Ellen Haramalis

Kishida’s support ratings rise, focus shifts to chances of an early general election

The conclusion of an expanded Group of Seven summit in the western Japanese city of Hiroshima was the last of a series of foreign policy wins for Japanese Prime Minister Fumio Kishida that has bolstered his domestic ratings, which is feeding speculation that he will dissolve parliament and call a general election.

Ukrainian President Volodymyr Zelensky’s surprise visit to the summit was widely reported in Japan as an example of Kishida facilitating discussion on Russia’s invasion of Ukraine, which is one of the most significant geopolitical risks facing the global economy.

Inviting Brazilian President Luiz Inacio Lula da Silva and Indian Prime Minister Narendra Modi to the summit also displayed the Japanese government’s will to expand debate and include emerging market countries in the Southern Hemisphere, recently known as the Global South, in acknowledgment of their rising influence on the global economy.

By hosting the G7 in Hiroshima and using the Atomic Bomb Dome, which is one of the only structures left standing after the US dropped an atomic bomb on the city almost 80 years ago, as a backdrop for his closing press conference, Kishida sent a powerful visual message to the world about the costs of war and won approval from domestic supporters of Japan’s pacifist approach to global affairs.

The G7 leaders’ final communique, issued a day earlier than expected, included stronger language about the importance of peace across the Taiwan Strait and a condemnation of North Korea’s launch of several ballistic missiles into the Sea of Japan that were not in last year’s communique, so Kishida can say he convinced G7 countries to express their concern about the significant risks that lie at Japan’s doorstep.

Japan’s courting of foreign semiconductor companies has also borne fruit. Micron Technology Inc and other chip makers are planning to invest billions of dollars into manufacturing their products in Japan and into training future semiconductor engineers. This is significant because Japan could regain the share it has lost in the global semiconductor market as G7 countries draw up plans to diversify their supply chains away from China.

In the months leading up to the G7 summit, Kishida managed a surprise visit to Ukraine to meet Zelensky and became the first Japanese prime minister to travel to South Korea in five years when he met South Korean President Yoon Suk Yeol in Seoul earlier in May. Japan also invited Yoon to attend the G7 summit as an observer as the neighbouring countries seek to improve ties.

The latest round of public opinion polls show an increase in support for Kishida after the G7 summit, but the biggest question political journalists are trying to answer is how Kishida will use this increase in approval ratings.

One argument is that Kishida should dissolve the lower house either before the current session of parliament ends on 21 June or sometime later this year and hold general elections to capitalise on his recent foreign policy gains. In his public statements so far, Kishida has ruled out this option. This may be prudent, because some Japanese political analysts say this approach could easily backfire because Japanese elections tend to be won or lost on domestic policy, and Kishida’s domestic policy record is less convincing.

Kishida has been in office for less than two years and has so far struggled to provide new ideas for solving some of Japan’s long-standing problems, such as the declining birth rate, a rapidly ageing society, low wage growth, and the loss of corporate competitiveness.

In by-elections held last month for five parliamentary seats, Kishida’s ruling Liberal Democratic Party (LDP) lost one seat in the lower house. The LDP won the remaining four votes, but one victory was by a margin of less than 400 votes, which highlights the risks when you do not have an abundance of positive messages about domestic policy to communicate to voters.

By Stanley White, Director

If you go back to ancient Greek literature, philosophers like Aristotle and Plato wrote about the possibility of creating intelligent machines that could perform tasks in a human-like manner. Today, artificial intelligence (AI) dominates the headlines and is impacting our everyday interaction, from dinner recommendations on food delivery apps to wearable tech diagnosing early signs of medical trouble.

Following my colleague’s dissection of why AI will likely augment the work we do as communications advisors, I thought it was worth exploring ways in which it is already exists in the Investor Relations (IR) industry.

Traditionally, IR has been seen as a field which needs a human touch and a friendly face. While this is still fundamentally true, there have been a number of interesting developments which have made it increasingly important for IR professionals to have a firm grasp on AI, and how it can be used to our clients’ advantage.

