The Anglo French Concorde Project

The Anglo French Concorde Project 1.1) Introduction Faster than the speed of sound comes the plane of the future. It has cost at least fifteen times the original estimates. It is described as a commercial disaster by a review committee of one of the countries that built it. It is besieged by the environmentalists. The Concorde is the benighted offspring of Anglo-French diplomacy and once-and-future dreams of glory in the skies. Now its builders are trying to keep it from crashing in a sea of red ink (Gillman 1977). Concorde was one of the greatest man made engineering design projects of the twentieth century. It was made by the successful handshake between British Aerospace and French Aerospatiale and was therefore termed as the Anglo-French collaboration. Their engineers and designers had put lot of hard work in producing the worlds first supersonic passenger aircraft, which can fly with the speed twice as much of the sound. It was so fast that it could cover the distance between London and New York in almost 3 hours (Design Museum 2006). In 1962, when the project began, its expected cost was between  £150 and  £170 million. It took nearly 20 years to put in front the first ever supersonic aircraft, which was quite efficient than the normal jet planes. Concorde had a take-off speed of 250mph and cruising speed of 1350mph at a height up to 60,000 feet. During its 27 years of service, it was considered as the economic pride for both the nations and also made emotional attachments with the people as it made them cherish, whenever they spotted it in the sky (Design Museum 2006). It was a 2 billion pound project started in 1962 and was completed in 1976. There were a total of 20 Concorde constructed: 14 for commercial service development and 6 for development. The key features about Concorde, was its Delta wings, pinpoint movable nose and sonic boom. Its wings were made by French, engines by British, the centre section by French and the middle section by the British; therefore it was a total collaboration between the 2 nations. It was an aircraft built for the people to whom Time is Money like big Celebrities. But was also protested by some people due to the amount of noise pollution it causes during its flight. In 1990 it earned a profit of almost 20 million pound a year and was considered as one of the safest aircraft and had become peoples attraction (BBC-The Concorde Story 2001). But on 25th July 2000 Concorde had its first massive crash killing about 113 people and all the 100 passengers including the crew members. Thus the aircraft lost its majesty as the peoples confidence on it was shattered and were frightened to fly. Later after much of the investigations the Concorde was finally grounded in both the nations because of the safety reasons stating that there were some design flaws in its construction. Thus it was the end of the 27 years of great service that this aircraft has provided (BBC-The Concorde story 2001). 2) Stakeholder Analysis Stakeholders are any individual, group or an organisation that has demonstrable interest in the outcome of the project. They are the people who actually participate in the project and are actually affected by its results. So, the most critical task of a project is to identify its stakeholders as this would help to predict the demands of the stakeholders which would help in running the project successfully. The following analysis is done by using the STEEPLE model (Mansfield 2008). The major stakeholders concerned with the Concorde project are as follows: 2.1) Environmentalists: Concorde was considered as an environmental disaster as it degrades the ozone layer and thereby lets the suns rays to enter into the environment, which ultimately cause diseases like skin Cancer etc. And the amount of noise that it produces was also intolerable for the human ears and not suitable for the people living nearby. Also, Concorde often creates a shockwave, which is actually a sonic boom and so if it passes over the populated areas, then it could also shake buildings, break glasses and can cause harm to the eardrums which often made people angry. Therefore it was routed only over oceans (Scott 1997, Happenheimer 2008). Their attitude was like Terrorists towards the project. (Mansfield 2008). 2.2) British and French Government: It was recognized as a powerful symbol of ultra modern technology and was considered as a symbol of national pride to most of the people in Britain and France As before this, only USA and Russia were the superior leaders in making of the supersonic aircrafts. So, the British and French wanted to make an aircraft more powerful and faster. This made both the countries to collaborate with each other in the interest of economy and efficiency .So, it was a clean chit given to it by the French and the British government without looking at the economical and environmental effects. Thus an agreement was formed between them as an Anglo-French collaboration. Also they had to overcome with the culture and language barrier, which was also a big challenge (Knowledgerush.com 2003, Design Museum 2006, Beginnings 2008). Their attitude was like Saviour towards the project (Mansfield, 2008). 2.3) Economists: It was considered as an economic white elephant (Owen 2001: 8). It was also considered as a economic disaster as it was failed to complete within the time specified as it got passed the original estimate by millions. The air routes above the sea level also causes intolerable effects to the people living nearby, because of the amount of noise it creates. Another factor that made it uneconomic was that it required heavy fuel consumption as it was launched when the fuel crises was at its highest peak, therefore it was unable to enter into the lucrative trans-pacific market. Thus all these factors like production delays, noise pollution, increase in price of fuel due to its shortage has made the task of selling it more difficult and due to its unaffordable cost, many airports have refused to buy a Concorde. Therefore it was difficult to operate it on an economic standpoint (BBC News 1969, Arnold 2003). Their attitude was like Irritant towards the project. (Mansfield 2008). 2.4) Local Population: The Concorde became the peoples attraction and was residing in almost every heart because of its beauty as well as its speed. It was a marvellous aircraft which belong less to the modern world than to the future. In its 27 years of commercial service, it became one of the best loved engineering design projects of the 20th century. It carried out an example of technological brilliance. The people were so emotionally attached with it, that when they saw it in the sky, they used to cherish a lot by taking photographs of it. Overall it was considered as a safe plane by the people. As it was considered as a national symbol so it made them get closer and gave them an exciting sensation (Design Museum 2006). Their attitude was like Acquaintance towards the project. (Mansfield 2008). 2.5) Stars and Businessman: Concorde was a great boon to them as faster the speed less the time and time is money for them, and if a plane is fulfilling and actually implementing that concept so it was the only medium that they were looking for, which actually they got it in the form of Concorde, which was providing them speed, which was twice the speed of sound and also the comfort that the businessman requires (Supersonic proving, 2008, BBC-The Concorde Story 2001). Their attitude was like Friend towards the project. (Mansfield 2008). 2.6) Global Population: People in Antarctica and other countries were protesting against this project as the amount of noise it generates was intolerable for them and also the speed with which it goes by creating the sonic beam i.e. it pushes the air out by creating a shockwave, which can cause disturbance to the people living in populated areas. So, it was highly opposed by them. Their attitude was like Irritant towards the project (Mansfield 2008). 2.7) Global Government: countries like India ,Russia and Africa didnt allowed this aircraft to reach there because of its certain flaws like noise pollution and depletion of ozone layer done by it, which can cause harmful affects to the human body. Their attitude caused Concordes route to be limited to some places only. Their attitude was like Irritant towards the project (Mansfield 2008). 2.8) Americans and Soviet Union: They were the main rivals for the Concorde project. There were many people in United States who were willing to bubble out the Concordes network to expand due to its noise and environmental pollution. US had a fear that if, Concorde would be able to capture the market forecast for supersonic transport, then USA would be forced to surrender world civil transport leadership and also to face payment deficits (Owen 2001:143pg). Their attitude was like Timebomb towards the project (Mansfield, 2008). Based on the above analysis, I have made a mapping of the stakeholders according to their Level of Interest and Level of Power. L E V E L O F I N T E R E S T LEVEL OF POWER LOW HIGH LOW Local public Stars and businessman Economists HIGH Global public Global government British and French Govt. Environmentalist Americans and Soviet Union Figure: Stakeholder Mapping (Mansfield 2008). According to the above mapping, we can summarize it in the form of Stakeholders Analysis: Stakeholders Analysis Stakeholder Groups Interest Power Environmentalist High High British and French Government High High Economists High Medium Local Public Low Low Stars and businessman High Low Global Public Medium High Americans and Soviet Unions High High Global government Low High 3) Financial slippage Slippage is a minute delay in the progress of a project. If its a single one then it can be managed but it becomes a combination of many slippages then it is often difficult to manage as it becomes overwhelming. So, its the responsibility of all the people associated with the project to report any slippage, no matter how small it is. There were certain reasons behind the financial slippage of the Concorde project: 3.1) Lack of commitment to the Project: There was an overall lack of commitment in the project. The original estimate that was made was around  £150 million for 4 years. But in 1963, when first major design took place then there was first official appraisal of costs which was raised to  £275 million compared with the maximum estimate of  £95 million. Then there was an additional redesign in 1965, where by 1966 the costs were given as  £45 million. As, the effort progressed, there was some problems related to the payload, which represented only 6% of the overall plane weight. As each time the design hurdle increased, the percentage was further reduced. As the original payload was for 150 passengers but was soon reduced to 130. But by 1968, it was observed that it was unattainable so they had to once again design the fuselage, undercarriage and wings. In 1969, due to redesigning, the cost rose up to  £730 million. And finally by 1975 the cost rose to  £1096 million, with a total of around 100 seats (Gillman 1977). 3.2) Too frequent changes: The rise in the cost of Concorde, was not because of the inaccurate estimation of the investors but it was because of increase in inflation rate which was around 37%, 31% due to the change in specifications; and nearly 20%on the new technology. Thus, they had to pay extra cost for reserved resources and have to make modifications in it according to the situation (The Concorde Project 1974). 3.3) Waste of time and resources: As during the making of Concorde, the time and resource management were not given more importance. Knowing that the plane having 4 engines could cause harm to the environment, they were continually investing on it. According to Journalist Mary Goldring, Concorde was a waste of resources on her understanding of airlines at the time which questioned if signing up to Concorde would be financially viable. She says that the project was a waste of time and a waste of resources (Goldring 2008). 3.4) Unrealistic targets objectives: In 1962, when the collaboration between the two nations began, it was estimated to cost between  £150 and  £170 million and for making this huge supersonic aircraft they planned just 4 years as a deadline. But actually, this project was so complex that it took much longer time and cost (Design Museum 2006). 