Entrepreneurship Education as the Emerging Trend in Pakistan Essay Example for Free

Entrepreneurship Education as the Emerging Trend in Pakistan Essay For the developing world, the emerging trend is entrepreneurship education in itself. It is significant and considered a powerful tool for propelling economic growth, as significant as venture capital and incubators. The youth today is exposed to a world of information and rapid change. He is prone to be the captain of his ship more than ever before. Hence the objective is to create awareness of trends and issues being faced in Entrepreneurship Education programs and see how Pakistan can gain from the experience of the developed world. It is also the objective to see how programs have to be designed for teaching and learning by the new generation of the future. The research methodology has been to examine relevant literature of other regions and compare this to the work done in Pakistan. Its been observed that it has acquired its own field of research methodology and finally is a standalone discipline, with ample work to show its breath and depth. Our finding is that it’s going to be a different world, calling for planning for a world unknown? Our conclusion is that it is significantly important to make the youth of today gainfully employed after imparting education to them. And Pedagogy is one of the issues that deserve attention in the Entrepreneurship Education. It is a question of evolving knowledge and evolving pedagogy to impart knowledge. Local experience and theory has to be evolved building the subject. Developing countries will have a host of issues far different from the developed countries. Education policy will play very significant role to resolve these issues. The authors conclude with suggestions that there is now a need to develop theory of entrepreneurship education based on the education theory and not on the theory of management and economics. There should be all out effort to build the ‘entrepreneurship capital’ and to give it central place in the education place. Keywords:Entrepreneurship Education, Entrepreneurial Generation, Pedagogy, Entrepreneurship Capital Entrepreneurship Education as the Emerging Trend in Pakistan: Confronting the Issues I. Introduction: a. Background: The field of entrepreneurship education is in the process of growing and gaining legitimacy and being recognized in the developing countries. In Pakistan it has been an up-hill task and despite efforts it is still an unknown academic field. But it is somewhat different in USA and in Europe and Japan. There it has recognition and there it has immense recognition as an important factor to keep pace with the economic growth and change required for economic efficiency. It is nurtured to impact the economies of the ‘technological tripod’ of economic growth. No doubt USA leads the way but European Council through the Lisbon Proclamation 2000 had launched itself in pursuit of economic growth through Entrepreneurship. The then President of EC committed the European Union to become the Entrepreneurship Leader as it was acknowledged that new economic growth, and productivity is generated by entrepreneurial activity (as cited by Audretch 2008). The statement is proclamation of the significance and importance of Entrepreneurship for economic development. In pursuit of entrepreneurship what is required is Entrepreneurship Education and the observation is that the trail it leaves behind is host of the emerging trends and issues which need to be examined and evaluated and worked out. Entrepreneurship Education is the path and road to developing an enterprising environment, building ‘social capital’ and ‘Entrepreneurship Capital’. â€Å"This refers to institutions, culture, and historical context that is conducive to the creation of new firms. This involves a number of aspects such as social acceptance of entrepreneurial behavior the activity of bankers, venture capital agents â€Å"(Audretsch 2008). The rationale of this paper evolve around the spirit of these terms and the process of evolving this capital is entrepreneurship education. The purpose of this paper is to explain the importance of entrepreneurship education in the light of compelling evidence surrounding us that it produces an enterprising society or ‘The Entrepreneurial Society’ and economic development. There is significant evidence about the impact of entrepreneurship on economic development (Wennekers et al 2005, Verheul Thurik 2003, Caree et al 2002, Audretsch et al 2006). â€Å"The way entrepreneurial activity has an effect on economy is that it is reflected in the macro-economic growth, value addition, employment generation, export growth, industrialization and poverty reduction†. (Wagha 2010) Entrepreneurship in the last two decades has achieved a central place in all recent discourse and debate and policymaking on education. There is a need for appropriate educational program at all academic institutions, universities, business schools and secondary schools. â€Å"So significant is the role of Entrepreneurship Education that it is considered a powerful tool for propelling economic growth as significant as venture capital and incubators†. A look at policy on education recently framed in different countries around the world reveal that there is emerging need to focus on entrepreneurship education and research. (Lee Wong 2005, Khan 2006) We realized through this research that there is a need to look at Entrepreneurship Education from the teaching and learning perspective. And of importance is how Entrepreneurship Education should be taught and the paradigm of research should be education and not merely economic and management. Bechard Gregoire (2002). It was also observed through empirical research and interviews that there is also the need to focus on the faculty of Entrepreneurship Education. There is an acute shortage of such teachers who are well versed in the pedagogy of Entrepreneurship Education. And according to Dr. Hasan Sohaib Murad, Rector, University of Management and Technology Pakistan (while addressing the audience at a Junior World Entrepreneurship Forum Pakistan (July 2011) : â€Å"The problem is our faculty, those who are teaching in business school today. They are teaching in business schools because they were not entrepreneurs. The other factor that has to be taken in consideration is the role of entrepreneurship in economic development. According to Global Entrepreneurship Monitor (GEM) entrepreneurship and economic development are exclusively mutual â€Å"GEM is based on the following premise. An economy’s prosperity is highly dependent on a dynamic entrepreneurship sector. This is true across all stages of development. Yet the nature of this activity can vary in character and impact. Necessity-driven entrepreneurship, particularly in less developed regions or those experiencing job losses, can help an economy benefit from self-employment initiatives when there are fewer work options available. More developed economies, on the other hand, can leverage their wealth and innovation capacity, yet they also offer more employment options to attract those that might otherwise become entrepreneurs†. (GEM 2010) It goes onto explain that the capacity of an economy is dependent upon highly competent individuals and positive societal perception about entrepreneurs. â€Å"An economy’s entrepreneurial capacity requires individuals with the ability and motivation to start businesses, and requires positive societal perceptions about entrepreneurship. Entrepreneurship should include participation from all groups in society, including women, a range of groups and education levels and disadvantaged populations. Finally, high-growth entrepreneurship is a key contributor to new employment in an economy, and national competitiveness depends on innovative and cross-border entrepreneurial