The first of which is in financial media and the rise of programmed journalism. This can be seen most obviously at Bloomberg and their increasingly sophisticated Cyborg algorithm. For several years, the firm has been investing in AI software which analyzes financial reports as soon as they are released and almost instantaneously publishes news items which incorporate all essential information.

In March, Bloomberg also announced updated information on their Automated Intelligence system, highlighting its capability to predict market events with Natural Language Processing and sentiment analysis. For an IR professional, it is becoming important to understand how these systems work and their limitations to evaluate how a client’s messaging and key figures are included in automated articles. Failure to do so could have a material impact on trading at market open.

AI has also been tipped to start encroaching on one of the very cornerstones of the IR profession. Gartner, the prominent Management Consultants, expect 90% of material in quarterly financial reports to be synthetically generated by the year 2025. That is a significant upheaval of the results process engrained in many of those from our industry.

There is a danger of looking at developments such as these as a threat to advisors, but I would disagree. In my colleague’s article mentioned above, this level of automation frees up a significant amount of time for IR practitioners to think more deeply about the core messages they are trying to convey and the overall equity story they are trying to tell.

Not only is AI set to streamline the work we can do for our clients, it also promises to fundamentally change their businesses.

A report by CCW Digital recently suggested that by the end of the year, over 80% of organizations will be looking to implement some machine-response capability.

This creates an imperative for comms advisors to understand these systems in order communicate the commercial benefit they are having in their clients.

Indeed, in a recent IR Magazine Webinar, speakers urged IR professionals to use ChatGPT and other artificial intelligence technologies in their daily work to gain a better grasp of this new technology. Efficiency, thoroughness of data assessment, and the ability to accommodate a talent that would otherwise need to be outsourced were just a few of the benefits which were discussed. Christoph Greitemann, a senior IR manager at Deutsche Telekom, said that his group utilized ChatGPT to write website content and postings for social media. Although the feedback was “never exactly what was needed”, he acknowledged that 80% of it is there, leaving 20% to finish manually.

However, this is not to say that utilizing artificial intelligence in Investor Relations will be without complication. It is a profession that is dominated by various regulations which will take time to catch-up with AI. In the interim, a level of human due diligence will be essential to catch any mistakes or inconsistencies thrown up. Furthermore, AI is still a nascent technology, particularly for this industry, and it is difficult to truly estimate the extent of its positive impact.

Nevertheless, while IR teams should remain cautious about using this technology, it is undeniable that AI will continue to change the nature of Investor Relations and reshape the financial landscape. Being an authority on the space and knowing how to best use it can give a competitive advantage that sets advisors apart from the competition.

As artificial intelligence (AI) continues to grab headlines, it is becoming increasingly vital for communications advisers to understand its impact on clients and our industry. Russell Shen from CDR’s US office, has put down his thoughts on how AI is transforming the Investor Relations (IR) industry. He emphasizes the critical need for IR professionals to keep themselves abreast of new AI developments to stay ahead of the curve and effectively serve their clients.

Effective communication is key to winning hearts and minds of investors

In late 2022, the Hong Kong government unveiled a range of policy measures aimed at developing the virtual asset industry, including legalising retail participation with a new licencing regime and allowing exchange-traded funds (ETFs) with exposure to Bitcoin futures. The government recognises the potential of distributed ledger technology and Web 3.0 to become the future of finance and commerce and believes that the innovative technologies behind virtual assets offer huge potential for applications in financial services, trade and enterprise services.  

The move marked a major change in the government’s approach towards virtual assets, which until recently were only allowed to be traded by individuals with a portfolio of at least HKD 8 million (£820k). The city’s crypto plan includes a mandatory exchange licensing regime due from 1 June 2023, and officials have also permitted ETFs investing in Bitcoin and Ether futures. Three such ETFs launched since mid-December 2022 have so far raised over USD 80 million. 

Meanwhile, a consultation is due in the first quarter 2023 on safeguards and allowable tokens for retail buyers. Officials are also willing to review property rights for tokenised assets and the legality of the automatically executing, software-based smart contracts that are key for many blockchain-based financial services. Then in February, Hong Kong issued the world’s first government tokenised green bonds worth USD 102 million, with the offer attracting strong investor interest. The success of the tokenised green bond demonstrated Hong Kong’s strengths in combining the bond market, green and sustainable finance as well as fintech, paving the way for digital bond offerings in the city. 