3.5) Inadequate Resources: There was a lack of firm orders, which made workers to believe that their jobs are at risk and enable them to turn out the available work as long as possible. 3.6) Costs of being late 3.6.1) Loss of reputation: During the start of the Anglo-French collaboration, several airlines from different parts of the world, expressed their interest in ordering Concorde. But due to its periodically increasing cost and increasing price, almost all of them stepped back and by the end of its development only two airlines were left to buy planes for a mammoth cost of  £23 million each. They were the two respective national carriers, British Airways and Air France (Design Museum 2006, Gillman 1977). 3.6.2) Extra cost for retained resources: It was developed at the time when the inflation rate was about 37% so ultimately cost of the booked resources also got higher. Thus, the project managers had to put extra cost into it (The Concorde Project 1974). 3.6.3) Maintaining existing equipment to extend its life: As after its development and running for several years, it had no supersonic competitors. So, there was no pressure to improve Concorde or to make investments in new sub-contractors and suppliers. As a result of that the maintenance expenditure had risen progressively, which made it impossible to take a flight because of the increasing expenses. Therefore on April 10 2003, both Air France and British Airways announced that they were withdrawing Concorde from service by the end of year. And finally on 24th October 2003, Concorde retired, being acknowledged as the fastest passenger aircraft in the world (Design Museum 2006). 4) Project Management Methodology Every Project which is going to implement is associated with some particular types of risks. These risks cannot be overlooked but can be reduced to some extent. Thus, we can foresee and avoid these risks by doing proper doing Risk Analysis. 4.1) Risk Analysis Risk Analysis is the systematic use of the available information in determining the occurrence of specific events and characterizing the risks involved in it (Mansfield 2008). Risk Analysis also helps in judging the impact of those risks on the project which may bring either positive or negative effect on the execution of it Several risks and their avoidance are given below Risk Description/Prevention Probability (1-5) [P] Severity (1-5) [S] Score [PxS] Financial Risks Description As per the case study, the project must be completed with the total budget of  £150 million. So, if the project is not completed in specified budget then it can cause the budget to go high resulting in a big loss. Prevention To avoid over budgeting, they must always need to have an eye on their budget. 4 4 16 Political/ Legal Risks Description Usually due to the Governments instability there is always a risk associated with the project. As if the government changes, then it can also result in the loss of contract. Prevention There must be proper deed, stating the security of the order, which can be helpful in minimizing these types of risk. 4 3 12 Scope creed Risks Description This risk is due to poor management and unpredicted moves in the target. This can cause lack of communication between the peers and the higher management Prevention There must be an effective communication channel between the employees of the company. 3 3 9 Environmental Risks Description Natural disasters like noise pollution, earthquakes etc can sometimes obstruct the progress of the project. So, the Concorde project must take all these factors into consideration, as it can lead to loss of money, material and time. Prevention Before proceeding with the project, analysis about its environmental impact must be done. 3 5 15 Technical Risks Description As a project involves different types of technologies, so while designing a product, technical risks must be kept in mind. As one failure can cause redesigning of the product and thereby increase in its manufacturing cost. Prevention To avoid any failure, each step towards the progress must be taken with proper assistance of the supervisor and higher officials. 3 4 12 Quality Risks Description As it was an Anglo-French collaboration, to design the worlds fastest passenger Aircraft, so they need to put lots of efforts in giving out a quality product. If the quality is poor, then they have to suffer from huge losses. Prevention Good quality and environment feasible aircrafts should be made so as to avoid loss of reputation and also several quality checks must be planned on timely basis, so as to avoid any problem. 3 2 6 Time Schedule Risk Description As per the case study, the Concorde project must be completed in 4 years of time. So, if the project is not completed in specified time then it can cause various hurdles and barriers in getting the orders from different airlines and also their payments. Prevention To prevent this to happen, a proper schedule must be prepared, so as to avoid redundant delays. It should be created in such a way that the activities that are more complex and time consuming should be done first. 4 4 16 5) Success and failure of the project 5.1) Success The meaning of success: It is an axiomatic that the goal of project management is to be successful; otherwise the incurring of this management overhead, and the training of staff to do it is a valueless exercise. (Knutson 2001:356pg). If a project doesnt meet all its objectives or achieve its certain objectives, does not mean that the project was a failure. It is also about whether what you are doing is infact the right thing to do (Knutson 2001:356pg). Though, the projects success is not only defined in terms of acceptability of the project deliverables like scope, quality, etc., but also in terms of the internal processes like time, cost, efficiency etc. Thus, success must always be assessed in terms of its contribution to the organisation that is doing the project. It is a multidimensional construct, which means different things to different people (Knutson 2001:356pg). There are four dimensions of success in which the project can be related 5.1.1) Project efficiency: Concorde project was considered as a success because it succeeded in providing the high standards of comfort to the passengers and provided them deluxe travel experience. It was hailed for its beauty and speed and it seemed to belong more to the future than to the modern world. During its 27 years of flying, over 2.5 million passengers have enjoyed the unique experience of travelling at a speed which is twice the speed of sound. Thus, it was quite efficient in reducing the time of the flight. As it made people to fly from London to New York in less than 3 hours. Even though the project was completed well out of its estimated budget but still it was recognized as a powerful symbol of ultra modern technology and was considered as a symbol of national pride to most of the people in Britain and France. Thus, the project was efficient in proving the needs and giving a promising start to the people (Design Museum 2006, Rowell 2008, Knowledgerush.com 2003). 5.1.2) Impact on customer: The Concorde had a great positive impact on the customers. It became the peoples attraction right from its first flight and captured itself into the peoples heart. It was considered as a beautiful, marvellous aircraft because of its quality service and the speed with which it travels. Due to this feature, it provides hours of extra time to the passengers, for some extra amount. It was more meant for the people, who were less fare-conscious, but more time conscious and they welcome those extra hours like stars, as for them Time is Money. Thus, Concorde made a strong emotional relation with the people, which often made them cheer whenever they spotted it in the sky (Supersonic Proving 2008, Design Museum 2003). 5.1.3) Business and direct success: As Concorde was cherished and loved by all the people so it was regarded as a successful project. Although it was an over budget project which took large amount of money and time in its completion, yet it was successful in giving out the final model of a supersonic aircraft, which can actually fly with the speed twice as much of the sound. On an average Concorde earned a profit of about  £30-50 Million per year for British Airways from the first class passengers. British Airways reportedly received  £1.75 Billion in revenue for Concorde services against an operating cost of around  £1 Billion. However, Air France made a much smaller profit with respect to that of British Airways (Concorde FAQ 2008). 5.1.4) Preparing the future: Concorde had no supersonic competitors, so its maintenance costs was raised steadily, which made BA and manufacturers to discuss about the maintenance programs, if they wanted the aircraft to continue the service. Finally it was decided to ground the aircraft, because of the increasing maintenance cost (Design Museum 2006). Thus, BAs chief executive Rod Eddington said: Concorde has served us well and we are extremely proud to have flown this marvellous and unique aircraft for the past 27 years (Concorde grounded for good 2003). So, even though it was retired, it was still considered as a Success. 5.2) Failure of the project A failure is caused if there is an inconsistency in its specification right before the beginning of the project and that inconsistency is overlooked. It can also be caused due to unrealistic and conflicting objectives. It is often caused due to poor planning and management, lack of understanding of contract strategy and process and underestimating costs to get the project to be approved (Mansfield 2008). The Concorde project was a failureà ¢Ã¢â€š ¬Ã‚ ¦ As technically the project was considered as powerful symbol of very modern technology, but it had more of the negative effects than the positive in terms of: 5.2.1) Environmental Feasibility: According to Environmental Scientists, the Concorde flights causes erosion to the ozone layer, which ultimately causes the incidences of skin cancer and also the noise it produces when it passes by was absolutely intolerable for human beings. Also it produces a shock wave, which tends to shake buildings, break glasses and can often cause damage to the ear drums. This made other airlines also to move backwards, in buying this disastrous aircraft, as during the beginning of this project they showed their keen interest in ordering it. Thus, it was considered as environmental disaster (Scott 1997). 5.2.2) Uneconomic: As per economic point of view it was considered as an economic disaster. The project took large amount of time and cost in its completion. As it had a range of around 4,143 miles and has a capability to carry 26,286 gallons of fuel, which was around 5,638 gallons of fuel during each hour of flight. This can be calculated as 6 gallons of fuel for every mile and also 1 gallon of fuel can take 1 passenger 16.7 miles only. So, none of the airlines wanted to by Concorde because of the shortage of fuel and rapid increase in its price (Rowell 2008, Design Museum 2006). This was also quoted by Journalist Mary Goldring in a way that: While the venture might be impressive technically, it would in fact prove to be a hugely expensive mistake. As the plane takes its final commercial flights, she says she was proved right. (Goldring, 2008). 5.2.3) Cost Inefficient: There were lots of financial problems associated with this project. It was the project that was started in 1960, with cost estimation between about  £150 million and  £170 million. Of which, France had to complete 60% of work on airframe and 40% of the engine and remaining was to be completed by Britain. But the development was so complicated that it took far more cost and time (Design Museum, 2006). As with the increase in inflation rate which was around 37%, 31% due to the change in specifications; and nearly 20% on the new technology, which made its estimated cost much higher, nearly double, and ultimately Britain fell into the financial crises. Then Britains new prime minister, Harold Wilson tried to cancel the partnership but he couldnt do it as France could collect the funds from London as a charge of breaking the partnership, so fearing from that, he continued the partnership. Therefore the project cost went up year by year causing the project to be over budget (The Concorde project 1974, Happenheimer 2008). 