ventures†. (GEM 2010) b. Objectives of the Study: So significant is the role of entrepreneurship that the developed countries are perusing it by adopting new educational policies and by introducing strategies to create an ‘Entrepreneurship Capital’. For the developing world that has lagged behind, this is a wakeup call. Therefore the Objective is: to be aware of the issues and see how Pakistan can gain from the experiences of the developed world and evolve a suitable strategy for implementing entrepreneurship education effectively. It is assumed that, some of the best practices if disseminated will have an impact. c. Justification: As can be seen that it is essential for all developing countries and Pakistan in particular to undertake various studies pertaining to entrepreneurship, simply because this era of entrepreneurship is as potent as the era of Industrial Revolution. It has the potential for developing countries to catch-up with Developed Countries if the national economic agendas are prudently organized. d. Statement of the Problem: However some issues surrounding Entrepreneurship Education are: How should entrepreneurship education courses be designed, what should be the structure of courses? What should be the balance between activity based and text based teaching? What should be the ethical domain, and what disciplines would fall in the entrepreneurial ambit of subject? What pedagogy would be considered appropriate to teach entrepreneurship? In the midst of this expansion of courses, these emerge as a challenge how to make teaching entrepreneurship effective. Years of research and considerable debates has dispelled earlier doubts that entrepreneurship cannot be taught, and it was Drucker (1985) who said, â€Å"like other disciplines it can be taught†. But the emerging trend of Entrepreneurship Education is compounded by such factors as IT revolution and globalization. The youth today is exposed to a world of information and rapid change. He is prone to be the captain of his ship as he sees opportunities far beyond his imagination. He can evaluate the advantage of going for his own venture. He can see that Entrepreneurship is about change and competition, changing in its wake markets and ushering in technologies that entrepreneurship binds as the ‘social glue’ high-tech and ‘main street’ activities (SBA 1998). e. Research Question: Therefore the research question that we will attempt to find answer to is: 1. What issues and trends are being faced by Pakistan in Entrepreneurship Education and what adoption is required to benefit from this trend? II (a)Research Methodology: My goal is to determine the current status of the subject, by looking at the theory based on the published articles of other regions by leading authorities such as Bechard, Audretch Fayolle, Dana, Plaschka, Hindle Kuratko. This will help guide future research, but beyond literature review, I also recorded empirical findings and interviews and survey of literature to see the emerging trends in Entrepreneurship Education in Pakistan. The literature reviewed has been some grey literature and some conference papers as these were very current and contemporary thinking on emerging issues and trends. Furthermore the research has been enhanced by visiting foreign conferences for gathering data at doctoral seminars in Europe and America on Entrepreneurship Education. In that sense this is rather epistemological analysis of educational theories and reports on Entrepreneurship Education Trends and Issues. But the problem encountered was that there is not much data a vailable on this subject in Pakistan. This paper therefore undertakes the qualitative approach based on survey, interviews and literature review of this region and of the academic body that has taught the subject and also of others who have written papers on the status of Entrepreneurship Education in Pakistan. â€Å"Primary data include such facts collected from observation, surveys, and even interviews. When secondary data are unavailable and our research questions are unanswered, we have to collect data from primary sources. This proves useful because they are collected specifically for the particular study† (Ghauri Gronhaug 2002). This is obvious in the case of Pakistan where there is no secondary data on this subject. The investigation attempts to determine differences between the developed and developing countries, describing conditions that already exist, (Say in Pakistan) and why conditions in European and America are different from it. The collection of data is ongoing and eventually synthesized and conclusions are drawn. II (b)Limitation: The fundamental limitation is that hardly any journals are available in Pakistan on Entrepreneurship Education. No doubt that recent support provided by HEC for library data bases and resource centres has been greatly useful. The other fundamental handicap that the Pakistani researchers or students seeking to adopt this as their subject of specialization would face is lack of faculty. Currently there is no known or accessible faculty available in Pakistan having a PhD Degree in Entrepreneurship Education. Hence there are no doctorates of Entrepreneurship Education available to supervise or act as advisers to students desiring to do a PhD in Entrepreneurship. III. Literature Review: Discussing the Definition of Entrepreneurship Education as Emerging Trend: The subject of entrepreneurship education begins with the entrepreneur. The study of the Entrepreneur goes beyond the study of the characteristic and the traits of the entrepreneur which is the psychological profile. The entrepreneur is part of the complex process of new venture creation (Gartner 1988). And new venture creation is new economic growth which brings the importance of entrepreneurship and the education process for developing entrepreneurs. Say (1816) defined the entrepreneur as the economic agent. Hence the entrepreneur is one of the dimensions of economic growth. If we were to examine the quotation by Cole (1946) we realize that this unleashes a host of issues and trends associated with entrepreneurship and the promotion of Entrepreneurship Education. Cole (1946, p.3) states that Entrepreneur is one who â€Å"Unites all means of production – the labor of the one, t he capital or the land of the others – and who finds in the value of the products which results from their employment the reconstitution of the entire capital that he utilizes, and the value of the wages, the interest, and the rent which he pays, as well as the profits belonging to himself†. This statement explains the process of new venture creation which the entrepreneur is prone to do. It is a complete picture of the role which an entrepreneur performs as an economic player in an economy. Whereas the behavioral view of entrepreneur defines the entrepreneur as a very special person but calling for investigation to understand and define Entrepreneur and Entrepreneurship. They even cropped up when Gartner (1988) examined in what way do we define the Entrepreneur. According to him since the entrepreneur causes entrepreneurship you could explain Phenomenon of Entrepreneurship through traits approach or explain Phenomenon of Entrepreneurship through Behavioral approach. Subsequently this leads to disseminating the knowledge of entrepreneurship education. We are once again confronted with trends to adopt in Entrepreneurship Education and issues to deal with to establish the infrastructure of Entrepreneurship Education e.g. there is no evidence to support successful or unsucc essful leaders. The new trend is to focus on behavior of the leader. What they do as a leader, and not on what they are, and this aptly applies to research on entrepreneurship and hence the definition which explains and determines for us what influences behavior and performance which define entrepreneurship. (Van