Shareholder registration, shareholder ID and annual report design are the three most-outsourced IR activities, according to IR Magazine’s Outsourcing IR 2018 report. Nine out of 10 respondents (89 percent) in North America currently outsource their shareholder registration. This activity also ranks highly among European (73 percent) and Asian respondents (66 percent).
The report looks at which of 13 different IR activities are most likely to be outsourced to a third party. Among the most outsourced, annual report design is the activity that reveals the greatest regional differences, with 76 percent of European and 72 percent of Asian respondents currently outsourcing it, but only 41 percent of North American respondents doing so.
According to the report, an average of 30 percent of the IR budget is spent on external services. Robert Borchert, senior vice president of IR at Texas-based healthcare administrator HMS Holdings, says IROs should identify which activities to outsource based on their team’s strengths and skills gaps.
‘We’re called on as core communications team members to deal with event-driven situations such as product or customer challenges, catastrophes or M&A activities,’ Borchert says. ‘This brings into focus the need to subcontract certain IR projects in order to keep the IR program moving forward to achieve our internal goals. The overriding objective is to leverage third- party expertise – when needed – to help make the next right IR decision.’
But there are some activities most companies would never seriously consider outsourcing, preferring to keep them in-house: 92 percent of companies globally say they wouldn’t even consider outsourcing IR strategy. Breaking it down by region, just 9 percent of Asian companies would outsource their IR strategy to a third party. The figure is even lower for European and North American companies with only 2 percent and 3 percent, respectively, willing to contract out this activity.
Additionally, more than 80 percent of companies would not consider outsourcing corporate communications, while more than 70 percent reject the option of hiring a financial PR firm. In the rare instances that these activities are outsourced, they tend to be the most expensive. Globally, companies that hire financial PR firms spend an average of $66,000 a year on them, while a typical spend on corporate communications is $50,000.
Mark Furlong, director of investor relations at Blackbaud and winner of the rising star award at the IR Magazine Awards – US 2018, confirms that he has actively been trying to bring more IR activities in-house since taking on his IR responsibilities, in order to have more control over the program. ‘At Blackbaud, we’ve been steadily trending toward insourcing IR functions over the last five years as the company reached a scale in 2014 to justify creating an internal IR department,’ he explains. ‘That has enabled us to ingest many aspects that we historically outsourced simply because we didn’t have the resources.
‘I’m a firm believer that an investor relations team should have complete and total control over external messaging and stewarding expense management to ensure the appropriate return. For example, we’ve insourced areas like script and presentation preparation, analyst days and investor targeting, to name just a few.’
Furlong adds that he takes a hybrid approach when it comes to perception studies, often conducting them using internal resources and then outsourcing them every few years to ensure he’s getting an accurate picture of what the Street thinks. The outsourcing of perception studies is most popular in Europe, according to IR Magazine’s research, with 54 percent of respondents saying they use a third party for this activity. In North America, that number is slightly lower, at 46 percent, while only one in five Asian respondents (18 percent) outsource it.
This article was published in the summer 2019 issue of IR Magazine