5.2.4) Commercial Impact: As per commercial point of view, the Concorde project was also a failure. Various factors like: The production delays, the environmental pollution, the shortage of fuel and its rapid increase in price, had made the selling of the aircraft more complicated, which was due to the cost estimate of  £20 million that made it quite expensive for the other aircrafts to buy. Thus at last only two of the airlines wished to buy the plane, were the 2 respective national carriers, British Airways and Air France. Thus, it had very limited routes to cover as it was opposed by almost all the nations (Gillman 1977). In a statement, BA said Concorde would cease flying in the autumn because of commercial reasons, with passenger revenue falling steadily against a backdrop of rising maintenance costs for the aircraft (Concorde grounded for good 2003). As the price of fuel was increasing, so was maintenance cost of the aircraft. So, continuing the service with Concorde was increasingly expensive. From this statement: BA has decided that such an investment cannot be justified in the face of falling revenue caused by a global downturn in demand for all forms of premium travel in the airline industry. (Concorde grounded for good 2003). It is clear that, it was no longer profitable, therefore British Airways and Air France decided to retire the renowned aircraft after 27years of its service. 5.2.5) Lack of coordination of activities: The Concorde project also had several problems related to their jobs, resources, orders and cultures like the languages and tradition of the people from Britain and France. And it is clear from the following statements. This statement shows that there was a risk about the future of the project in the mind of the workers. The PM was told by the Department of Trade and Industry, The main reasons are all too clear. A lack of firm orders, and a consequent belief by the workers that their jobs are at risk, causes them to spin out the available work as long as possible (BBC News 2004). The following statement shows that there was no communication medium between the managerial hierarchies. The number of people deployed on the project steadily increased to nearly 50,000. Most of these thousands were able to get on with their work without reference to anyone except their immediate superiors. But their efforts could only be effective so long as there was coordinated direction at the top and close liaison at all executive levels throughout the international organization (Beginnings 2008). These all factors made the project to lack in coordination of activities. 5.2.6) Successive slippages: The Concorde project was considered as the project with many continuous slippages, which made the project to go out of control, which ultimately made it to cross the barriers of its estimated time and cost. As it was scheduled to complete in 4 years of time with the budget of about  £150 million but it actually took 14 years with the increased budget of  £1096 million. It was all due to lack of planning as their milestone was quite blurred and were not set accurately. And also the reason behind their continuous slippage was continuous change in the design and inadequate objectives, which was the ultimate reason for its slippage (Wysocki 2007:331pg, Mansfield 2008). 6) Conclusion According to me the Concorde Project was a Failure Concorde was the first supersonic aircraft to travel with the speed twice as that of the sound, which offers its passengers the ultimate travel experience. And based in this quality it became the peoples attraction and was considered as the safest and luxurious plane ever made. During its 27 years of service, it provided unique experience of travelling faster to more than 2.5 million people. Thus, it was considered as a symbol of national pride to most of the people in Britain and France. However, only fast travelling is not the only factor which declares it as a success. There are certain other factors in which this project was a complete disaster. First of all, the Concorde aircraft was an economic disaster as it was outdated and incredibly fuel inefficient plane. Also it was too costly for any normal airline operations to buy it. And as this aircraft was unique and had no competitors, so its cost of maintenance was rising was increasing year by year. Thus, keeping the aircraft in service would be quite expensive for the British government. Therefore they took the brave decision to finally ground this aircraft and keep it out of service. Another factor was its hazardous impact on the Environment. While flying, it often causes erosion of the ozone layer, which gives rise to various diseases like skin cancer. And also the amount of noise that it produces was intolerable for the human ears. Also it produces a shock wave which can cause damage to the ear drums, shake buildings and break glasses. Therefore it was not possible for it to fly over cities and towns. Th

Analysis of Risk Management in Banking Activity

Analysis of Risk Management in Banking Activity The Case of Mauritian Banks Financial deregulation, globalization and liberalization have heightened considerable banking risks. Moreover, banks necessitate effective risk management strategies to promote banking welfare, protect outside agencies transacting with banks and to ensure stable banking operations. Risk managers need to focus on the diversity of risks and secure the interests of the overall banking sector. Risk Management is nowadays segregated where there is inconsistency in reporting, insufficient evaluation and low quality of management and becomes ineffective due to lack of pertinent information and improper analysis of the risk factors (Prabir Sen, 2009). Nonetheless, banks are unable to keep equilibrium in the situations of risks with huge losses and slight possibility of occurrence and risks of minimal losses with propensity of occurrence.   According to Talmimi and Hussein, Mazroezi and Mohammed (2007), risk management enables profits maximization and entails restrictions in risky activities. Risks can be averted by ordinary banking procedures, can be shifted to other institutions and can be managed actively in banks (Oldfield and Santemero, 1997). 1.1 Objectives of the Study The core objectives of the study are: To probe into the methodologies and aspects of the risk identification, assessment, monitoring, management and mitigation in Mauritian banks. To ascertain the effects of risk management on Mauritian banks. To determine to which extent risk management strategies like Basel II, derivatives, stress testing and Asset and Liability Management are applicable in Mauritian banks. To analyze the factors which improve Risk Management Practices in Mauritian banks and the perspectives about Banking Risk Management. To explore the reasons for managing risks in Mauritian banks. 1.2 Statement of the Problem There is an increasing awareness that the gradual intensification of banking risks impacts adversely on banking transactions which raises the concerns for risk management. The basis concern of this study is whether the Mauritian banks are using diverse risk management tactics and whether they are able to cope with the present and prospective challenges of risks and risk management requirements. 1.3 Significance and Contribution of the Study Bank managers can be conversant with divergent risk management techniques, their implications, effects and their relevance in banks through the practical aspects of risk management application. Bank managers can analyze the mechanisms resulting in the increasing level of risk exposures. Business administrators and management practitioners can use this study as guide to design efficient measures to mitigate risks in the process of developing marketing tactics. 1.4 Structure of the Project Chapter 2 elaborates on the literature review related to the risk management. Chapter 3 uncovers the general overview of Mauritian Banking Sector. Chapter 4 focuses on the detailed research methodology that has been used. Chapter 5 discusses the analysis and interpretation of the Mauritian banking risk management information. Chapter 6 probes on the recommendations to improve Risk Management practices in Mauritian banks. Chapter 7 concludes the whole findings of the project. PART 1- THEORETICAL ASPECTS 2.1 Introduction The advent of technology, globalization and the competition has encouraged banks in risk taking activities exposing banks to risks. Regulatory and supervisory institutions have emphasized the need for banks to enhance their risk management practices. Risks arise from the probabilities of the occurrence of losses and usually emerge from the internal and external banking transactions. 2.2 Banking Failures determinants The past decades have encountered numerous bank turbulences where high costs have been incurred on both local and overseas level (Gaytà ¡n and Johnson 2002, p.1), hindering the credit facilities, minimizing investment and consumption and generating bankruptcy cases (Demirguc-Kunt and Detragiache, 1998a, p.81). According to them, the expensive monetary policy was used to force the sound banks to sustain the failures of insolvent banks which dissuade risk management. Fluctuations in interest rates post abolition of Brettons Woods System, higher banking competition, the non existence of intermediation margins, unskillful lending and investment tactics (Hellwig 1995, p.724-726 ) , the diminishing role of the oligopoly rents as stated by Gehrig (1995 cited Hellwig 1995, p.726 ), the lower level of capital reserves in banks, companies high reliance on banks for external finance mentioned by Rajan and Zingales (1998 cited Randall S. Kroszner 2007),systemic shocks caused by credit risks, the inability to diversify loans, trade deterioration and decrease in asset prices caused bank failures argued by Gorton (1988 cited Demirguc-Kunt and Detragiache1998b, p.85). Moreover, regime changes like financial repression, liberalization and severe macroeconomic conditions encourage the entry of inexperienced players and preference for the acquisition of useless loans stated by Honohan (1997 cited Gaytan and Johnson 2002, p.4) have generated banking turbulences.   Non-performing loans increase where the asset returns are less than the returns to be paid on liabilities. Banks borrow in international currency and lend in local currency where the latter depreciates if the foreign exchange currency risk is shifted to local borrowers if they loaned in foreign currency. Banks buy insurance protection which encourages risk taking activities in the absence of prudential supervision and regulation. Bank managers engage in fraudulent actions by taking a portion of money for their personal use (Demirguc-Kunt and Detragiache 1998c, p.85-87). Diamond and Dybrig (1983 cited Demirguc and Detragiache 1988d, p.86) argued that banks portfolio assets can worsen and depositors believe that other depositors are removing their money. Obstfeld and Rogoff (1995 cited Demirguc and Detragiache 1988e, p.87) mentioned that an anticipated devaluation could occasion bank runs in local banks and these deposits are shifted overseas and render the domestic banks without l iquidity. 2.3 Banking risks alsamakis et al (1996 cited Young 2001, p.57) argued that risks can be classified as pure risks and speculative risks. Pure risks which embody market risks, credit risks, interest rate risks, liquidity risks, country risk and settlement risk are associated with the probability of occurrence of loss or no loss and can be curtailed by risk management strategies. However, speculative risks comprising of operational risks, technology risk, reputational risk, compliance risk, legal risk and insurance risks involve an opportunity for gain or loss which can be hedged. 2.3.1 Credit Risks These major risks occur in banks when the borrower defaults on his obligation to reimburse the principal amount and the interest charged of the loan. Credit risks consist of three types of risks like (Arunkumar and Kotreshwar 2005, p.9): Transaction risk emerges from the fluctuations in the credit type and capital depending on how the bank underwrites individual loan transactions. Intrinsic Risk is risk prevailing in some institutions and on granting credit to some firms. Concentration risk is the average of transaction and intrinsic risk within the portfolio and encourages granting of loans to one borrower or one firm. 2.3.2 Interest rate risks Koch (1995 cited Beets and Styger 2001, p.9) defined interest rate risk as the future changes in a banks net interest income and market value of equity due to changes in the market interest rates. Kropas (1998 cited Martirosianien) enumerated three types of interest rate risks like: Reappraisal risk stems from the diverse periods of assets and liabilities Profitableness curve risk entailselements affecting the reappraisal risk. Basic point risk concernsflawed association between the receivable and payable interest rate. Option risk is where the benefits of options can adversely affect the banks equity. 