de Ven 1980 p.86) We have been amply warned that we should study the behaviors and activities of entrepreneurs. This brings us to the performance of an entrepreneur, the dynamism by which he proceeds as an entrepreneur and hence we call it entrepreneurship. We have come to realize that entrepreneurship can be enhanced by entrepreneurship education. Hence our question is what is entrepreneurship education. According to Bechchard Toulouse (1998) the definition of Entrepreneurship Education is â€Å"A collection of formulized teaching that informs trains and educates anyone interested in participating in social economic development through a project to promote entrepreneurship awareness, business creation or small business development†. Jones English (2004) define Entrepreneurial Education as: â€Å"Entrepreneurial Education can be viewed broadly in terms of the skills that can be taught and the characteristics that can be engendered in individuals that will enable them to develop new and innovative plans†. The creation of a discipline confronts trends and issues: Therefore the emerging trends and issues are related to multi-dimensional aspect of entrepreneurship education. The gathering of information and knowledge of this aspect is the fundamental activity of research and education to understand the behavioral phenomenon of entrepreneurship (Gartner 1988).Following the line of reasoning if personality traits could define entrepreneurs, the question of education, training and development would seem irrelevant and the foregone conclusion would be that those who possess the requisite traits should be successful entrepreneurs. As that is not the case we seek constantly ways of educating the entrepreneur to behave in a particular way to become successful. The contemplation of this fact has created a series of issues and trends required for the development of entrepreneurship education programs. In our quest for this answer we get a response from Gartner (1988) that we should follow Mintzbe rgs advice. Issues that confront entrepreneurs should be resolved to develop a profound entrepreneurship program along with its multiplicity of dimensions. Each question throws up a new philosophy and search for truth that could be developed into an answer to the issues confronting entrepreneurship education. What roles does the entrepreneur perform in moving information, in making decisions, in dealing with the people? How and why do individuals enter a new venture? The other emerging issue from this kind of reasoning is to what extent is entrepreneurship a science? To what extent is the entrepreneurs work programmable? All such questions resolve the issue of designing new branches of education in the domain of entrepreneurship. These would have to be dealt in accordance to the trends in development, competitiveness, economic growth and resource allocation.

Six steps to writing a successful narrative Essay Example for Free

Six steps to writing a successful narrative Essay A narrative should be able to tell a story, whether it relates to fiction or non-fiction ideas. In writing any form of literary narrative, several steps should be followed to arrive at a coherent and consistent whole. The first step involves the identification of an appropriate topic, that which stirs the best interest of the target reader. It is in this first step that the attention of the reader will be established. Secondly, the major details that will be interwoven into the storyline must be gathered, included in which are the characters, setting, conflict and the events that make up the plot. Without this, the narrative may be exposed into several risks like, disorganized thoughts and missing details. It may further contribute confusion to readers since this part lays all the foundations of pre-creating a story. Subsequently, the results of the gathered information must undergo the assessment of an instructor or any learned narrative writer. This serves as a guide whether supplementary accounts must be added or eliminated. The fourth step, which necessarily deals with the construct of an outline, takes account of the introduction, the main events and the conclusion. Gathered details are coherently fabricated according to the writer’s choice of style, whether for a tone of whodunit, essay, poems etc. It is best to evaluate the details of this next step through sensory details. Moreover, transitions and dialogues must be properly observed to help guide the readers on the events the writer tries to show. For corrections to the written work, editing and proofreading courtesy of an instructor constitute the fifth step. Finally, the corrected story can now be shared among others to live up the ideas incorporated in it. References http://yennadon. sd42. ca/online/langarts/narrative/narrativewriting. html (July 2007) http://www. bookrags. com/articles/7. html ( July 2007)

Financial Risk Management in Mauritius Banking Sector

Financial Risk Management in Mauritius Banking Sector During the past 10 years, there have been great changes in the Mauritian banking sector and this is a continuing process that will not stop here. This is mostly because of fast innovations in the financial markets and the internationalization of the financial flows. Other factors like technological development and deregulation have both triggered competitive pressures and also provided new opportunities among banks. But these opportunities are also subject to complex risks that challenge traditional approaches to banking risk management. These factors have influenced the financial world on the international level and the Mauritian banking sector has not been left unaffected. The growth of international financial markets banks have been exposed to a wider access to funds. As a result of which banks have been developing new products, services and techniques. The receipt of deposits and granting of loans, being the traditional banking practice, is today only one part of a banks activities. These new instruments have also drawn interest to areas where financial risks were earlier thought to be relatively unimportant. Hence banks are now exposed to a greater variety of risks and their ability to measure, monitor and steer risks accordingly is becoming a decisive parameter for their survival. The aim of this project is to provide an overview of the management process of financial risks in our Mauritian banking sector as risk is the fundamental element that influences the financial behavior. Banking Risks Banks are faced with a wide array of risks in their course of their operations, as illustrated in the figure below. In general, risks are categorised into three different parts: Financial Risks, Operational Risks and Business Risks. Figure 1: Categories of Banking Risks Banking Risks Financial RisksOperational Risks Business Risks Interest Rate Risk 1) Business Strategy Risk1) Legal Risk. Foreign Exchange Risk 2) Internal System and Operational Risk 2) Policy Risk. Credit Risk 3) Technology Risk 3) Systemic Liquidity Risk 4) Management and Fraud (Country) Risk. Source: Annual Report on Banking Supervision 2000 BOM Financial risk concern the effective management and control of the finances of an organisation and the effects of external factors such as availability of credit, foreign exchange rates, interest rate movement and liquidity risk. For this project only the financial side of Risk Management is going to be considered. Focus will be on the four main types of risks which are: Interest rate Risk is the risk borne by an interest-bearing asset, for example in this case a loan, due to variation in interest rates. Foreign Exchange Risk is a form of risk that crop up due to the change in price of one currency against another. Credit Risk is the risk of loss due to a debtors non-payment of a loan. Liquidity risk is the risk to earnings arising