The digitalization of IR: Going beyond communications at DIRK 2019
German IR teams have certainly proved themselves on the international IR stage, winning numerous IR Magazine Awards over the years and eight in one night at last week’s IR Magazine Awards – Europe 2019. But Kay Bommer, general manager at German IR association DIRK, says there is an area where his compatriot companies fall a little short: technology.
‘As much as I believe that German IR is very good in an international context, in terms of digitalization, IR in Germany is behind both the UK and the US, where IROs are more daring and try more new things,’ he tells IR Magazine.
Things are changing, however. Bommer highlights companies such as BASF – which has been using WhatsApp as part of its investor communications – and Deutsche Post DHL, which was one of the first to introduce a chat bot for IR.
‘But that’s not the norm,’ he notes. ‘I think these moves are bold: they’re quite brave and that’s how you test new waters.
‘We’ve looked at [what these companies are doing with WhatsApp and the chat bot] and asked ourselves whether this is best practice – is this something we want to teach other companies? The answer is ‘not yet’ because at the moment these types of technologies are interesting for a very small number of companies. For example, in terms of a chat bot, it only makes sense if you have a very large number of retail investors. It’s a bit early days.’
One of the challenges around the digitalization of IR – at least as far as German firms are concerned – is the very wide spread of experience and understanding. ‘When it comes to digitalization in the IR world, there’s a huge spread in terms of what it means for the individual IRO,’ Bommer explains. ‘For some, it’s a case of, How do I use Excel properly, and what other tools do I need to be digital? For others, that is a discussion that happened 20 years ago.’
But what is positive is the increased focus on the technologies being designed to make life easier for the IR community. While the DIRK 2019 conference covered a wide range of themes, digitalization is the one that really stood out for the 420 delegates who attended the Frankfurt conference over two days at the start of June.
Some technologies Bommer thought might have had more of an impact seem to have faded into the background – he cites initial coin offerings, which he says ‘are done, they’re out.’ Others, such as the ongoing focus on Big Data and analytics continue to drive digitalization forward.
‘We’ve heard about these companies that analyze the earnings call for words and tone – and from that analysis, investors are making buy and sell decisions,’ he continues. ‘Now what some companies are doing is prerecording the same earnings call, with the same person, on four different days, always saying the same thing but then letting it run through the software to choose the most positive version. And I think when it comes to identifying new investors, with Big Data, if you have the right tools you could find potential investors you’d never thought about in the past.’
The digitalization of IR is, therefore, about much more than just making communications more efficient, he adds: ‘[For those more advanced IROs] the question might not only be how to make communications better, but also how digitalization is actually changing the IR function – and what will the job look like in five years’ time?’
ESG: An opportunity for IROs with a strong backbone
Of course, German IROs didn’t just talk technology at the two-day event. Another big theme of the conference, says Kay Bommer, general manager at German IR association DIRK, was ESG – as it has been at many of this year’s IR conferences.
It’s an issue Bommer has been encouraging IROs to take by the horns for a number of years now. ‘More than eight years ago I was telling our IROs: embrace this – there’s no one feeling really responsible for ESG – so if you do this you can widen your role in IR.
‘I still believe IR can play a pivotal role around ESG because in the end it’s the money that’s going to decide how important this is. You might have a sustainability department – and they’re all good guys – but IR should be in on this. And it’s only now that the money is really getting involved in ESG that it’s starting to make a difference.’
Back when he first started evangelizing about the benefits of IR involvement in the ESG story, however, Bommer says few took note. ‘People were either laughing at me on ESG or simply not listening because for them it meant more reporting formats, having to do all the green stuff,’ he says.
‘And I think that was a bit of a missed opportunity. But ESG is definitely here to stay. It’s reached the mainstream – you simply can’t pretend that sustainability or ESG issues don’t matter: they do.’
Despite this – and the fact that so many big institutions cite ESG issues among their top concerns these days – Bommer says he’s still having to bang that drum. ‘What I see is that many IROs do it because they have to, but few do it because they really see the opportunity,’ he explains.
No matter the reasons, however, all in the IR community will see this as a growing area, he adds. ‘At the same time, I think if you take it seriously and think ahead, you can be an adviser to the board on ESG matters. Tell it that greenwashing doesn’t work.’
He feels IROs need to tell senior management that companies need non-financial KPIs as well as the usual financial markers that they’re using to steer the company. ‘People want to see you challenging yourself – not just setting 10-year goals you know you can meet.’
This is an area where IROs can really make themselves stand out as an asset, Bommer says: ‘For a strong IRO with a strong backbone, this presents a great opportunity.’