These developments come as more Asian markets recently announced that they are establishing and/ or reinforcing their cryptocurrency regulations, including Thailand, India and Australia, while Indonesia said back in January that it was looking to set up its own cryptocurrency exchange within the year.  

However, decentralised finance and blockchain technologies have suffered a blow to their reputations of late, which will require a lot of education and trust-building as the industry begins the recovery process. As such, with regional investor appetite for emerging crypto strategies increasing, it is vital that crypto companies communicate their long-term goals and put forth a public image that matches the promise of their technology, if the industry is to build back its reputation.  

This can be done by contributing educational content to publications both inside and outside the ecosystem. Yet with crypto being relatively new, even sophisticated investors may not have a firm grasp of its fundamentals, and although accredited investors may be the primary target, that does not necessarily mean they understand the basics of crypto’s value proposition. Therefore, the challenge is to communicate that value proposition, and the risks to be aware of, in a way that is efficient, interesting and easily understandable.  

And while crypto has its opponents and critics, data suggests that cryptocurrencies and cryptocurrency-powered financial applications are here to stay, and the rapid growth of interest and large sums that are being poured into this space suggests that banks and other traditional financial institutions, and not just fintech, should be looking for ways to embrace this technology. 

Some banks, as well as major hedge funds and sovereign wealth funds, are already invested in cryptocurrency and blockchain companies. However, the financial industry has been traditionally slow to adapt, and is lagging behind when it comes to moving with the times and reclaiming the space. The most important thing for financial services firms is to understand what crypto is and what it can and cannot do. Crypto is probably one of the most disruptive technology innovations of our generation, but that does not mean that it will revolutionise every part of the value chain.  

To help potential customers understand solutions based on the blockchain, the technology behind it needs to be explained first. Awareness of its many advantages and benefits must be raised and only then can the business and its products be promoted effectively. That is why crypto projects must invest their resources wisely and concentrate on their target audience – even if this means starting with only one or two main communication channels to get the message across. 

Truly innovative crypto projects are happening right now: blockchain solutions for fintech companies, smart contracting, innovative payment systems, and online security systems are quietly developing a completely new economic sector. 

For those involved in the crypto and decentralised finance markets, now is the perfect time to start engaging with the media. In recognition that these topics are becoming more prevalent, mainstream media outlets now employ full-time crypto reporters, and those reporters need credible and trusted resources to help them make sense of the crypto space. 

As communications advisers, we can not only help boost the profile of these businesses through the media, but we can also help crypto companies navigate what will be a shifting regulatory landscape. The establishment of an integrated comms strategy is integral for giving these businesses a solid foundation to capitalise on when new regulations come into effect, ensuring they are positioned as a leader in the space from the off, rather than a challenger snapping at heels. 

In January 2022, Hong Kong Exchanges and Clearing (HKEX) announced new listing regulations to improve gender diversity among  company directors. The new regulations, which state that listed issuers with a single gender board will have to appoint at least one director of a different gender by 31 December 2024, are estimated to create more than 1,300 director positions exclusively for women. However, as of February 2023, 24.8% of boards in Hong Kong still have no female directors, which means that nearly  one in every four firms is likely to have an all-male board of directors.  

The Hong Kong Census and Statistics department observed that almost 57% of students in business and management courses are female as of 2022, and while women make up more than half of entry-level positions, they only occupy a third of senior management positions in Hong Kong’s financial sector. Overall, women currently make up only 16.5% of issuers’ boards in Hong Kong.  This begs the question: why are corporates struggling to retain female talent beyond education and entry-level roles? And what can be done to reverse this trend?  

A number of studies have noticed a correlation between the presence of women on corporate boards and strong performance. While no causal relationship has been established, these studies propose that the reason for this correlation could be that more diverse groups make better decisions, since they are less likely to let the desire for group consensus overpower independent thought and unique perspectives, a social phenomenon known as “groupthink”. Without the challenging of ideas or lively debate and discussion, groupthink effectively sacrifices high-quality decision making and creativity for the comfort and uniformity of the status quo.  