from a banks inability to meet its obligations when they come due. Operational risks are related to a banks overall organisation and functioning of internal systems, including computer-related and other technologies, conformity with bank policies and procedures and measures against mismanagement and fraud. Although these types of risks are important, emphasis will not be put on them in this project. Business risks are associated with a banks business environment, including the macroeconomic and policy concerns, legal and regulatory factors and the overall financial sector infrastructure and payment system. Outline of Chapters Chapter 2:Literature Review This chapter will focus on previous studies and surveys carried out with respect to financial risks encountered by banking institutions around the world. It will also focus on the different techniques used to manage these types of risks. Chapter 3:Overview of the Mauritian Banking Sector This chapter aims at giving an overview of the current Mauritian banking sector and also information pertaining to risk management. Chapter 4:Research Methodology In this chapter an outline of the methods used to collect data and carry out the research is given. The way in which the interview questions have been set and how the data has been analysed using different techniques. Chapter 5: Presentation of findings and Analysis This chapter which is the main one aims at presenting and explaining the answers received from the different interviews and data from the annual reports of banks, in a structured way. Chapter 6: Recommendations and Conclusion This last chapter consists of the suggestions regarding financial risk management for the Mauritian banking sector and also the answer to the main question. 2. LITERATURE REVIEW 2.1 Defining Financial Risks Financial risks in the banking field are the probability that the result of an action or event could bring up unfavorable impacts. Such outcomes could either cause direct loss of earnings or capital or may result in limitations on banks capacity to meet its business objectives. Such constraints pose a risk as these could influence a banks capacity to perform its ongoing business or to take advantage of opportunities to advance its business Risks are frequently defined by the negative impacts on profitability of numerous separate sources of uncertainty. While the types and degree of risks of an organization may be exposed to depend upon a number of factors such as its size, complexity business activities, volume etc, it is believed that generally the banks face Credit, Market, Liquidity, Operational, Legal and Systemic risks etc. 2.2 Definition of Financial Risks as Per Basel II The role of risk management in banking has changed from the simple insurance of identified risks, to a discipline that concentrates on complex econometric and financial model of uncertainty. Financial risk management has been defined by the Basel Committee (2001) as a sequence of four processes: the identification of events into more or broad categories of market, credit, operational and ‘other risks and specific sub-categories; the assessment of risks using data and a risk model; the monitoring and reporting of the risk assessments on a timely basis; and the control of these risks by senior management. The first Basel Accord (1988) analysed only credit risks in the banking book; the Basel Amendment (1996) extended this to market risks in the trading book; and now the new Basel 2 Accord that will be adopted by all G10 and many other countries in 2007 refines credit risk assessments to become more sensitive and extends the calculation of risk capital to include operational risks. 2.3 Distinction between Risk Management and Risk Measurement? Risk measurement is a key part of the general risk management process, but its certainly just one of the parts. Other, similarly key parts include defining risks, setting policy risk limits and guidelines, and taking action when those limits are threatened of being breached. Risk management is as much about people, procedures, and communication, as it is about quantitative methods involved in risk measurement (Suren Markosov, 2001). Risk measurement, however, is important to the success of the risk management process. Part of the risk measurement task is to guarantee that the risk measures being used are suitable to the nature of the risks, and since these risks can be quite various in nature, so can the necessary choices of risk measures. 2.4 Why do Banks manage Risks? The analysis of risk management reported in Santomero (1995) gives us a lists of dozens contributions and at least four separate rationales considered for active risk management. These include managerial self-interest, the non-linearity of the tax structure, the costs of financial distress and the existence of capital market imperfections. Risk is a fundamental part of the banking business, it is not amazing that banks have been using risk management ever since there have been banks the industry could never have survived without it. The only modification is the degree of sophistication now necessary to reflect the new complex and fast moving environment (Laurence H Meyer, 2000). The Asian financial crisis of 1997 has shown us that ignoring necessary risk management can also add to economy-wide difficulties. The long period of extraordinary economic growth and prosperity in Asia had hidden weaknesses in risk management. Many Asian banks did not think about risk or conduct a cash flow analysis before giving way loans, but rather lent on the basis of their relationship with the borrower and the availability of guarantee despite the fact that the security was often hard to seize in the event of default. The result was that loans including loans by foreign banks grew faster than the capacity of the borrowers to repay. Risk management is clearly not free. In fact its expensive in both resources and in institutional disturbance. The cost of delaying or avoiding proper risk management can be extreme: failure of a bank and possibly failure of a banking system (Laurence H Meyer, 2000). 3.4 Determinants of Risks When banks are exposed to risk, this implies that they are vulnerable to financial distress and failure. Determinants of risk are thus causes of problem bank failure. The common causes of bank failure are: Management. Argenti (1984) attributed 17% of his A-scores to management style and composition. He attributed another 71% to accounting deficiencies, poor response to change, over-gearing, over trading and large projects; all of which hinge upon capabilities of management. Arguments that he put forward was that management is the primary and single most important cause of financial distress. Asset quality Loan and advances comprise a substantial portion (50%-80%) of commercial banks total assets and they account for more than 70% of their income. This highlights the banks role as financial intermediary. â€Å"Asset quality is the most important determinant of bank risk exposure†. This was pointed out by Hefferman (2000), Gonzalex-Hermossilo (1999), and Hardy (1998). The asset quality of a bank is affected by various factors such as, over concentration, insider lending and political loans. Over-Expansion Banks that grow quickly tend to have unjustified risks and often find that their administrative and management information system cannot keep up with the rate of expansion. Too much liquidity by way of rapid deposit growth could also be a problem in that management may undertake riskier credit proposals and this will adversely affect the asset quality. Capitalization Capital adequacy ratio is a function of adjusted risk assets. A bank can either maintain this ratio by increasing its capital or reducing of adjusted risk assets. The prime objective of this control is to protect depositors. However Blum (1998) found that with the incentives for asset substitution, capital adequacy requirements may actually increase risk. This was found in the case of J.P Morgan and Deutsche Bank. In Mauritius the BOM has adopted a capital adequacy ratio of 10% to match international standards. Fraud Fraud is one of the key determinants of risk. However it is closely related with the management competence that some fraudulent activities have passed off as incompetence. The BCI and Barings Bank are good examples. 