, whose roles have experienced perhaps the greatest coming of age of any executive through the progress of technological innovation.
For IROs, fintech traces its origins back to the first consensus forecasts ushered in by the earliest real-time distribution networks pioneered by IBES more than a quarter century ago. Shortly thereafter, the space took off with the subsequent introduction of First Call for the spread of important news.
A seminal moment that helped bridge fintech from its adolescence in the early days of First Call, to its rapidly maturing, consumer-facing status today, was the 2000 promulgation by the SEC of Regulation Fair Disclosure (Reg FD). Reg FD stipulated that all companies, whenever they have information to tell the market, divulge that information to the whole of the market at the same time.
From an informational standpoint, the advent of Reg FD helped spur a paradigm shift that ensured all companies sought to discover ways to use the internet effectively. In a world where regulation barred preferential treatment with regard to information with the potential to move markets, firms publishing information on their respective websites began to indicate information had been fully disclosed.
IROs prior to this had been thought of strictly as communicators who liaised with investors and analysts at moments of market-moving events. But in today’s world, that description paints an incomplete picture. Given the need for fair disclosure, coupled with the fact that technologies such as Google have taught the marketplace the expectation that we can seek out and find the precise information we want in only fractions of a second, IROs have by necessity become the eyes and ears of companies, partaking in the formulation of strategy alongside CEOs and other top executives.
Their jobs have become far more strategic and vital to public companies. They’re charged with communicating ideas from the C-suite both upstream and downstream, and at the same time performing highly efficient research, as well as conducting some forecasting and quantitative analysis.
Today, with the end of each fiscal quarter comes the preparation for an earnings announcement, where metrics arrive from finance departments, a script is prepared for the CEO and CFO, and invitations must be properly sent out to all shareholders. In performing such preparation, it’s critical that IROs have on-hand all previous questions posed by the sell side – on their company and asked of competitors – for the past five years.
This has always been a laborious process where IROs have dealt with the ever-present fear of missing the proverbial needle in the haystack. But the same technological concept that identifies your face when you tag yourself in a picture on social media – machine learning – can now enable executives at Pfizer, for example, to look beyond transcripts and see where Roche stands from a patent expiration standpoint in real-time while fielding a question.
Perfect foresight would be ideal, particularly in finance. But, what seems apparent is the advent of the information age – driven by innovations such as cloud computing that enable more information to be stored and sifted through than ever before, and automation that helps robots operate cars and much, much more – will position the IRO as the safeguard and the supercharged librarian and historian of the corporate universe.
John Blaine is general manager and global head of corporate services at AlphaSense