Secondly, gender-diverse companies are likely widening their search beyond the immediate networking circles of current employees and board members, and, therefore, are more effectively utilizing the available pool of talent compared to other companies. According to the MSCI, firms with more women on their board of directors are more likely to have higher female representation in senior management roles as well. 

There are a variety of ways that firms can promote female leadership. Alongside regular employee training initiatives and reviews of company policy to maintain high-quality talent management and a respectful workplace, companies can run mentorship programmes, pairing women in senior management positions with entry-level employees to nurture talent and promote the longevity of female careers. Companies can also sponsor networking events to promote solidarity amongst different female leaders and employees in the same industry and improve access to career opportunities, and may go further as to sponsor events in universities and schools to offer such networking and work experience opportunities to female students that will set them up for long and fulfilling careers in finance. 

From a public relations perspective, companies can improve the visibility of female figures in sectors such as finance by proactively arranging media opportunities for female spokespersons to publicly share their insights and expertise. Regular and active engagement in the conversation around diversity and inclusion, which could look like sponsoring research in employee diversity or collaborating with non-profit organisations that specialize in such research, will add to positive media coverage and company goodwill. Meanwhile, companies that prioritise transparency and regularly monitor the demographics of their company structure, while publicising their diversity efforts and affirmative action, will attract stronger talent and benefit from strengthened stakeholder trust.  

Industry regulations such as the HKEX’s gender diversity requirements are likely to accelerate over the coming years, due to a newer generation of stakeholders that demand more accountability and social consciousness from corporates. It will be the companies that take the lead in diversity efforts that stand apart from their peers and reap the benefits. By publicly setting new goals and working towards milestones, companies can inform industry standards and be leading examples in accountability and progressive action. Hopefully, by December 2024, Hong Kong’s firms will be reporting significant changes in the gender markup of their boards, and professionals will be navigating a corporate landscape that offers a more levelled playing field for aspiring business leaders, regardless of gender.  

A balancing act between embedding ESG agendas and maintaining profit 

With global ESG assets predicted to soar to USD 53 trillion by 2025, Asia looks to be sparking the next leg of growth. From green bonds to carbon trading and asset management, the Hong Kong Government is angling to be a leading green finance and investment hub in Asia, and has just earmarked HKD 200 million for a three-year pilot scheme to build green and sustainable finance capacity. The Asian hub is also poised to benefit from its proximity to China, which is currently the fastest-growing market for green bonds. For context, with 70 ESG funds run by managers based in Hong Kong and a total AUM of USD 53.1 billion as at November, this equals five times the USD 11.3 billion across 26 funds run out of Singapore. 

The CFA Institute, the global association of investment professionals, has seen growing interest among its members to acquire the Certificate in ESG Investing, and Hong Kong has gone from being the top APAC market for registrations last year to now being the top market in the world. 

However, sustainability initiatives in 2023 could be tested by persistent inflation and economic uncertainty, and Hong Kong companies must balance between their spending on initiatives that enhance ESG performance in 2023 and maintaining profit in the short term. Furthermore, out of 125 businesses in Hong Kong, even with 45% committed to achieving net zero emissions, the challenge remains that still only one in three are aligned with the standards and accounting methodologies of the Science Based Targets initiative. 

The economic slowdown is forcing organizations to rigorously attend this balancing act, and to accelerate their journeys to net zero, which means that both public and private sectors need to hire sustainability talent. The challenge is that the durability of sustainable employment practices and long-term energy transition goals are at risk, weighed alongside nearer-term considerations such as energy affordability and security. Increasingly, companies and investors must also navigate the risk of litigation related to sustainability, from inaction to disclosure, and the rise of “greenhushing”, the trend of refraining from disclosing sustainability practices for fear of penalties. 24 of the world’s largest and richest companies, including three based in Asia, were mired by ambiguous commitments.  

This presents a particular problem in Hong Kong, where industry professionals are appreciating their lack of expertise in a sector that is expected to see significant growth, and there remains a substantial skills gap. With education institutes ramping up courses to deal with the acute need for ESG talent, there is an increasingly wider space for one of the hottest job markets, and the lack of hiring professionals with relevant ESG expertise has led to salary inflation, with ESG jobs in the city now commanding salary premiums of more than 30%. 