2.5 HOW ARE RISKS MANAGED? As pointed out by Anthony M. Santomero (1997) there need to be essential procedures that must be put in place to carry out satisfactory risk management? In essence, what techniques are employed to both limit and manage the different types of risk, and how are they implemented in each area of risk control? The management of the bank relies on a series of steps to put into operation a risk management system. These can be seen as containing the following four parts: 2.5.1 Standards and reports, 2.5.2 Position limits or rules, 2.5.3 Investment guidelines or strategies, 2.5.4 Incentive contracts and compensation. In general, these tools are used to measure exposure, define procedures to manage these exposures, limit individual positions to acceptable levels, and encourage decision makers to manage risk in a manner that is consistent with the firms goals and objectives (Oldfield and Santomero, 1995). To see how each of these four parts of basic risk management techniques achieves these ends, we elaborate on each part of the process below. 2.5.1 Standards and Reports The first of these risk management techniques involves two unlike conceptual activities, i.e., standard setting and financial reporting (Santomero and Babbel, 1996). They are listed jointly because they are the sine qua non of any risk system. Underwriting standards, risk categorizations, and standards of review are all traditional tools of risk management and control. Consistent evaluation and rating of exposures of various types are essential to understand the risks in the portfolio, and the degree to which these risks must be mitigated or absorbed (Hodgson, 1999). The consistency of financial reporting is the next ingredient. Obviously outside audits, regulatory reports, and rating agency evaluations are necessary for investors to measure asset quality and firm level risk. These reports have long been standardized, for better or worse. However, the need here goes beyond public reports and audited statements to the need for management information on asset quality and risk posture. Such internal reports need similar standardization and much more frequent reporting intervals, with daily or weekly reports substituting for the quarterly GAAP periodicity. 2.5.2 Position Limits and Rules The use of position limits, and minimum standards for participation can be categorized as a second method for internal control of active management. According to Santomero (1995) risk taking is restricted to only those assets or counterparties that pass some prespecified quality standard. Then, even for those investments that are eligible, limits are compulsory to cover exposures to counterparties, credits, and overall position concentrations relative to various types of risks. While such limits are costly to set up and control, their imposition restricts the risk that can be assumed by any one individual, and therefore by the organization as a whole. In general, each person who can commit capital will have a well-defined limit. This applies to traders, lenders, and portfolio managers. Summary reports show limits as well as current exposure by business unit on a periodic basis. In big organizations with thousands of positions maintained, precise and well-timed reporting is difficult, but even more necessary (Lopez, 2003). 2.5.3 Investment Guidelines and Strategies Investment guidelines and recommended positions for the instant future are the third technique commonly in use. Cummins et al (1998) provide that under this means of management control, strategies are shaped in terms of concentrations and commitments to particular areas of the market, the extent of desired asset-liability mismatching or exposure, and the need to hedge against systematic risk of a particular type. The limits described above show the way to passive risk avoidance and diversification, because managers generally work within position limits and prescribed rules. Beyond this, guidelines offer firm level advice as to the appropriate level of active management, given the state of the market and the willingness of senior management to absorb the risks implied by the combined portfolio. Such guidelines lead to firm level hedging and asset-liability matching. In addition, securitization and even derivative activity are rapidly growing techniques of position management open to participants looking to reduce their exposure to be in line with managements guidelines. 2.5.4 Incentive Schemes Banks can enter incentive compatible contracts with line managers and make compensation linked to the risks assumed by these individuals, and then the need for complex and costly controls is decreased. However, such incentive contracts require precise position valuation and proper internal control systems. Such tools which include position posting, risk analysis, the allocation of costs, and setting of required returns to various parts of the organization are not irrelevant. Despite the complexity, well designed systems align the goals of managers with other stakeholders in a most desirable way. In fact, most financial debacles can be traced to the absence of incentive compatibility, as the cases of the deposit insurance and so clearly illustrate. The association of managerial compensation to book earnings can bring about acquisition of investments with negative convexity, duration mismatch risk, liquidity risk and credit risk, whose book profits are higher than their expected return (Cummins et al., 1998). STRATEGIES USED BY BANKS TO MANAGE RISKS INTEREST RATE RISK All banks face interest rate risk. This type of risks occurs when long term mortgages are funded by short term deposits. Interest rate risk is like the â€Å"blood pressure for banks and is vital for their survival.†(Ron Feldman and Jason Schmidt) Furthermore, according to the Basel Committee (2001) â€Å"interest rate risk is the exposure of a banks financial condition to adverse movements in interest rates. Accepting this risk is a normal part of banking and can be an important source of profitability and shareholder value.† According to the Bank of Jamaica each banking institution needs to establish explicit and prudent interest rate risk limits, and ensure that the level of interest rate risk exposure does not exceed these limits. Interest rate risk limits need to be set within an institutions overall risk profile, which reflects factors such as its capital adequacy, liquidity, credit quality, investment risk and foreign exchange risk. Interest rate positions should be managed within an institutions ability to offset such positions if necessary. Gap analysis, duration analysis and stimulation models are interest rate risk measurement techniques used by the Bank of Jamaica (2005). Each technique provides a different perspective on interest rate risk, has distinct strengths and weaknesses, and is more effective when used in combination with another. Gap Analysis A simple gap analysis measures the difference between the amount of interest-earning assets and interest-bearing liabilities (both on- and off-balance sheet) that reprice in a particular time period. Duration Analysis Duration is the time-weighted average maturity of the present value of the cash flows from assets, liabilities and off-balance sheet items. It measures the relative sensitivity of the value of these instruments to changing interest rates (the average