Understanding investors

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On occasion, small business owners essentially count on investors for financial backing. Whether the business is expanding operations, launching a new product or performing a capital upgrade, investor resources can provide significant support.

ACCA has unswervingly contended, time and again, that the role and interests of investors need to be better understood and positioned more centrally in policymaking procedures by legislators as well as standard setters. In order to address this growing need for greater understanding of the investor universe, ACCA, in collaboration with Longitude Research, has developed a four-stage project that examines the changing investor landscape, post-global financial crisis, and what investors want from corporate reporting. The four-stage project observes how pressure to respond to the needs of investors may alter the approach taken by organisations in reporting their activities as well as engaging investor groups. According to ACCA’s report, Understanding investors: directions for corporate reporting, investors’ voice is often not heard strongly enough. “This is perhaps understandable given the range of organisations and interests that can be classified under the heading of investors.” Generally an investor is an individual who allocates and commits money to investment products with the hope of great financial return. However, there are various kinds of investors. In business, a stakeholder is typically an investor in whose actions define the outcome of business decisions.

“Investors don’t like uncertainty” – Kenneth Lay

According to the report, ever since the global financial crisis, a number of investors have lost trust in corporate information. Almost two-thirds of investors place greater value on information that has been generated outside the company than on traditional corporate reporting. Today’s increasingly sceptical investors are in search of greater assurance and have a strong appetite for integrated reporting. The report revealed that more than two out of five investors believe that integrated reporting would provide a better explanation of the linkage between sustainability and long-term corporate performance; and a similar number consider that it would provide greater information on how long-term risks, such as climate change, could influence a company’s overall business model. Investors believe that good reporting can also help to strengthen financial markets and ensure that capital flows to where it can be most usefully invested. In addition to wanting more information to guide their decisions, investors increasingly want it more quickly.

Better reporting is crucial to the smooth running of a capitalist system. It helps organisations attract great investment and build deep-rooted relationships with investors, and it allows stakeholders to develop a holistic understanding of a company’s strategy and position. In essence, stronger relationships with investors mean that organisations have greater financial support and stability. “The relationship between company and investor is paramount”

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