Ultimately, to make a fundamental impact in climate mitigation, more investment is needed. From banks to investment funds, Hong Kong institutions focused on sustainability need to look towards bringing in the right ESG talent, particularly around compliance, the consulting side, and staff training to drive decarbonization. From assigning chief sustainability officers to looking at leaders with backgrounds in finance, HR and marketing, Hong Kong companies should be weaving ESG into job design and reskilling, and that could be from designing green buildings to a green supply chain, to closely monitoring tax policies and subsidy schemes that are encouraging the issuance of more green finance products. 

ESG initiatives are being forensically monitored by the Asian investor community. There has been a shift from shareholder capitalism to stakeholder capitalism, which places pressure on businesses and leadership to deliver, particularly on the emerging social dimension of ESG, i.e., the importance of community, people, well-being and mental health in the workplace. 

Firms, especially in Hong Kong, need to look into hiring talent with the relevant skills and knowledge in ESG reporting, climate change, carbon emissions and crucially today, developing digital solutions to improve the accuracy and efficiency of their ESG reporting and risk analysis.  

Effective communication from the very top will be vital in these efforts, and firms need to improve how they communicate their commitment to ESG, in order to attract and retain the best talent. Leadership must show genuine commitment and action towards enhancing ESG, through policies, initiatives and campaigns, in order for old and new talent to feel properly supported, and all through clear messaging from senior management, with science based evidence and case studies to back up their ambitions. 

With 87% of investment managers in Hong Kong saying that the focus on ESG issues will increase over the next twelve months, despite current macroeconomic concerns, the key answers institutions need to find are how best to embed ESG into their people strategy, how to promise and deliver positive impact at scale, and which focus areas and impact measures should be tackled to the greatest effect, in the short and long term. 

The current corporate debt restructuring wave, which is likely to be prolonged, puts pressure on market participants to seek amend-and-extend solutions, according to the participants of Debtwire Restructuring Forum Europe 2023 which took place last week.

CDR attended the event and took the following takeaways:

The panellists debated whether we were going into another 2008-like crisis and highlighted the difference between then and now. Whilst they agreed that the current crisis is different in nature from the GFC, they also forecasted that the current downturn cycle was going to be the biggest and longest one since 2008.

Inflation and rising interest rates were clearly front of mind as corporate borrowers across the globe urgently reassess the sustainability of their debt funding and evaluate the best refinancing and restructuring options.

Debtwire conducted an online survey ahead of the conference and many of the findings were in line with the consensus at the event. In particular, 86% of survey respondents thought that debt restructuring activity was likely to increase in Europe in 2023 compared to the previous year whilst 52% of respondents believed rising interest rates to be one of the top three macroeconomic factors most likely to drive that restructuring activity this year.

Interestingly, the UK and Italy topped the list of countries that were likely to see the biggest uptick in year-on-year restructuring activity in 2023. In terms of sectors, financial services and consumer featured among the most attractive to distressed debt investors in Europe in the next 12 months. In the Middle East, construction and real estate topped the list (58%) whilst in Africa – energy was the top pick (63%).

The evolving regulatory environment was also discussed with mention of the EU Directive of Restructuring and Insolvency impact on local legislations. It was mentioned that Germany, France, Spain and the Netherlands had already updated their restructuring regimes. Interestingly 96% of respondents in the UK and Ireland favoured further harmonisation of restructuring and insolvency law in the EU, a higher proportion than in any other region, despite Brexit.

Not surprisingly ESG remains a prominent topic among debt professionals. 84% agreed that companies without positive ESG records would find it challenging to attract funding when restructuring compared to companies with solid ESG records.

Given this challenging outlook, opportunities for distressed debt participants and restructuring are highly likely to increase and companies who need to refinance will benefit from the advice of a bench of senior advisers, like CDR, who are experienced in protecting their clients’ reputation through the most complex macro-economic cycles.  