term to repricing), and therefore reflects how changes in interest rates will affect the institutions economic value, that is, the present value of equity. In this context, the maturity of an investment is used to provide an indication of interest rate risk. The longer the term to maturity of an investment, the greater the chance of interest rates movements and, hence, unfavourable price changes. Simulation Models Simulation models are an important complement to gap and duration analysis. Simulation models analyse interest rate risk in a dynamic context. They evaluate interest rate risk arising from both current and future business and provide a way to evaluate the effects of strategies to increase earnings or reduce interest rate risk. Simulation models are also useful tools for strategic planning; they allow a banking institution to effectively integrate risk management and control into the planning process. FOREIGN EXCHANGE RISK It is the current risk to earnings and capital arising from negative movements in currency exchange rates. It refers to the impact of adverse movement in currency exchange rates on the value of open foreign currency position. The use of hedging techniques by the Bank of Jamaica is one means of managing and controlling foreign exchange risk. Many different financial instruments can be used for hedging purposes, the most commonly used, being derivative instruments. Examples include forward foreign exchange contracts, foreign currency futures contracts, foreign currency options, and foreign currency swaps. Generally, few banks will need to use the full range of hedging techniques or instruments. Each bank should consider which ones are necessary for the nature and extent of its foreign exchange activities, the skills and experience of trading staff and management, and the capacity of foreign exchange rate risk reporting and control systems. CREDIT RISK Credit risk is the oldest and important risk which banks exposure and important of credit risk and credit risk management are increasing with time because of some reasons like economic crises and stagnation, company bankruptcies, infraction of rules in company accounting and audits (Dr.Adem Anbar, 2006). For the Norinchukin Bank in Japan (2006), transactions involving credit risk are one of the most important and strategic sources of earnings. In addition to assessments of the risks present in individual loans and other assets, the bank conducts comprehensive risk management from the perspective of its overall credit risk portfolio. In this way, the bank works to generate earnings proportionate with the level of credit risk it takes. While frequently strengthening its credit analysis capabilities, the bank conducts expert checks on the standing of borrowers, taking due account of their characteristics as cooperatives, private corporations, public entities, or non-residents. To conduct credit analysis on private corporations and public corporations, the bank has established the Credit Risk Management Division, which is separate from the Corporate Business Management Strategy Division, to prepare credit analyses by industry, drawing fully on the expertise the bank has historically acquired. To achieve greater accuracy in assessments, each senior credit analyst in charge of a certain industry assesses each client and business through comparisons with competitors in the same business, making use of industry research capabilities. Credit risk is measured for loans, guarantees, foreign exchange and securities, such as corporate bonds, as well as for swaps and other off-balance transactions. Measurement of risk volumes are conducted according to types of transactions partners, including domestic and overseas corporations and financial institutions. Based on estimates of the total credit extended, the bank uses information related to credit risk— such as rating transition ratios that measure the probability of rating changes and are computed based on background history and future business prospects, default ratios by rating, recovery ratios in the event of default and correlations among the creditworthiness of corporations and other entities to conduct tens of thousands of simulated scenarios, under various assumptions regarding defaults and rating changes for its customers and their products—to determine the distribution of potential losses. For the estimated potential losses, the bank calculates two risk volumes: the â€Å"expected loss† that corresponds to the loss that can be expected on average over the next year and the â€Å"probable maximum loss,† which is defined as losses that can be expected under the worst case scenario. This enables the bank to check expected profitability against risk and determine the risk capital to be allocated for each business category. LIQUIDITY RISK Liquidity risk is the risk that could occur if an institution does not have enough funds accessible to meet all its cash outflow obligations as they become due. Liquidity risk management ensures that funds will be available at all times to honour the institutions obligations (Bank of Mauritius). A liquidity risk management involves not only analyzing banks on and off-balance sheet positions to forecast future cash flows but also how the funding condition would be met (Bank of Pakistan). The latter involves identifying the funding market the bank has access, understanding the nature of those markets, evaluating banks current and future use of the market and monitor signs of confidence erosion. Banks use a variety of ratios to quantify liquidity. These ratios can also be used to create limits for liquidity management. However, such ratios would be meaningless unless used regularly and interpreted taking into account qualitative factors. Ratios should always be used in conjunction with more qualitative information about borrowing capacity, such as the likelihood of increased requests for early withdrawals, decreases in credit lines, decreases in transaction size, or shortening of term funds available to the bank. To the extent that any asset-liability management decisions are based on financial ratios, a banks asset-liability managers understand how a ratio is constructed, the range of alternative information that can be placed in the numerator or denominator, and the scope of conclusions that can be drawn from ratios. Because ratio components as calculated by banks are sometimes inconsistent, ratio-based comparisons of institutions or even comparisons of periods at a single institution can be misleading. Cash Flow Ratios and Limits. One of the most serious sources of liquidity risk comes from a banks failure to roll over a maturing liability. Cash flow ratios and limits attempt to measure and control the volume of liabilities maturing during a specified period of time. Liability Concentration Ratios and Limits. Liability concentration ratios and limits help to prevent a bank from relying on too few providers or funding sources. Limits are usually expressed as either a percentage of liquid assets or an absolute amount. Sometimes they are more indirectly expressed as a percentage of deposits, purchased funds, or total liabilities. Other Balance Sheet Ratios. Total loans/total deposits, total loans/total equity capital, borrowed funds/total assets etc are examples of common ratios used by financial institutions to monitor current and potential funding levels. EMPIRICAL EVIDENCE ON FINANCIAL RISK MANAGEMENT TECHNIQUES USED BY BANKS CREDIT RISK MANAGEMENT Credit operations are traditionally the main source of income as well as risks for banks. I am going to elaborate on the result and analysis of market central bank meeting participants carried out by Ramon Moreno in 2005. It was found that 40% of the respondents to his survey cited credit to household as an important source of credit risk. According to Moreno, a distinct increase