Investment Banking Outsourcing refers to hiring a team of subject matter experts to take care of your company’s investment banking for you on a contractual basis. Such outsourcing service providers handle all operations related to investment banking, such as forming detailed strategic plans, evaluating business requirements, applying compatible solutions to complex problems, negotiating with potential clients, and managing its investment structure after finalizing the deal. Since these professionals are highly trained in implementing optimal financial solutions for your company, taking their help in managing the investment section through component trade processing, collateral management, and regular taxation documentation can prove beneficial for your company.
Here are the top six things you should consider if you want to go for outsourcing investment banking:
1. The Cost Factor
According to a study conducted across IT and business sectors, 87% of all companies choose to outsource functionalities to cut down on their overall expenses. Outsourcing investment banking analysts can save your company a considerable amount of its capital that would otherwise be spent on hiring employees, setting up a department, arranging for the required resources, maintaining the equipment, and updating the existing technology with time. Such a drastic reduction in costs can give significant financial thrust to your organization’s essential activities.
2. Technology and Tools
Investment banking outsourcing relieves you of the task of maintaining the best resources and research tools for your analyst team. The outsourced team will work on the latest AI technology available to keep track of constantly changing market prices, develop robust DCF and LBO models. They will also retrieve financial transaction statements, implement a range of business valuation methods, and carry out the best negotiation deals keeping in mind your company’s objectives. Many investment banking services also offer customizable financial solutions to best suit your organizational requirements.
3. Focus at the Core
Outsourcing non-core and low priority tasks enable your firm to focus on improving its core competency. For a growing organization, outsourcing is highly recommended. Keeping all operations in-house and managing every task equally efficiently can hamper business growth and slow down the overall development. Instead, keep only critical tasks within the company and outsource investment banking assignments to help you entirely focus on your core, enabling you to produce high-quality results.
4. Peak Time Management
One of the main benefits that come with investment banking outsourcing is the strict adherence to deadlines. Since the team understands that with the currently existing dynamic market scenario, it becomes crucial to make the right decisions at the right time for the best results. You’ll have a lot of operational time since your core functions work parallelly with the company’s financial sector. Such agile task completion ensures that the pace at which your company moves is practically doubled, greatly boosting your performance.
Data security can be a major concern while considering outsourcing because the team gets a detailed insight into your financial status and often works with highly confidential data. This concern is covered in the Service Level Agreement (SLA), ensuring the parent company’s high data security and financial privacy. Make sure this legal document is elaborately drafted and all ambiguity resolved before the contract is made to be certain that the service providers match your expectations. Apart from this, a good routine that most organizations follow is to visit the vendor’s website and workplace to get familiar with their infrastructure, working principles, employee discipline, and safety measures. This way, you can make a first-hand assessment of the firm and its reliability.
6. Clear communication
The outsourced team of investment banking professionals keeps the company regularly updated about all its tasks. It maintains constant vigilance on market trends and immediately presents a detailed report on potential profit-producing opportunities for the company during their market analysis. During bidding evaluations and final negotiations, the company’s management is approached with thoroughly researched data and well-organized documents so that the decision-making process becomes more comfortable. Clarity of communication is of utmost importance to ensure that the company’s objectives and the investment banking team are in perfect alignment with each other. It is also vital that the team respond to your queries promptly and consider your inputs during discussions.
Investment banking services that are commonly outsourced include the management of Equity Capital Markets and Debt Capital Markets, strategy building for mergers and acquisitions, dynamic policy updating as per volatile market trends, well-defined financial modeling, appropriate and timely reporting of tasks, taxation documentation, and sales support. With the range of benefits that came with this practice, like reduced costs and increased productivity, investment banking outsourcing is highly recommended for organizations of any size, be it small or large.