Women-led Cities was launched during the United Nations’ 67^th session of the Commission on the Status of Women (CSW67). Women-led Cities is a joint initiative formed by UN-Habitat, UNCDF, and ellaimpacta, a consortium of women-led companies and philanthropies, to develop and support projects that accelerate gender equality, achieve SDGs, and create cities that foster inclusivity.

Achieving gender equality in political and public life is critical for upholding women’s human rights and also plays a pivotal role in progressing towards the UN’s Sustainable Development Goals (SDGs), especially as women still face unequal representation in public life. More than 50% of the world’s population are women, and only 5% of the world’s cities are led by women. WLC was founded last year to address this problem by creating a crucial link between women business leaders and women city leaders to promote and innovate solutions that empower women and serve the whole city.

WLC is a unique network of women business leaders globally and women mayors worldwide seeking to foster the growth and development of women in leadership, andn establishing new generations of women business leaders and political leaders. Working together and leveraging their expertise, women leaders will advocate for transformative change to accelerate progress against SDGs by improving safety for women in the city and access to basic services, while supporting women entrepreneurship, equal work rights, and political empowerment as women engage equally in local decision making.

Speaking of the launch, Executive Director of UN-Habitat Maimunah Mohd Sharif stated, “Women can’t wait 265 years to bridge the gender equality gap. We need to accelerate and support Women-led Cities to promote development and eradicate violence against women…women city leaders and women businesses leaders working together in solidarity can drive the transformation needed to support human rights, gender rights and equality.”

Leveraging the power of blended finance, WLC brings together financial institutions such as Multilateral Organizations, Development Banks, Foundations, Funds and Family Offices, to finance and support projects focused on addressing gender equality and promoting women leadership and inclusion. As of its launch, WLC has over $5 million pledged to begin its journey, and seeks to mobilize $480 million in the next four years to impact over 200 cities around the world, which will be directed towards financing gender responsive projects related to service delivery, infrastructure and economic growth, providing seed capital and investment in women-led businesses, and assisting local governments with financing and de-risking solutions for urban improvement projects.

WLC will begin its co-creation journey with a 12-month exploratory phase in select countries in Latin America, Africa and Asia. This phase will further inform the philosophy of WLC, identify entry points for action, and capture lessons that can be applied at scale. Projects will work to address three main objectives:

1. Political empowerment: Improved engagement of women in local decision-making processes
2. Economic empowerment: Improved economic opportunities for women
3. Better places to live: Improved urban environments for women

CDR is part of ellaimpacta initiative and is honored to contribute our expertise to this vital initiative and look forward to continuing our collaboration with UN-Habitat, UNCDF, and ellaimpacta to support women everywhere, accelerate progress towards gender equality, and make cities better for everyone.

Written by Lucia Domville

For more information on Women-led Cities, please read the announcement linked here.

Will widespread use of ChatGPT lead to key parts of the strategic advisor’s role being obsolete? After all, if a chat bot can be instructed clearly enough, then surely it can draft accurately many of the day-to-day documents that advisors craft for their clients. 

ChatGPT has generated – in addition to impressive written responses – a level of intrigue, discussion and conjecture that is hard to overstate. While much of this has centred on the Big Tech industry and its combined trillions of dollars in market cap, there has also been significant speculation surrounding the potential implications that text generative AI could have for wider industries such as ours, the strategic communications profession. 

However, to misquote Mark Twain, rumours of the death of the advisor have been greatly exaggerated! 

To begin with, despite Elon Musk’s recent tongue-in-cheek comments about the risks of ChatGPT’s integration in Bing ‘going haywire and killing everyone’, it is important to recognise that AI chat bots are a nascent technology and, at least for the time being, have notable limitations which necessitate continued human input.  

Firstly, the process through which chat bots access and repackage information remains fraught with reliability issues and is liable to manipulation. As such, for communications consultants who choose to use these technologies, enhanced due diligence will be required with continued fact-checking and proofing needed before materials can be released to the public.  

Additionally, a more fundamental consideration to bear in mind is that while chat bots excel in rapidly drafting well-structured summaries of chosen topics, they lack the ability to use nuanced language capable of resonating with specific audiences. As communications consultants we help companies develop a voice and tone which is unique to them and resonates with their key stakeholders. Chat bots in their current form lack this level of subtlety and innate understanding of an intended audience. 