in credit to the household sector has altered risk exposures and he also found that in some countries there is significant credit risks on the banking book associated with asset price fluctuation for example lending for residential real estate accounts for around 25% of total loans in Hong Kong and Korea, around 19% in Hungary, Poland and Israel, but lower in Colombia and Mexico. Another study carried out by Santomero in 1997 found that banks usually use a credit rating procedure to evaluate investment opportunities in order for credit decisions to be made in a consistent manner and to limit credit risk exposure. By using such a procedure banks were able to monitor the quality of its loan portfolio at any time. It was found that the credit quality report signals changes in expected loan losses, if the system is meaningful. Also many banks are starting to develop concentration reports, indicating industry composition of the loan portfolio. Moody had developed a system of 34 industry groups that may be used to report concentrations. Reports such an industry grouping to illustrate the kind of concentration reports that are emerging as stand in the banking industry. Moreover a credit risk survey study was done in the Turkish Banking by Dr Adem ANBAR, where he found that there is main quantitative credit risk measurer. There are expected loss (EL), unexpected loss (UL) and credit value at risk (CVAR). Although these credit risk measures are used for measuring credit risk of one asset, particularly they are used for measuring portfolio credit risk. Only 35% of the bank used these measures. According to Dr Anbar, 30% of the banks said they measured credit risk using a portfolio credit risk model and software developed mostly by them. Furthermore 95% of the bank used internal credit rating system and a credit scoring model in credit risk analysis. This technique was used to determine credit limits, to determine problematic credit and credit risk measurement. According to the study there are 3 approaches in Basel II for credit measurement. These are Standardised Approach (SA), Foundation Internal Ratings Based Approach (FIRBA), and Advanced Internal Rating Based Approach (AIRBA). It was found that 60% of the banks used the first method and 20% the FIRBA and 20% the AIRBA. Dr Anbar found that in general the tools which are used by Turkish banks are collateral, credit limits and diversification but they dont use methods like loan selling, securitization, credit insurance for transferring credit risk. One reason for that was that these types of methods havent been developed in Turkish sector yet. INTEREST RATE RISK MANAGEMENT The tradition has been for the banking industry to diverge somewhat from other parts of the financial sectors in the treatment of interest rate risk. According to Santomero (1997) institutions that do not have active trading businesses, value-at-risk has become the standard approach. Many firms use this model but in some cases it is still in an implementation process. According to his analysis, commercial banks tend not to use market value reports and guidelines but rather, their approach relies on cash flow and bank values. This system has been traditionally been known as the GAP reporting system. This system has been supplemented with a duration analysis. (Hempel, Simonson and Coleman, 1994) Most banks, however have attempted to move beyond this gap methodology, they have concluded that the gap and duration reports are static and do not fit well with the dynamic nature of the banking market. Furthermore, according to the survey, many banks are using balance sheet simulation models to find the effect of interest rate variation on reported earnings overtime. This system requires relatively informed repricing schedules as well as estimates of prepayments and cash flows. The simulation system being completed, reports the resultant derivations in earnings associated with the rate scenarios considered. Officials then make use of cash, futures and swaps to reduce this risk. 2.7.3 LIQUIDITY RISK MANAGEMENT The liquidity risk that does present a real challenge is the need for funding when and if a sudden crisis arises. Standard reports on liquid assets and open lines of credit, which are germane to the first type of li

Thomas Young :: biographies bio physics physicist

Thomas Young (1773-1829) Thomas Young was a brilliant man throughout his life. At a young age of fourteen, he was familiar with Latin, Greek, French, Italian, Hebrew, Arabic, and Persian. He was so educated in a variety of areas that his peers called him Phenomena Young. This Englishman found interest in languages, medicine, nature, and light. He did his studies in London, Edinburgh, and Gà ¶ttingen, and practiced medicine in London. With his strong interest in sense perception, he was able to make many realizations and discoveries about the eye. For example, he was the first to realize the eye focuses by changing the shape of the lens, he discovered the cause of astigmatism, and he and Helmoltz initiated the three color theory of perception. In 1801, regardless of the uncertainty from other scientists, his double-slit experiment established that light was a wave motion, making his famous. Over the years, he gained new interests. He started studying Egyptology, and while he was one Napoleon’s expedit ions he started studying the texts of Rosetta Stone. This in time helped to decipher the ancient Egyptian hieroglyphic writing. Some other interests that Young acquired over the years, leading him to more discoveries are surface tension, elasticity and energy. He even worked as a professor at schools, including the Royal Institution and Cambridge University. Thomas Young was a smart, well educated English physician and physicist. His love for his work and interests allowed him to make discoveries that help us to this day, and to be remembered and acknowledged as â€Å"†¦a man alike eminent in almost every department of human learning.† Lifelong Accomplishments 1773 -Thomas Young is born 1792 -Young decided on a career in medicine. 1793 -Presented a paper before the Royal Society in which he attributed the accommodation of the eye to its muscular structure 1794 -Elected to membership of the Royal Society -After completing his medical studies at Edinburgh and Gà ¶ttingen, he returned to London to practice but continued his scholarly studies at Emmanuel College, Cambridge -His uncle died, making him financially independent, allowing him to pursue his real interests 1798 -Some investigations on sound and light formed the starting point for his theory of interference 1799 -Began his medical practice in London -While attending medical school, he discovered how the lens of the human eye changes shape to focus on objects at different distances 1800 -Published his experiments on Sound and Light in the Philosophical Transactions of the Royal Society 1801 -Discovered the cause of astigmatism -Young and Helmholtz initiated the three color theory of perception.

Smoking Cigarettes Essay -- Argumentative Persuasive Example Essays

Why Smoking is Hazardous Essay written by Ren M.Chu Hi I’m here today to tell you the dangers of smoking. Smoking is one of the most preventable causes of death in our society. About one in five deaths in the US are results from using tobacco. About half all of smokers between of 35 and 69 die ahead of time the new smokers replace them. Smokers could be losing an average of 20 to 25 years of their life. Sometime I’m around an adult that smokes and when he smokes, it makes the house smell awful. I have many reasons to why I think this. It gives you aliment, shortens your life, can affect others around you and yourself. Every time you smoke, it’s like cutting 5 minutes of your life and there are many ways to quit. About 430,000 people in the US die every year from smoking related problems...