2.3.3 Liquidity risks Liquidity risks occur when the banks are unable to meet the demands of the depositors because of lack of funds and the illiquid assets resulting eventually in bank insolvency. Credit, strategic, interest rate and reputation risks build up liquidity risks (Gaulia and Maserinskieno 2006, p.49). 2 types of liquidity risks are (ADB Report 2008, p.9): Funding liquidity risk is the potentiality to obtain money via the sale of bank property and by borrowing. Trading Liquidity risk arises from making a constant entry in market activities and dealings. 2.3.4 Market risks These risks arise when the value of the financial products changes negatively and consist of currency risk, interest rate risk, equity or debt security price risk (Gaulia and Maserinskieno 2006, p.49). 2.3.5 Operational Risks Basel Committee (2004) which imposes a capital charge defined operational risks as the risk of direct or indirect losses resulting from inadequate or failed internal processes, people, and systems, or from external events. This definition includes legal risk, but excludes strategic and reputational risk. 2.3.6 Reputational Risks These risks emerge when the number of clients decreases as they hold negative perspectives about the quality of services offered by the banks. 2.3.7 Strategic risks Strategic risks arise when bad decisions and projects are undertaken to develop a special system in banks due to the lack of resources, technological tools and the expert staff. 2.3.8 Foreign Exchange Risks These risks come when the prices of the currency fluctuate when engaging in foreign activities. There are 3 types of foreign exchange currency risks. (Deloitte Treasury and Capital Markets 2006) Transaction risk entails the future of original cash flows like imports and exports. Translation risk is concerned with the disparities between foreign exchange encountered when again transforming a foreign exchange value into the functional currency of the company concerned. Translation risks are usually converted into transaction risks on a late basis as earnings are repatriated or assets and liabilities are realized. Economic risk arises when indirectly exposed to buying and selling of goods from someone who buys goods overseas. 2.3.9 Systemic risks The bank cannot collect money from an organization it is dealing owing to the political, economic and social conditions prevailing in the country where the organization is situated. Country risk includes political, economic risk and transfer risk (National Bank of Serbia). 2.3.10 Legal Risks Legal Risks are losses incurred when the bank is sanctioned by a court for the non-compliance with the lawful rules and regulations and on not fulfilling its obligations towards the other parties (National Bank of Serbia). 2.3.11 Financial Fraud There is mismanagement of money and fraudulent actions from the members of the banks who embezzle some deposited money and when there is lack of security controls. 2.4 Bank risk management methods Greenspan (2004 cited in Lam 2007, p.3) said that It would be a mistake to conclude..that the only way to succeed in banking is through ever-greater size and diversity. Indeed, better risk management may be the only truly necessary element of success in banking. 2.4.1 Risk Management in Banking Sector Flaker (2006, p.4-8) proposes three methods: 2.4.1.1 Risk Identification The board must set the risk profile of the bank and identify the risk-return tradeoff. The bank should understand and identify types of risks exposures, their sources and their effects on the overall banking stability. 2.4.1.2 Risk management and reduction Risk management and minimization embody the following: (1) Allow loans after considering their financial status of the borrowers. (2) Comparison of the expected risks with the actual ones to diminish the loan losses in a bigger portfolio. (3) Loan losses will decrease due to diverse borrowers in the lending transactions. (4) Actual risks can be compensated through the opposite movement of other risks in particular financial activities. (5) Insurance negotiations can be used to protect against diverse risks. 2.4.1.3 Risk Management System This flexible system encompasses the combined structure of identification, evaluation and risk mitigation techniques. The Board must set up a strong risk culture and an effective governance structure where the risk management system aligns with the existing structure of the bank. Risk management procedures are possible when retaining higher level of capital to cushion the risks. Furthermore, the risk management functions comprises of: (1) Delegation of responsibilities to each banking segment (2) Auditing system to deal with the internal control processes and proper execution of risk controls (Nikolis, 2009). (3) Ongoing reviews, reporting, updating and the control of risk management system must be executed to ensure that they tailor with the banking aims (4) Training courses gaining know-how about the design of the risk management system and risk models must be offered to avert banking failures. (5) Establish rules and regulations and take necessary actions to those who contravene with them regarding risk management practices. (6) Participation of the banks, regulatory and supervisory bodies where information is disseminated externally and internally in the banks (Kroszner, 2007). 2.4.2 Asset and Liability Management Asset and Liability Management entails the design of organizational and governance models which define the risk approaches subject to the banking operations (ADB 2008, p.10). 2.4.2.1 ALM operations are as follows (ADB 2008, p.10-12): ALM ensures a risk and return management process where the combination of expertise and risk appetite is needed. ALM unit manages bank risks either through a passive or aggressive approach thus increasing its value. ALM unit investigates upon the static and dynamic mismatch; sensitivity of net interest income; and, market value under multiple scenarios -including under high stress. The net interest income evaluates the sophisticated banks operating results. It does not project the effects of risk compared to the economic value which can identify banking risks but is inaccessible to most banks. 5. Funds Transfer Pricing eradicates the interest rate risks by securing a spread in loan and deposits by allocating a transfer rate that mirror the repricing and cash flows of the balance sheet. Liquidity risks can be managed like diversification of financing sources, correlate the liquidity risks with other risks and use stress testing analysis. 2.4.3 Stress testing Practices Stress testing is another risk management strategy where Stress testing is a generic term used to describe various techniques and procedures employed by financial institutions to estimate their potential vulnerability to exceptional but plausible event (Kalfaoglou 2007, p.1). It uses statistical data analysis to risk management techniques, interpret and control the unfavorable outcomes. JP Morgan Chase has integrated stress testing equipment to manage and analyze the sources of possible banking risks, implement tests on the value of its portfolio, analyze its risk profile and contemplate the effects while applying diverse scenarios. An effective risk management scheme, stress testing project and bank staff expertise are requisite to tackle the statistical and economical fundamentals of stress testing with a data measurement tool. Board of directors should monitor the inputs of stress testing system (Seminar on Stress Testing Best Practices Risk Management Implications for Egyptian Banks 2007, p.2-3). Furthermore, the 2 types of stress testing strategies in banks like: (1) Simple Sensitivity Test deals with the rapid fluctuations of the portfolio value due to a risk factor on a short term basis. (2) Scenario analysis is used by large complex banks and is associated with a realistic and econometrics approach towards shifts in portfolio value due to changes in many risk factors. 2.4.4 Basel II Basel II published in June 2004, promotes banking supervision and emphasizes the specified capital requirements to cushion against potential losses. Basel II uses qualitative and quantitative requirements to monitor risk management strategies, to ensure compliance with regulations and reinforce corporate governance structure. The risk based supervision has enabled the supervisors to concentrate on the origins of banking risks. 2.4.4.1 Pillars of Basel II Pillar 1 entails capital needed for credit risk, market risk and operational risk. Moreover, banks under this regime must have a capital adequacy of 8 %. The methods for the computation of the capital charge to measure operational and credit risks (Ma, 2003)are: Basic Indicator Approach The size and capital requirements of the operational risk are estimated as a fixed proportion of the banks net interest income and non-interest income, measured as the average over the last three years. The Standardized Approach –The activities of the banks are allocated risk ratios weights related proportionally to the quantity distributed to every category. The aggregate capital requirements are the addition of all the requirements for the categories. Advanced Measurement Approach Computation of credit and market risks and the capital requirements are founded on the banks internal system for the measurement and management of operational risk for large banks An Internal Rating Based System The BIS stated that capital requirements must be founded on a qualitative and quantitative analysis of credit risk and must be used for diverse bank units. Founded IRB approach indicates that large banks should calculate probability default related to a borrowers grade to demonstrate the capital requirement level. However, under advanced IRB approach, these banks with an internal capital allocation can furnish the loss given default and exposure at defaults which are processed. Pillar 2 A supervisor must ensure that the bank has the adequate capital requirements to deal with risks. Banks estimate the internal capital adequacy by adopting quantitative and qualitative techniques. On-site investigation and ongoing reviews probe in capital adequacy. Pillar 3- Market discipline framework provides with detailed information about the banks risk profile to evaluate and report capital adequacy where risk exposures can be analyzed through quantitative and qualitative approach regularly. The risk based capital ratios and qualitative information about the internal procedures are needed for capital adequacy purposes. 2.4.5 Derivatives olatility of financial market, the liberalization and deregulation in the 1980s and 1970s has founded derivative markets (Hehn no date a, p.100). Derivatives are financial tools (like futures, commodities futures, options, swaps, forwards) whose returns, values and performance are derived from the returns, values and performance of the underlying assets. Hedging is covering against potential risk through an opposite position in the derivative markets. Bank International Settlements (2004 cited Bernadette A. Minton et al 2008, p.2) noticed that the quantity for derivatives has leveled from $698 billion in 2001 to $ 57,894 billion in 2007. Proper derivatives trading can insure against market risks and interest rate risks without retaining additional capital requirements in the balance sheet (Kaudman no date a, p.85). The determinants of derivatives use are banking size, balance sheet constituents, aggregate risk exposures, profitability, performance and risk taking incentives. Jason and Taylor (1994 cited in Hundman b, p.86) argued that speculation used with derivatives to make profitable returns can engenders more interest rate risks. Moreover, Tsetsekos and Varangis (1997 cited Roopnarine and Watson 2005a, p.9) argued that financial derivatives promote increase in resource allocation and increase the productivity of investments projects. Jorion (1995 cited Roopnarine and Watson 2005b, p.9) argued that in price discovery, market participants are offered information on balance prices that mirror the present demand on the supplies which enable effective decision making and reveal the position of the cash prices. Besides, liquid funds are increased and transaction costs are reduced and the futures market reflects the large transactions at prevailing prices (Roopnarine and Watson 2005c, p.10).   