What is it that those busy people in finance DO all day?
Compliance
The process of becoming or staying in accordance with regulations or other established guidelines or specifications
Deal Construction
The process of structuring and building a financial transaction, particularly when there are many parties involved
Design Investment Thesis
A process in which investors design a theory, strategy, or guidelines of how they will allocate capital within their portfolio
Due Diligence
A process of examining potential investments by asking questions regarding risk and potential return on investments
Exercise Governance Rights
The right of a shareholder or investor to vote on matters of corporate policy
Exit from Investments
The method by which an investor plans in advance to get out of an investment at an opportune time. Sometimes called exit strategy
Impact Reporting
The practice of sharing projections and results related to economic, environmental, and social outputs, outcomes, or impact
Issue Legal Opinion
The custom of obtaining an opinion on issue of some legal risk of an attorney or someone with legal authority
Marketing
The process of communicating with a targeted consumer audience in order to persuade them to buy or use a specific product or service, in this case, a financial product or service
Negotiate Terms
Through the negotiation process, the parties involved come to a mutual agreement on price, terms, and how the investment is structured
Raising Capital
The process of approaching investors with investment products or fundraising to finance an investment or business opportunity or project
Rating
An evaluation of a corporate or municipal bond’s relative risk compared to other bonds
Pipeline Development
A process to identify and cultivate relationships for future investment opportunities
Underwriting
Underwriters research and assess the risk of a financial transaction and determine how much risk they are willing to take on in the investment.
Valuation
A process to determine a company or investment’s worth, by looking at future projections, underlying assets, and risks
Factoring
Within invoice financing, factoring is the process of discounting outstanding invoices to a lender who pays the company a percentage of what the invoices are worth
Accounting
The systematic and comprehensive recording of financial transactions pertaining to a business. This also refers to the process of summarizing, analyzing, and reporting these transactions
Advising Portfolio Companies
The practice of consulting to a company that the fund has invested in, in order to increase the value of the investment
Auditing
The official, professional examination of an individual’s or organization’s accounts, including giving an opinion as to their fairness, consistency, and conformity with generally accepted accounting principles
Benchmarking
The practice of comparing investment and performance metrics to industry bests and best practices from other companies
It matters who we see as expert… who we see as holding the power of knowledge… who we trust to manage capital in all its forms
Contractors
An outside party or company who is legally designated to provide a specific service or job
Custodians
Individuals or organizations that protect securities by holding them for safekeeping in order to minimize the risk of theft or loss
Executive Teams
A team of individuals at the highest level of organizational management who have the day-to-day responsibilities of managing a company or corporation
Escrow Agents
Individuals or institutions that serve as a neutral, trusted third party to hold documents and funds in the transfer of assets, acting for both parties in line with instructions
Financial Advisors
Professionals who helps individuals manage their finances by providing advice on money issues such as investments, insurance, mortgages, college savings, estate planning, taxes, and retirement
Industry Experts
People who are trusted as having knowledge and authority about a specific subject matter or industry
Investment Committees
Maintain the prudent and effective investment of an endowment and formulates and oversees the investment policies and management of the endowment
Investment Managers
Individuals or organizations that make investments in portfolios of securities on behalf of clients, in accordance with the investment objectives defined by those clients
Investors
People who provides capital with the expectation of financial or other gain in the future
Investor Relations
The role of enabling the most effective two-way communication between a company, the financial community, and other constituencies
Employees
A person usually below the executive level who is hired by another to perform a service in exchange for wages or salary
Lawyers
Attorneys that represent the interests of their clients and provide legal advice
Stakeholders
Individuals or groups who may not have a financial interest in a business or investment, but have something else at stake
Strategic Partners
Parties in a long term agreement, sharing physical and/or intellectual resources in achievement of defined outcome
Tax Accountants
Accountants that advise investors and companies of tax implications
Analysts
Research and examine companies and markets in order to run calculations that will determine the perceived value of a particular investment
Auditors
Produce an audit, a report that judges procedures and financial performance reports against the external standards that ensure common reporting across systems of finance
Beneficiaries
The group or individual who gains as the result of an investment, or specific financial instrument such as an insurance policy
Board Members
A group of governors that are elected to act as representatives of the shareholders to establish policies and to make decisions on major issues
Finance is a complicated business. It is possible to lose money on an investment before you even make it. What are the factors that affect the costs of making investments?
Complexity of the Transaction
A greater number of variables that leads to potential complications increasing the cost of a financial transaction
Maturity of Markets
Less mature markets or industries (also called emerging or frontier markets) are, in general, less organized and therefore more costly to participate in but they allow room for growth and innovation and so are attractive to investors
Regulatory Complexity
Significant complexity or rate of change in of the regulatory environment requires more time and expertise to navigate therefore increasing the costs of investments
Economies of Scope
Average total cost of a service or product decrease when number of different services provided within a single institution increases. As a result, financial institutions often diversify what financial services or products they offer
Economies of Scale
The greater number of similar transactions (also called specialization), the lower per unit fixed costs as costs are spread over a larger number of transactions. Scale also creates operational efficiencies and synergies
Access to Knowledge
Whether or not knowledge necessary to inform investment decision is readily available; for example, in an early stage, field knowledge is less readily organized or accessible
Access to Deal Flow
If investors cannot easily identify enterprises ready for investment in a particular industry or geography (also called absorptive capacity), investors need to build technical support or market formation activities into the cost of financing
Availability of Investment Capital
Investors rarely invest alone. Therefore, whether other appropriate investment capital is available to co-invest or partner affects the cost of the transaction to the investor
Whether investment returns go up or down matters a lot, but it isn’t the only way to make money in systems of finance.
Non-Monetary Benefit
A return that is not in the form of money but makes the opportunity advantageous to the investor
Sale of Assets
Gains that come from selling the asset to another party, at a price higher than the original purchase price
Sale of Equity
In the sale of the common shares of a company the investor’s return is determined by the price of the share
Management Fees
The blanket term for fees incurred while buying, selling, trading, and holding investments
Strategic Benefit
An advantage or non monetary benefit related to the way a company operates its business or within the industry or sector in which it exists
Broker Dealer Fees
Revenue generated through the handling of the sale and resale of securities by a broker dealer
Carried Interest
A share of any profits in a fund (often known as the “carry”) that the general partners of private equity and hedge funds receive as compensation
Consulting Fees
A source of revenue from providing consulting services that add value to the investment process
Interest
The charge for the privilege of borrowing money, typically expressed as percentage of the principal of the loan