My Trip On The Ganges River :: essays research papers

My Trip on the Ganges River About 2 weeks ago I went on an exciting trip along the Ganges River. In this letter I'll tell you all about it. It turns out that the Ganges has its beginning in an ice cave 10,300 feet above sea level in the snow-covered Himalayan Mountains of northern India. From there, the river flows towards the southeast and goes through East Pakistan, for about 1,557 miles. Ganges River then empties into the Bay of Bengal. Several tributary rivers, including the Jumna, Rmganga, Gumti, Gogra, Son, and Kusi also add to the waters of the Ganges. As I was going past the Bay of Bengal I noticed some people with severe sicknesses and crippled bathing in the Ganges River. My guide told me that to Indians, Ganges River is sacred and people believe that the touch of its water will cure some diseases. I was shocked to find out that people even go to that river to die in hope that they will go to paradise. I should point out that the river is only sacred to Hindus. It was interesting to find out that each year, thousands of Hindu pilgrims visit such holy cities as Benares and Allahabad along the banks of the Ganges. They go there just to bathe in the river and to take home some of its water. The Ganges River is so important to the Indians that they call it "Ganga Mata" or Mother Ganges. It is also the greatest waterway in India and one of the largest in the world. Temples line the riverbank, and stairways, called ghats, lead down to the water. I am enclosing one of the pictures I took of the Ganges River. The river is an important trade place. Its valley is fertile and densely populated. Some of India's largest cities like Calcutta, Howrah, Patna, Benares, Allahabad, and Cawnpore are located on the river. India's capital, New Delhi, is on one of its tributaries, the Jumna. The Ganges River however, isn't as

JC Penney Advertising Essay

As time progresses, the world, in terms of business is rather contracting. There is growing communication, interaction and exchange between different parts of the world. Technologies that were once thought of as a far sighted notion are now being used like household commodities and communication mediums that were once considered luxuries available to few are now necessities needed to prosper. And as the world is becoming more integrated and countries are becoming more and more dependent on one another in terms of trade and business the concept of branding, advertising and promotion is becoming more prevalent and widespread. This paper will focus on the marketing of JC penny. It would elaborate on the print as well as online marketing. Moreover it would compare and contrast advertising of online and bricks and mortar companies. Discussion The demand for accountability of marketing is rising and also the pressure of having less absolute dollars to work with so there is utmost need to be sharper, more purposeful and more targeted with marketing. JC Penney is a general retail brand that specializes in clothing, accessories and home furnishing. It has been around for decades and has been catering the needs of consumers of all ages and backgrounds. JC Penney’s main target audience at the present times is women as well as youngsters. JC Penney faced criticism for being a brand that accommodated only the high-end and older generation. However, they have been changing their brand image and have been successful in implementing an image that is portraying a more young and trendy vibe. It now focuses on providing products that have the characteristics of being conservative, traditional, modern or trendy. Fundamentally JC Penney has been escalated in the last years is through the fact that it has moved from mass marketing to a more targeted approach. The few reasons for this change is that JC Penney believes that when business is difficult there is a lot greater chance of success with getting the arms around the best customers and increasing frequency share of wallet and trips with the best customers then trying to recruit new customers in tough times that may not shopping the brand. JC Penney has managed to find ways to develop formats that allowed it to get more productivity out the money that is spend. It has also become more targeted in terms of customer selection through becoming much sharper about making sure the right customers get the right format in the right piece. (Fetterman, 2006) JC Penney is one of the brands that hold the significance of being a brick and mortar store as well as an online retailer. Hence, it follows branding through all of the sources of mass media. It publishes magazines and postcards for the promotion of its products. It also advertises it products and offers through newspapers, television ads and online ads. When comparing the online and print media usage it quoted by Mike Boylson the Executive Vice President and Chief Marketing Officer of JC Penney that In the postcard you can deliver more of a sales message, or more of a discount message these postcards may drive the customers online to see the full assortment online where as the larger brand books of JC Penny show a much richer sense of the style that they have and they portray fundamentally completely different messages. The postcard includes the offer and a link to the website to go see the expanded content where as the book itself that goes out shows the product, the customer can then either come in the store or they can go online or place their order on the phone. Direct mail is very important because through versioning and through customer segmentation the company is able to send out more targeted messages that are highly accountable and are also able to track the results in direct mail to a degree that cannot be possible in a lot of the other traditional mass media used by JC Penney. JC Penney has been focusing a great deal over its brand image and has been trying to diversify and broaden its target audience. It has recently changed to a new brand motif; ‘Every day matters’ along with the new tag line, the company has been working on enhancing its customer’s services and the opening of several temporary promotional stores. JC Penney is focusing on increasing the popularity of its brick and mortar stores as well as its online retailing through providing customers with latest offers, discounts and showcasing their product line online for ease of access. Sloan, 2007) As the world is advancing so are the technologies and the ease with which communication is possible among all parts of the world. With the advent of the internet and the upscale increase in its popularity, there has been almost nothing that is not available on the World Wide Web. The phenomenon of e-shopping emerged with the internet. The fact that customers could get what they want in the ease of their homes, increased the recognition of the internet and also of online shopping. There are numerous differences and similarities between online shopping and traditional shopping. But what holds more importance is the way the companies market their product online and how different it is from the marketing and promotion of brick and mortar companies. (Lowrey, 2008) Marketing over the internet is considered less costly, as it is holds a lower cost of distributing information on a global platform. More and more business are moving towards online retailing due to its outnumbered advantages in terms of cost, convenience and mobility of information over a great distance. One of the major focuses that companies including JC Penney is on the website. The success of online marketing is highly dependent over the outlook, design and the information provided by the website. Both the online companies as well as brick and mortar companies need to identify their target audience before they implement any marketing strategies. This lets them focus on the type of marketing tool they would benefit them. Brick and mortar companies offer a more traditional aspect of shopping and they also follow a traditional approach of marketing. This is mostly through mass media such as newspapers, television broadcast and magazines. With the passage of time, there are less and less companies that focus solely over brick and mortar business. Most companies are now available online as there is less overheads and larger audience prone to response through the internet. Conclusion In the end it is imperative to recognize the increasing importance of internet in business. Both, online retailing and brick and mortar companies hold their own set of characteristics that make them distinct. As the progress of online shopping is increasing there is still need for brick and mortar stores for traditional shoppers. Most companies, however, imply both the alternatives and hence, carry out their marketing accordingly.