However, derivatives have generated enormous failures in Barings Collapse, Merill Lynch and Procter Gambler (Hehn b, p.101). Bank staff must be trained and educated about derivatives use. Derivatives trading can be constrained with the liquidity problems and legal uncertainties that emerged from the market price movement which is argued by Bhaumik (1998 cited Roopnarine and Watson 2005d, p.11). Pricing of assets becomes difficult if there is insufficient information about the derivatives use. Principal agent problem is aggravated (Roopnarine and Watson 2005e, p.12). The derivatives market must be regulated properly to avert fraudulent actions and insolvency. Partnoy and Skeel (2006 cited Minton et al. 2008a, p.2) claimed that derivatives intensify systemic risks as banks do not control the lending activities. Hunter and Marshall (1999 cited Roopnarine and Watson 2005f, p.28) argued that derivative markets attract investors whose private information are assimilated in the observable p rices and diminish the bid ask spread. The underlying cash prices reduce the transaction costs and the demand for money thereby affecting the operations of the monetary policy. Bedendo and Bruno (2009a, p.2-4) argued that credit transfer tools like securitization, credit derivatives and loan sales reduce regulatory capital requirements, motivate lending and enhance the banking liquidity positions. Moreover, they remedy the issues of information asymmetries as stated by Greenbaum and Thakor (1987 cited in Bedendo and Bruno 2009b, p.2). Duffee and Zhou (2001 cited Minton et al. 2008b, p.11) mentioned that credit derivatives are used if the loan sales or securitization techniques become expensive due to moral hazard problem and can shift default risk where information advantage is insignificant and retain some portion of risks where information advantage is huge. Banks use credit transfer tools as they have little access to inter-bank funding, huge funding expenses, low capital and want loan transfer (Bedendo and Bruno 2009c, p.8-9). CRT tools encourage banks to use originate-to-distribute models via aggressive lending occasions (Bedendo and Bruno 2009d, p.10) . Pricing of CRT tools is preferred by large banks having higher skills. Some loans sales have loan characteristics like small size, asymmetric issues and standardization convenient for securitization (Bedendo and Bruno 2009e, p.11). PART 2- EMPIRICAL REVIEW There is a growing literature that examines the relationship of banking risks with other many economic and financial variables. Moreover, this section describes the diversity of banking literature where different types of risk management strategies were tested and criticized. Even the links between different types of risks were experimented using banking information and models derived from other authors empirical work. Peek and Rosengren (1996) found that the large users of derivatives for speculation purposes are the troubled organizations using derivative information of 25 active banks in the United States from 1990 to 1994 in the US dummy regression model.   Banks are unable to track the risky aspects of these derivatives and guide their risk profile because of insufficient derivative information which could jeopardize the overall banking system. The onsite targeted examinations can enable banks to window dress their derivatives. Regulatory rules and formal transactions must be imposed on the banks taking unfavorable speculation and to constrain the moral hazard problem related to the derivative transactions. The use of speculative derivatives constitutes a stringent criminal penalty for breaching the established rules and regulations. Cebenoyan and Strahan (2001) used data of the sale and purchase of bank loans and those loans sold or purchased without recourse from all domestic commercial banks in the US from 1987 to 1993 in a regression model. They found that banks that engage in loan sales market to manage credit risks retained minimum level of capital which can be modified. Moreover, these banks retained more risky loans since they managed credit risks and were exposed to an unsafe position despite they endured lower level of risks compared to the other banks who manage risks without the loan sales market. Banks that employed the risk management techniques are more inclined to engage in risk taking activities. In fact, banks that manage credit risks lend to more risky loans depicting that complex risk management practices enhanced the bank credit position rather than minimizing the risks. Gatev et al (2006) investigated upon the presence of liquidity risk from both sides of bank balance sheets using some aspects of the Kashyap, Rajan and Stein (2002) model (that liquidity risks originating from the two fundamental businesses of banking promotes a diversification benefit) to analyze the link between deposit taking and commitment lending for large, publicly traded banks using regression analysis. Pooling deposits and commitment lending insure against banking liquidity risks and deposits activities insure against liquidity risk from idle loan activities. Bank stock-return volatility increases with idle loan transactions which is insignificant for banks with huge amount of depository dealings. The deposit-lending risk management becomes more reinforced when there is low level of liquidity and when troubled market participants deposit money in banks. Shao and Yeager (2007) used information of large publicly traded U.S BHCs from 1997 to 2005 using regression models to find the link between credit derivatives and their risk, return and lending issues. Banks buy credit derivatives to hedge against risks, to increase their equity and to compensate for the risky loan losses. However, they sell credit derivatives exposing themselves to risks to gain a premium charge. Moreover, the credit derivatives users enjoyed minimal returns and increase risks which are compensated. Their findings implied that on a general basis, the impact of credit derivatives on risk relies on the risk management strategies. Holod and Kitsul (2008) used panel data of stock returns from 53 U.S BHCs from 1986 to 2007. They found that after 1996, poor capitalized banks engaged in active trading transactions are more exposed to systemic risks compared to well capitalized banks. Banks cannot always have enough capital to cushion the market risks and must sell their illiquid assets or invest in the financial markets to compensate for the lack of capital to adhere to the market-based capital requirements. Capital requirements in Basel II do not help to reduce banking risks totally but contribute towards increasing systematic risks. Topi (2008) used a model of Allen and Gale (2004) where banks offer deposit contracts to ex ante identical, risk averse depositors who face heterogenous liquidity shocks for Bank of Finland which shows that the liquidity can impact on the banks motivations to minimize the default losses. The bank runs encourage the banks to avert the credit losses after the sub-prime mortgage crisis. However, the bank runs without a signal of the credit risks will reduce the banks willingness to curb the incidence of credit losses. The central bank can mitigate the propensity of liquidity stress for solvent banks rather than insolvent banks. In addition, this research provides an area for further research where the policy interventions and financial market innovations can be integrated in the model to identify the impact on banks motivations. Achou and Tenguh (2008) used regression model for Qatar Central Bank by executing a time-series analysis of financial data from 2001-2005 to examine the correlation between profitability and loan losses. They showed that effective credit risk management improves the financial result of the bank with the aim to secure the banking property and to work in the welfare of the market participants. Besides, their study revealed that credit risk management infrastructures are used to minimize the credit losses. Banks with efficient credit risk management system have insignificant loan default ratios, good revenues, minimal non-performing loans and are able to tackle credit losses. Minton et al. (2008) investigated the use of credit derivatives using U.S BHCs (assets overtakes $ 1 billion) and non-missing data on credit derivatives use from 1999 to 2005. Few companies use credit derivatives for dealer activities rather than for hedging against default losses. Credit derivatives use is constrained because the liquidity of credit derivatives market is favorable for investment grade companies since they can use derivatives to insure against the default losses. Therefore, the illiquidity of credit derivatives market affects the non-investment grade companies as they need confidential information for loans where higher cost of hedging will dissuade banks to hedge. Nevertheless, the bank borrowers get loans at a cheap price and banks are more on a competitive stance with the capital markets to provide loan facilities if the credit derivatives can help bank to retain capital. Credit derivatives can only promote the financial health of banks if they generate lesser ban king risks. The sub-prime crisis prior to 2007 has shown that the dealer activities via the credit derivatives contain many risks and in 2008 generated systemic risks. This study provides an avenue to assess the risks posed by credit derivatives when engaging in dealers transactions dealers. Bedendo and Bruno (2009) differentiated between the application of loan sales, securitization and credit derivatives for a sample of US large domestic commercial banks (total assets greater than one billion USD) for June 2002-2008   They found that the most CRT users employ conservative tools and large international banking corporations utilize credit derivatives. They detected that highly capitalized banks with less risky portfolios purchase credit derivative protection to hedge against capital inadequacy.   Moreover, banks with riskier loan portfoli Analysis of Risk Management in Banking Activity Analysis of Risk Management in Banking Activity The Case of Mauritian Banks Financial deregulation, globalization and liberalization have heightened considerable banking risks. Moreover, banks necessitate effective risk management strategies to promote banking welfare, protect outside agencies transacting with banks and to ensure stable banking operations. Risk managers need to focus on the diversity of risks and secure the interests of the overall banking sector. Risk Management is nowadays segregated where there is inconsistency in reporting, insufficient evaluation and low quality of management and becomes ineffective due to lack of pertinent information and improper analysis of the risk factors (Prabir Sen, 2009). Nonetheless, banks are unable to keep equilibrium in the situations of risks with huge losses and slight possibility of occurrence and risks of minimal losses with propensity of occurrence.   According to Talmimi and Hussein, Mazroezi and Mohammed (2007), risk management enables profits maximization and entails restrictions in risky activities. Risks can be averted by ordinary banking procedures, can be shifted to other institutions and can be managed actively in banks (Oldfield and Santemero, 1997). 1.1 Objectives of the Study The core objectives of the study are: To probe into the methodologies and aspects of the risk identification, assessment, monitoring, management and mitigation in Mauritian banks. To ascertain the effects of risk management on Mauritian banks. To determine to which extent risk management strategies like Basel II, derivatives, stress testing and Asset and Liability Management are applicable in Mauritian banks. To analyze the factors which improve Risk Management Practices in Mauritian banks and the perspectives about Banking Risk Management. To explore the reasons for managing risks in Mauritian banks. 1.2 Statement of the Problem There is an increasing awareness that the gradual intensification of banking risks impacts adversely on banking transactions which raises the concerns for risk management. The basis concern of this study is whether the Mauritian banks are using diverse risk management tactics and whether they are able to cope with the present and prospective challenges of risks and risk management requirements. 