The global investment banking market is predicted to reach USD 127.7 billion by 2023 from USD 109 billion in 2020. The post-pandemic deal market is estimated to be quite lucrative for investment banks across the globe. As these investment banks experience tremendous growth, they would also feel the need to outsource several operations to focus on scaling up.

The benefits of investment banking outsourcing

There are several advantages of hiring an external professional team to take care of your organization’s investment banking activities.

  1. Reduction of costs

59% of all businesses globally outsource to cut down on costs. Outsourcing investment banking activities can save your company the expense of hiring employees, updating infrastructure, and maintaining resources. The capital can then be navigated to other sectors of your business to bring about development.

       2. Improvement of core competencies

Contracting out the laborious yet necessary investment banking functions of your organization to third-party experts can help you redirect your time, energy, resources, and overall concentration to improving your core capabilities.

       3. Better quality service

When you outsource to a company that deals only in investment banking, the quality of service you get will be highly professional. Our team is well-trained in investment strategy formation, financial modeling, taxation filing, bid evaluation, and market negotiations. It will manage these operations with extreme skill and efficiency, giving you a definite edge over your competitors.

     4. Higher efficiency

Having one section of your functionality outsourced implies that you now have two work departments that operate parallelly to one another, essentially doubling the pace at which your company moves. Such an increase in efficiency can prove to be a vital factor in your growth in the market.

The risks posed by investment banking outsourcing and how to mitigate them

It is natural to feel apprehensive about outsourcing investment banking to a third-party company since it can involve several risks. Here are a few such risks posed and how we help mitigate them:

  1. Trustworthiness

How can you trust an outsider company with your financial data when you are required to provide them with all the banking information and procedural policies for their functionality? It will depend on the following research about the company:

  • The maturity of the company and its tenure in the market.
  • The average number of successful projects that it has produced annually.
  • The regular clients of the company.
  • The structure of its website and the maintenance of its social media pages.

Apart from this background check, you can judge the company’s reliability from the feedback given by other businesses regarding the quality of financial solutions provided, resources and tools used, and efficiency of operations.

     2. Domain Expertise

It is vital to determine the quality of services, level of domain expertise, and compatibility of the outsource team’s banking solutions before you hire them. Keep a record of the employees’ educational qualifications and the different skill training and knowledge development programs carried out within the organization so that you can be aware of the complexity of banking solutions they can work with.

     3. Knowledge Transfer

The two-way communication between the investment bank and the client should be transparent and regular. The company must provide all the necessary information and knowledge to the outsource company to understand what is expected of it. Moreover, the implementation of Business Excellence and Automation Tools helps investment banks automate most software functions, capture business processes, and use knowledge transfer technologies to pass on the company’s “know-how” and expertise associated with investment banking to the external team.

     4. Data Security

The risk factor accompanying investment banking outsourcing can be a major concern for many businesses since it includes giving the external team access to their IT infrastructure, financial statements, and other sensitive information. It can be taken care of while signing the Service-Level Agreement (SLA) and the Non-Disclosure Agreement (NDA) forms, which establish a confidential relationship between the involved parties, ensuring that the information passed between them stays within them.

Conclusion

All risks that come with outsourcing investment banking practices can be easily mitigated through elaborate team analysis and systematic project development. With the right outsourcing team working hand-in-hand with your organization, you can expect a drastic reduction in costs and a gradual increase in business performance efficiency.