To this end, the role of the communications consultant will remain essential in helping companies to develop the unique tone of voice and key messages on which all communications materials should be based.  

The idea that chat bots pose a threat to communications consultancies also entails a rather reductive understanding of the services advisory firms provide to clients. More specifically we see an excessive focus on the work consultancies do in drafting communications materials, which ignores their crucial role in deciding strategy around what, when and how to communicate in the first place. Even prior to ChatGPT, any company could draft their own communications, but it is the knowledge of the media landscape and wealth of experience that makes advisors’ services valuable.  

Although the adoption of AI systems like ChatGPT could certainly reduce the barriers to entry associated with communicating on pertinent issues, this does not diminish the value of strategic advice. Instead, the potential saturation of key communication channels with undifferentiated material, could actually see greater demand for more creative and self-aware communication strategies, which will be needed to cut through noise and secure clients a voice.  

Recognising these points, the correct way to conceptualise chat bots should be as supplements to, rather than replacements of, existing ways of working. Here the emphasis should be placed on how chat bots can sharpen existing proficiencies and streamline the execution of low skilled work.  

I myself have found it useful in my work in anything from proofing pieces of content I produce to assisting with research. It’s ability to connect dots between topics and information has given it a clear utility for me. 

In this way chat bots are powerful tools for freeing up time and headspace, allowing consultants to focus on strategic thinking and explore innovative communications approaches. Ultimately, the things which matter most to our clients. 

Of course, it would be remiss not to accept that with technological developments comes potential for disruption and efficiency gains may lead to a change in how companies are operated and structured. Despite this though, it is clear to see that opportunities for the most imaginative and open-minded individuals remain plentiful. And this is no bad thing.   

Written by Jonah Boon

Decisions by various central banks to raise interest rates have dominated column inches in recent months, from recession and recovery predictions, to rising mortgage repayments and debt servicing costs. But something about looking back at the extraordinary period of near-zero interest rates has captured my attention, and the knock-on effects affects across the world of business. One such effect that has been thrown into focus is governance, where it fell short and how this greatly contributed to catastrophic losses. To paraphrase Warren Buffet, I believe it is only when rates go up that we see who has been growing without proper governance.  

There has been a pattern of similar stories over the last few years that have grabbed headlines, and most have had the same type of company at their heart; a rapid growth disruptor. These companies have tended to progress through infancy to achieving unicorn status in a miraculously short time period, often bypassing the necessary steps needed to sustainably build and run a company of this size. The main reason for this is simple; a near-zero interest rate environment has led to investors valuing growth as the most important metric, and cheap money inflating the valuation of anything demonstrating growth.  

Granted, this day-trader investment style has awarded investors significant returns over the last two decades. However, in some cases the fear of missing out prevented robust oversight by forgoing the proper due diligence, leading to the implosion of some of the investor community’s favourite businesses.  

Growth vs Governance 

Due diligence has always been a cornerstone of the financial industry. Handling other peoples’ money comes with the fiduciary responsibility to ensure the risk profile matches that of your investment criteria, including ensuring there are solid corporate governance structures.  

The problem with due diligence is that it is time intensive, and can be seen as an impediment to those chasing momentum in a bull market. However, it is a necessity in the identifying and protecting of long-term successes. Set against my own living memory (which is admittedly reasonably short), when it comes to companies which claim to have the ability to change entire industries, to lose time has been to lose growth opportunity. 

These companies in question were founded on disruptive ideas coupled with engaging stories that convinced those they were pitching of fast and furious growth. This lethal combination meant investors were willing to cut corners to get a piece of the action, resulting in not enough attention being paid to the devils in the detail, neglecting oversight of corporate governance and risk. A quirky founder with a strong personality and an idea became a new form of tradeable currency.  

When the tide goes out 

Examples of this are abundant, just look at the failings of WeWork and Bulb. Or perhaps think of Elizabeth Holmes and Theranos, a company built on empty promises and non-existent medical technology which investors failed to uncover for years. 