1.3 Significance and Contribution of the Study Bank managers can be conversant with divergent risk management techniques, their implications, effects and their relevance in banks through the practical aspects of risk management application. Bank managers can analyze the mechanisms resulting in the increasing level of risk exposures. Business administrators and management practitioners can use this study as guide to design efficient measures to mitigate risks in the process of developing marketing tactics. 1.4 Structure of the Project Chapter 2 elaborates on the literature review related to the risk management. Chapter 3 uncovers the general overview of Mauritian Banking Sector. Chapter 4 focuses on the detailed research methodology that has been used. Chapter 5 discusses the analysis and interpretation of the Mauritian banking risk management information. Chapter 6 probes on the recommendations to improve Risk Management practices in Mauritian banks. Chapter 7 concludes the whole findings of the project. PART 1- THEORETICAL ASPECTS 2.1 Introduction The advent of technology, globalization and the competition has encouraged banks in risk taking activities exposing banks to risks. Regulatory and supervisory institutions have emphasized the need for banks to enhance their risk management practices. Risks arise from the probabilities of the occurrence of losses and usually emerge from the internal and external banking transactions. 2.2 Banking Failures determinants The past decades have encountered numerous bank turbulences where high costs have been incurred on both local and overseas level (Gaytà ¡n and Johnson 2002, p.1), hindering the credit facilities, minimizing investment and consumption and generating bankruptcy cases (Demirguc-Kunt and Detragiache, 1998a, p.81). According to them, the expensive monetary policy was used to force the sound banks to sustain the failures of insolvent banks which dissuade risk management. Fluctuations in interest rates post abolition of Brettons Woods System, higher banking competition, the non existence of intermediation margins, unskillful lending and investment tactics (Hellwig 1995, p.724-726 ) , the diminishing role of the oligopoly rents as stated by Gehrig (1995 cited Hellwig 1995, p.726 ), the lower level of capital reserves in banks, companies high reliance on banks for external finance mentioned by Rajan and Zingales (1998 cited Randall S. Kroszner 2007),systemic shocks caused by credit risks, the inability to diversify loans, trade deterioration and decrease in asset prices caused bank failures argued by Gorton (1988 cited Demirguc-Kunt and Detragiache1998b, p.85). Moreover, regime changes like financial repression, liberalization and severe macroeconomic conditions encourage the entry of inexperienced players and preference for the acquisition of useless loans stated by Honohan (1997 cited Gaytan and Johnson 2002, p.4) have generated banking turbulences.   Non-performing loans increase where the asset returns are less than the returns to be paid on liabilities. Banks borrow in international currency and lend in local currency where the latter depreciates if the foreign exchange currency risk is shifted to local borrowers if they loaned in foreign currency. Banks buy insurance protection which encourages risk taking activities in the absence of prudential supervision and regulation. Bank managers engage in fraudulent actions by taking a portion of money for their personal use (Demirguc-Kunt and Detragiache 1998c, p.85-87). Diamond and Dybrig (1983 cited Demirguc and Detragiache 1988d, p.86) argued that banks portfolio assets can worsen and depositors believe that other depositors are removing their money. Obstfeld and Rogoff (1995 cited Demirguc and Detragiache 1988e, p.87) mentioned that an anticipated devaluation could occasion bank runs in local banks and these deposits are shifted overseas and render the domestic banks without l iquidity. 2.3 Banking risks alsamakis et al (1996 cited Young 2001, p.57) argued that risks can be classified as pure risks and speculative risks. Pure risks which embody market risks, credit risks, interest rate risks, liquidity risks, country risk and settlement risk are associated with the probability of occurrence of loss or no loss and can be curtailed by risk management strategies. However, speculative risks comprising of operational risks, technology risk, reputational risk, compliance risk, legal risk and insurance risks involve an opportunity for gain or loss which can be hedged. 2.3.1 Credit Risks These major risks occur in banks when the borrower defaults on his obligation to reimburse the principal amount and the interest charged of the loan. Credit risks consist of three types of risks like (Arunkumar and Kotreshwar 2005, p.9): Transaction risk emerges from the fluctuations in the credit type and capital depending on how the bank underwrites individual loan transactions. Intrinsic Risk is risk prevailing in some institutions and on granting credit to some firms. Concentration risk is the average of transaction and intrinsic risk within the portfolio and encourages granting of loans to one borrower or one firm. 2.3.2 Interest rate risks Koch (1995 cited Beets and Styger 2001, p.9) defined interest rate risk as the future changes in a banks net interest income and market value of equity due to changes in the market interest rates. Kropas (1998 cited Martirosianien) enumerated three types of interest rate risks like: Reappraisal risk stems from the diverse periods of assets and liabilities Profitableness curve risk entailselements affecting the reappraisal risk. Basic point risk concernsflawed association between the receivable and payable interest rate. Option risk is where the benefits of options can adversely affect the banks equity. 2.3.3 Liquidity risks Liquidity risks occur when the banks are unable to meet the demands of the depositors because of lack of funds and the illiquid assets resulting eventually in bank insolvency. Credit, strategic, interest rate and reputation risks build up liquidity risks (Gaulia and Maserinskieno 2006, p.49). 2 types of liquidity risks are (ADB Report 2008, p.9): Funding liquidity risk is the potentiality to obtain money via the sale of bank property and by borrowing. Trading Liquidity risk arises from making a constant entry in market activities and dealings. 2.3.4 Market risks These risks arise when the value of the financial products changes negatively and consist of currency risk, interest rate risk, equity or debt security price risk (Gaulia and Maserinskieno 2006, p.49). 2.3.5 Operational Risks Basel Committee (2004) which imposes a capital charge defined operational risks as the risk of direct or indirect losses resulting from inadequate or failed internal processes, people, and systems, or from external events. This definition includes legal risk, but excludes strategic and reputational risk. 2.3.6 Reputational Risks These risks emerge when the number of clients decreases as they hold negative perspectives about the quality of services offered by the banks. 2.3.7 Strategic risks Strategic risks arise when bad decisions and projects are undertaken to develop a special system in banks due to the lack of resources, technological tools and the expert staff. 2.3.8 Foreign Exchange Risks These risks come when the prices of the currency fluctuate when engaging in foreign activities. There are 3 types of foreign exchange currency risks. (Deloitte Treasury and Capital Markets 2006) Transaction risk entails the future of original cash flows like imports and exports. Translation risk is concerned with the disparities between foreign exchange encountered when again transforming a foreign exchange value into the functional currency of the company concerned. Translation risks are usually converted into transaction risks on a late basis as earnings are repatriated or assets and liabilities are realized. Economic risk arises when indirectly exposed to buying and selling of goods from someone who buys goods overseas. 2.3.9 Systemic risks The bank cannot collect money from an organization it is dealing owing to the political, economic and social conditions prevailing in the country where the organization is situated. Country risk includes political, economic risk and transfer risk (National Bank of Serbia). 2.3.10 Legal Risks Legal Risks are losses incurred when the bank is sanctioned by a court for the non-compliance with the lawful rules and regulations and on not fulfilling its obligations towards the other parties (National Bank of Serbia). 2.3.11 Financial Fraud There is mismanagement of money and fraudulent actions from the members of the banks who embezzle some deposited money and when there is lack of security controls. 2.4 Bank risk management methods Greenspan (2004 cited in Lam 2007, p.3) said that It would be a mistake to conclude..that the only way to succeed in banking is through ever-greater size and diversity. Indeed, better risk management may be the only truly necessary element of success in banking. 2.4.1 Risk Management in Banking Sector Flaker (2006, p.4-8) proposes three methods: 2.4.1.1 Risk Identification The board must set the risk profile of the bank and identify the risk-return tradeoff. The bank should understand and identify types of risks exposures, their sources and their effects on the overall banking stability. 2.4.1.2 Risk management and reduction Risk management and minimization embody the following: (1) Allow loans after considering their financial status of the borrowers. (2) Comparison of the expected risks with the actual ones to diminish the loan losses in a bigger portfolio. (3) Loan losses will decrease due to diverse borrowers in the lending transactions. (4) Actual risks can be compensated through the opposite movement of other risks in particular financial activities. (5) Insurance negotiations can be used to protect against diverse risks. 2.4.1.3 Risk Management System This flexible system encompasses the combined structure of identification, evaluation and risk mitigation techniques. The Board must set up a strong risk culture and an effective governance structure where the risk management system aligns with the existing structure of the bank. Risk management procedures are possible when retaining higher level of capital to cushion the risks. Furthermore, the risk management functions comprises of: (1) Delegation of responsibilities to each banking segment (2) Auditing system to deal with the internal control processes and proper execution of risk controls (Nikolis, 2009). (3) Ongoing reviews, reporting, updating and the control of risk management system must be executed to ensure that they tailor with the banking aims (4) Training courses gaining know-how about the design of the risk management system and risk models must be offered to avert banking failures. (5) Establish rules and regulations and take necessary actions to those who contravene with them regarding risk management practices. (6) Participation of the banks, regulatory and supervisory bodies where information is disseminated externally and internally in the banks (Kroszner, 2007). 2.4.2 Asset and Liability Management Asset and Liability Management entails the design of organizational and governance models which define the risk approaches subject to the banking operations (ADB 2008, p.10). 2.4.2.1 ALM operations are as follows (ADB 2008, p.10-12): ALM ensures a risk and return management process where the combination of expertise and risk appetite is needed. ALM unit manages bank risks either through a passive or aggressive approach thus increasing its value. ALM unit investigates upon the static and dynamic mismatch; sensitivity of net interest income; and, market value under multiple scenarios -including under high stress. The net interest income evaluates the sophisticated banks operating results. It does not project the effects of risk compared to the economic value which can identify banking risks but is inaccessible to most banks. 5. Funds Transfer Pricing eradicates the interest rate risks by securing a spread in loan and deposits by allocating a transfer rate that mirror the repricing and cash flows of the balance sheet. Liquidity risks can be managed like diversification of financing sources, correlate the liquidity risks with other risks and use stress testing analysis. 2.4.3 Stress testing Practices Stress testing is another risk management strategy where Stress testing is a generic term used to describe various techniques and procedures employed by financial institutions to estimate their potential vulnerability to exceptional but plausible event (Kalfaoglou 2007, p.1). It uses statistical data analysis to risk management techniques, interpret and control the unfavorable outcomes. JP Morgan Chase has integrated stress testing equipment to manage and analyze the sources of possible banking risks, implement tests on the value of its portfolio, analyze its risk profile and contemplate the effects while applying diverse scenarios. An effective risk management scheme, stress testing project and bank staff expertise are requisite to tackle the statistical and economical fundamentals of stress testing with a data measurement tool. Board of directors should monitor the inputs of stress testing system (Seminar on Stress Testing Best Practices Risk Management Implications for Egyptian Banks 2007, p.2-3). Furthermore, the 2 types of stress testing strategies in banks like: (1) Simple Sensitivity Test deals with the rapid fluctuations of the portfolio value due to a risk factor on a short term basis. (2) Scenario analysis is used by large complex banks and is associated with a realistic and econometrics approach towards shifts in portfolio value due to changes in many risk factors. 2.4.4 Basel II Basel II published in June 2004, promotes banking supervision and emphasizes the specified capital requirements to cushion against potential losses. Basel II uses qualitative and quantitative requirements to monitor risk management strategies, to ensure compliance with regulations and reinforce corporate governance structure. The risk based supervision has enabled the supervisors to concentrate on the origins of banking risks. 2.4.4.1 Pillars of Basel II Pillar 1 entails capital needed for credit risk, market risk and operational risk. Moreover, banks under this regime must have a capital adequacy of 8 %. The methods for the computation of the capital charge to measure operational and credit risks (Ma, 2003)are: Basic Indicator Approach The size and capital requirements of the operational risk are estimated as a fixed proportion of the banks net interest income and non-interest income, measured as the average over the last three years. The Standardized Approach –The activities of the banks are allocated risk ratios weights related proportionally to the quantity distributed to every category. The aggregate capital requirements are the addition of all the requirements for the categories. Advanced Measurement Approach Computation of credit and market risks and the capital requirements are founded on the banks internal system for the measurement and management of operational risk for large banks An Internal Rating Based System The BIS stated that capital requirements must be founded on a qualitative and quantitative analysis of credit risk and must be used for diverse bank units. Founded IRB approach indicates that large banks should calculate probability default related to a borrowers grade to demonstrate the capital requirement level. However, under advanced IRB approach, these banks with an internal capital allocation can furnish the loss given default and exposure at defaults which are processed. Pillar 2 A supervisor must ensure that the bank has the adequate capital requirements to deal with risks. Banks estimate the internal capital adequacy by adopting quantitative and qualitative techniques. On-site investigation and ongoing reviews probe in capital adequacy. Pillar 3- Market discipline framework provides with detailed information about the banks risk profile to evaluate and report capital adequacy where risk exposures can be analyzed through quantitative and qualitative approach regularly. The risk based capital ratios and qualitative information about the internal procedures are needed for capital adequacy purposes. 2.4.5 Derivatives olatility of financial market, the liberalization and deregulation in the 1980s and 1970s has founded derivative markets (Hehn no date a, p.100). Derivatives are financial tools (like futures, commodities futures, options, swaps, forwards) whose returns, values and performance are derived from the returns, values and performance of the underlying assets. Hedging is covering against potential risk through an opposite position in the derivative markets. Bank International Settlements (2004 cited Bernadette A. Minton et al 2008, p.2) noticed that the quantity for derivatives has leveled from $698 billion in 2001 to $ 57,894 billion in 2007. Proper derivatives trading can insure against market risks and interest rate risks without retaining additional capital requirements in the balance sheet (Kaudman no date a, p.85). The determinants of derivatives use are banking size, balance sheet constituents, aggregate risk exposures, profitability, performance and risk taking incentives. Jason and Taylor (1994 cited in Hundman b, p.86) argued that speculation used with derivatives to make profitable returns can engenders more interest rate risks. Moreover, Tsetsekos and Varangis (1997 cited Roopnarine and Watson 2005a, p.9) argued that financial derivatives promote increase in resource allocation and increase the productivity of investments projects. Jorion (1995 cited Roopnarine and Watson 2005b, p.9) argued that in price discovery, market participants are offered information on balance prices that mirror the present demand on the supplies which enable effective decision making and reveal the position of the cash prices. Besides, liquid funds are increased and transaction costs are reduced and the futures market reflects the large transactions at prevailing prices (Roopnarine and Watson 2005c, p.10).   However, derivatives have generated enormous failures in Barings Collapse, Merill Lynch and Procter Gambler (Hehn b, p.101). Bank staff must be trained and educated about derivatives use. Derivatives trading can be constrained with the liquidity problems and legal uncertainties that emerged from the market price movement which is argued by Bhaumik (1998 cited Roopnarine and Watson 2005d, p.11). Pricing of assets becomes difficult if there is insufficient information about the derivatives use. Principal agent problem is aggravated (Roopnarine and Watson 2005e, p.12). The derivatives market must be regulated properly to avert fraudulent actions and insolvency. Partnoy and Skeel (2006 cited Minton et al. 2008a, p.2) claimed that derivatives intensify systemic risks as banks do not control the lending activities. Hunter and Marshall (1999 cited Roopnarine and Watson 2005f, p.28) argued that derivative markets attract investors whose private information are assimilated in the observable p rices and diminish the bid ask spread. The underlying cash prices reduce the transaction costs and the demand for money thereby affecting the operations of the monetary policy. Bedendo and Bruno (2009a, p.2-4) argued that credit transfer tools like securitization, credit derivatives and loan sales reduce regulatory capital requirements, motivate lending and enhance the banking liquidity positions. Moreover, they remedy the issues of information asymmetries as stated by Greenbaum and Thakor (1987 cited in Bedendo and Bruno 2009b, p.2). Duffee and Zhou (2001 cited Minton et al. 2008b, p.11) mentioned that credit derivatives are used if the loan sales or securitization techniques become expensive due to moral hazard problem and can shift default risk where information advantage is insignificant and retain some portion of risks where information advantage is huge. Banks use credit transfer tools as they have little access to inter-bank funding, huge funding expenses, low capital and want loan transfer (Bedendo and Bruno 2009c, p.8-9). CRT tools encourage banks to use originate-to-distribute models via aggressive lending occasions (Bedendo and Bruno 2009d, p.10) . Pricing of CRT tools is preferred by large banks having higher skills. Some loans sales have loan characteristics like small size, asymmetric issues and standardization convenient for securitization (Bedendo and Bruno 2009e, p.11). PART 2- EMPIRICAL REVIEW There is a growing literature that examines the relationship of banking risks with other many economic and financial variables. Moreover, this section describes the diversity of banking literature where different types of risk management strategies were tested and criticized. Even the links between different types of risks were experimented using banking information and models derived from other authors empirical work. Peek and Rosengren (1996) found that the large users of derivatives for speculation purposes are the troubled organizations using derivative information of 25 active banks in the United States from 1990 to 1994 in the US dummy regression model.   Banks are unable to track the risky aspects of these derivatives and guide their risk profile because of insufficient derivative information which could jeopardize the overall banking system. The onsite targeted examinations can enable banks to window dress their derivatives. Regulatory rules and formal transactions must be imposed on the banks taking unfavorable speculation and to constrain the moral hazard problem related to the derivative transactions. The use of speculative derivatives constitutes a stringent criminal penalty for breaching the established rules and regulations. Cebenoyan and Strahan (2001) used data of the sale and purchase of bank loans and those loans sold or purchased without recourse from all domestic commercial banks in the US from 1987 to 1993 in a regression model. They found that banks that engage in loan sales market to manage credit risks retained minimum level of capital which can be modified. Moreover, these banks retained more risky loans since they managed credit risks and were exposed to an unsafe position despite they endured lower level of risks compared to the other banks who manage risks without the loan sales market. Banks that employed the risk management techniques are more inclined to engage in risk taking activities. In fact, banks that manage credit risks lend to more risky loans depicting that complex risk management practices enhanced the bank credit position rather than minimizing the risks. Gatev et al (2006) investigated upon the presence of liquidity risk from both sides of bank balance sheets using some aspects of the Kashyap, Rajan and Stein (2002) model (that liquidity risks originating from the two fundamental businesses of banking promotes a diversification benefit) to analyze the link between deposit taking and commitment lending for large, publicly traded banks using regression analysis. Pooling deposits and commitment lending insure against banking liquidity risks and deposits activities insure against liquidity risk from idle loan activities. Bank stock-return volatility increases with idle loan transactions which is insignificant for banks with huge amount of depository dealings. The deposit-lending risk management becomes more reinforced when there is low level of liquidity and when troubled market participants deposit money in banks. Shao and Yeager (2007) used information of large publicly traded U.S BHCs from 1997 to 2005 using regression models to find the link between credit derivatives and their risk, return and lending issues. Banks buy credit derivatives to hedge against risks, to increase their equity and to compensate for the risky loan losses. However, they sell credit derivatives exposing themselves to risks to gain a premium charge. Moreover, the credit derivatives users enjoyed minimal returns and increase risks which are compensated. Their findings implied that on a general basis, the impact of credit derivatives on risk relies on the risk management strategies. Holod and Kitsul (2008) used panel data of stock returns from 53 U.S BHCs from 1986 to 2007. They found that after 1996, poor capitalized banks engaged in active trading transactions are more exposed to systemic risks compared to well capitalized banks. Banks cannot always have enough capital to cushion the market risks and must sell their illiquid assets or invest in the financial markets to compensate for the lack of capital to adhere to the market-based capital requirements. Capital requirements in Basel II do not help to reduce banking risks totally but contribute towards increasing systematic risks. Topi (2008) used a model of Allen and Gale (2004) where banks offer deposit contracts to ex ante identical, risk averse depositors who face heterogenous liquidity shocks