FTX is arguably the ultimate culmination of this investor approach, so much so that John Ray III, the new CEO of FTX hired to manage the company through bankruptcy proceedings, commented he had never “seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information”. Having dominated headlines in recent weeks, rehashing its failings seem redundant. However, one anecdote worth mentioning is when an investor asked FTX to consider a two page list of recommendations as part of their due diligence, the response they received was a simple: “Go f*** yourself”.  

So, what safeguards can we put in place to prevent this risk, even when it is incentivised by economic factors? 

It would be fair to argue that investors should take more responsibility to understand the financial risks of their investments, including from a corporate governance perspective, rather than jumping on a popular bandwagon backed by other recognisable names.  

However, it also highlights the necessity of external consultants. Issues such as these could have been prevented by having a strong bench of independent and experienced advisers in place. 

Advisers provide balance 

Focus on growth at all costs has a tendency to centralise power around charismatic founders and create blind spots around unit economics. This ultimately creates long-tail risk for high-growth companies.  

Advisers should be more than just enablers of growth stories: they need to provide counsel that grounds companies in the real world. Investors need to be responsible stewards for their clients as well as generating returns. Advisers need to consider the long-term health of companies they work with, not just chase short-term fees. 

Governance is essential and advisers who don’t give adequate advice on this can and should be held accountable. They should support boards and management teams to ensure companies are governed by a comprehensive system of checks and balances. Most importantly, these advisers bring a wealth of sector specific knowledge and experience: their function is to call out the risks before anyone external has a chance to.  

To steal another Buffet quote, we know how long it takes to build a reputation and how quickly it can be ruined. As strategic communications consultant, we see the consequences of poor governance and the far-reaching reputational impacts it can have. We exist to elevate profile and performance through a clear, consistent narrative and ask the uncomfortable questions before others do. Stories about these rapid growth disruptors built on shaky foundations show how imperative it is to weigh reputational risk in equal measure against investment risk in order to achieve long-term success. 

Written by George Peele

Following more than two years of restricted interaction with the investment community, reinforcing existing and building new relationships is the main priority for companies over the next 12 months. Companies are accelerating efforts to increase engagement with a broader investor base and are striving to refine their story and tell it through wider ranging channels. This is reflected in greater engagement with passive and retail investors, the continued popularity of Capital Markets Days, and the increased willingness to travel for investor meetings.

However, against the current market backdrop, effectiveness of such initiatives is far from guaranteed. In addition to making expectation management more challenging, the volatile external environment has proved a significant distraction for investors, prompting fund managers to adopt a top-down approach while navigating challenging macroeconomic and geopolitical events and conditions. 37% of companies report difficulties in gaining traction with their desired targets while, despite increased desire for in-person meetings, two thirds of companies continue to conduct more than 50% of their investor meetings virtually.

As market conditions continue to evolve, investment narratives too need to be adapted in response – 45% of our survey respondents plan to refine their investment case over the coming 12 months to reinforce differentiation. This exercise is likely to consider greater integration of ESG themes into the overall narrative given the growing practice of referencing non-financial achievements across results materials and ongoing news flow.

Despite the continued rise in the number of companies with a dedicated sustainability committee at board level, from 37% in 2019 to 57% in 2022, half of boards still do not have members with specific experience of managing sustainability issues. The connection between the ESG commitments companies make and how management teams are remunerated also remains weak. Three out of four of the companies surveyed have less than 10% of executive remuneration linked to ESG targets and of this, 42% have 0% of executive pay linked to ESG targets.

Slow progress in addressing this issue may be partly due to a lack of awareness regarding investment decisions taken based on ESG factors, with 95% of IR teams unaware of any divestments based on unsatisfactory ESG performance. Investor feedback and greater transparency regarding investment decision making could go a long way in accelerating change in this respect.

With so much noise in the market, it may seem like no one is paying attention, but the reputational risks of abandoning clear, consistent and authentic communications have never been higher.

CDR’s 14th Annual IR Survey incorporates feedback from 282 Investor Relations Officers (IROs) at leading companies across the world. Click here for full highlights from our report and the download archive.

By Sandra Novakov, Head of Investor Relations, London