for Bank of Finland which shows that the liquidity can impact on the banks motivations to minimize the default losses. The bank runs encourage the banks to avert the credit losses after the sub-prime mortgage crisis. However, the bank runs without a signal of the credit risks will reduce the banks willingness to curb the incidence of credit losses. The central bank can mitigate the propensity of liquidity stress for solvent banks rather than insolvent banks. In addition, this research provides an area for further research where the policy interventions and financial market innovations can be integrated in the model to identify the impact on banks motivations. Achou and Tenguh (2008) used regression model for Qatar Central Bank by executing a time-series analysis of financial data from 2001-2005 to examine the correlation between profitability and loan losses. They showed that effective credit risk management improves the financial result of the bank with the aim to secure the banking property and to work in the welfare of the market participants. Besides, their study revealed that credit risk management infrastructures are used to minimize the credit losses. Banks with efficient credit risk management system have insignificant loan default ratios, good revenues, minimal non-performing loans and are able to tackle credit losses. Minton et al. (2008) investigated the use of credit derivatives using U.S BHCs (assets overtakes $ 1 billion) and non-missing data on credit derivatives use from 1999 to 2005. Few companies use credit derivatives for dealer activities rather than for hedging against default losses. Credit derivatives use is constrained because the liquidity of credit derivatives market is favorable for investment grade companies since they can use derivatives to insure against the default losses. Therefore, the illiquidity of credit derivatives market affects the non-investment grade companies as they need confidential information for loans where higher cost of hedging will dissuade banks to hedge. Nevertheless, the bank borrowers get loans at a cheap price and banks are more on a competitive stance with the capital markets to provide loan facilities if the credit derivatives can help bank to retain capital. Credit derivatives can only promote the financial health of banks if they generate lesser ban king risks. The sub-prime crisis prior to 2007 has shown that the dealer activities via the credit derivatives contain many risks and in 2008 generated systemic risks. This study provides an avenue to assess the risks posed by credit derivatives when engaging in dealers transactions dealers. Bedendo and Bruno (2009) differentiated between the application of loan sales, securitization and credit derivatives for a sample of US large domestic commercial banks (total assets greater than one billion USD) for June 2002-2008   They found that the most CRT users employ conservative tools and large international banking corporations utilize credit derivatives. They detected that highly capitalized banks with less risky portfolios purchase credit derivative protection to hedge against capital inadequacy.   Moreover, banks with riskier loan portfoli

To Kill a Mockingbird by Harper Lee - The Importance of Atticus Finch :: Kill Mockingbird essays

The Importance of Atticus Finch in To Kill A Mockingbird  Ã‚  Ã‚   The core character of a novel is responsible for maintaining the stability of society within the novel, exhibiting qualities of a true hero, and constantly emphasizing the novel’s central themes.   In the classic, To Kill A Mockingbird, Atticus Finch serves as the core of the novel by displaying a character of stability, humility, and high moral standards.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Atticus Finch is a character of stability in an unstable society.   He is a balanced figure who is able to cope with the unreasonable and highly emotional town in which he lives.   He can manage the prejudiced white masses and still deal justly with the underprivileged Negro population of Maycomb.   He is one of the few people who understand the individual worth of a person regardless of the color of his/her skin.   This enables him to defend Tom Robinson based solely on the concept of justice and equality.   In his closing argument, Atticus explains that, â€Å"there is one place all men are created equal.   That place is in a court room† (Lee 205).   This justifies the fact that Atticus believes in equality in a society, the equality not only of race, but also of sex, class, and religion as well.   His view of equality and justice is a symbol of his own psychological stability throughout the novel.   Accordingly, in the final analys is of the story, Atticus represents the â€Å"justice† in the community of Maycomb.   His stability throughout the book is one of the many characteristics that depict Atticus Finch as the novel’s core.   Ã‚  Ã‚  Ã‚  Ã‚   In a town of such undeserved glory, Atticus Finch is the one character who is worthy of glorification.   Yet, his humility further illustrates Atticus as a man of pure stability.   Surrounded by the self-righteousness of others, he is able to remain emotionally grounded.   Atticus Finch is a highly accomplished man of great intelligence, but even greater meekness.   For example, during one of their chats with Miss Maudie, Scout learns that her father’s childhood nickname was â€Å"Ol Shot† (Lee page #), which referred to his unbelievable marksmanship.   When Scout becomes excited about telling all of her friends about her father and his incredible talent, Jem says, â€Å"I'd reckon if he wanted us to know he’d a told us.   If he was proud of it he’d a told us†¦ but Atticus is a gentleman†¦and people in their right minds never take pride in their talents† (Lee 98).

Reading :: essays research papers

For as long as I can remember, I've loved to read: short stories, fiction, nonfiction sometimes, even philosophy if nothing else were available. This term I've been given more reading assignments than I can ever remember having to deal with. This term has been extra special because we studied no less than three types of literature: short stories, poetry, and drama. While I was in high school, a short story was a book with less than three hundred pages. This term I learned that even though a short story may be only a few pages long, there are chapters of interpretation, ambiguity, and symbolism to understand. In "The Lottery" by Shirley Jackson, I found a story teeming with so much symbolism that I had to read the story twice before I understood half of it. In "Araby" by James Joyce, I learned to look deeper than just the surface of the original wording to find new meanings to the story. Poetry, on the other hand, has been like a curse to me. I felt as if I were out of my depth when forced to read it. I could read the words, but comprehension was beyond me. Then, just last week I discovered poetry is indeed a foreign language. "I've always picked up languages easily," I thought. I then knew that all I had to do was translate the dead language of poetry into terms I could understand, then, with a blinding flash, comprehension dawned. E.E. Cummings is really just a dirty old man. Carlos Williams is a political activist, and Dylan Thomas is incredibly grief stricken about the loss of some loved one. The emotions of the poems were almost too overwhelming to deal with. Once I was told that as we evolve, so to does our language. I thought my teacher had been in the sun too long when she told me that. But when I started reading works by William Shakespear, I found just how right she was. The writings of Shakespear also have the added benefit of being like poetry. For me drama is tedious, boring, and too hard to keep track of.

American Universities Contribution to Society Essay

Since the first time a female high school graduate stepped foot into an American university, it has become a tradition for high school graduates to attend college. Prior to this shift in American culture, only wealthy families could send their sons. Instead, sons worked for the family business, or joined the military. During this time it was a privilege to attend a university. The men that came out of these American institutions graduated with a special skill that they could offer to the American public. Now most young men and women attend college. The question I wish to raise now is: what does the American university contribute to the public? The answer to the question is simple. The American university still produces a well-rounded, cultured individual. American universities since have altered their ways of running their institution to account for the large enrollment of students. Institutions hired more professors to teach smaller classes so students could get more focused attention rather then having professors teach larger classes. Several hundreds of universities now have organizations, clubs and activities that culture and shape their students. These organizations provide the students with opportunities to meet new people and learn about their backgrounds and differences. This is crucial for a college graduate when they are ready to go into the business world. The American university gives their student this quality of understanding of differences between people they encounter, which allows the graduates to better understand their colleagues in the workforce. Collegiate organizations also provide many experiences, such as community service activities, which provide the students a minimum understanding of what it is like to poor or misfortunate. Most of these students can benefit the American culture by starting their own organizations and benefiting the less fortunate. Another thing a college could offer the American culture is a well educated person, also skilled in a specified field. During their collegiate career, students choose what they would like to study because, eventually, they would like to have an occupation involving what they studied. Considering the fact that the students enjoy what they study, it would do them better in the business world. It would allow them to work to their fullest because they like what they do. Not only would a skilled person properly execute their job, they make it easier to interact with their associated because they have learned how to work with people and their differences. This is what an American university provides to the American culture. A well rounded man and women, who, over their collegiate career, have learned to accept differences, helped out the community and studied what they loved, is what an American university gives to American society. The more mature people of today’s society don’t believe that the youth of America have it in them to fill their shoes and lead America to a brighter tomorrow, but that isn’t right. By that I don’t mean their parents, I mean the war vet who feels 1950s America was ideal. A good college experience and education can and will provide American culture with the well cultured, experienced future leaders of America.

Comparison/Contrast Between American Indians Essay

Over 400 years ago, the Powhatan Indians inhabited a place called Jamestown, Virginia. Their every-day life was disrupted, though, when, in 1607, a ship carrying men from England came to claim their land, making Jamestown their new capital. This could have been seen as a bright opportunity for both parties: the Powhatan Indians could have shared their knowledge of the land they occupied, and the English could have shared some of the skills and technology brought over with them. But, of course, the two groups found that they had many differences. They had a hard time sharing and trading because of how different they were, such as in their belief systems, materials and resources, and their living environments to name a few. As stated before, the Powhatan Indians and the English had different belief systems. For example, the English, much like many Americans today, were monotheist, believing in only one god. The Natives, on the other hand, believed that there were many gods. There were not only differences in their religious beliefs, though. For instance, the Powhatan Indians honored their women and treated them with a high respect. They believed that women were the â€Å"giver of life† in society, therefore they were greatly valued. The Colonists, on the other hand, believed that women were property. Land ownership was a conflict as well. While the Indians believed that the land was something that was Mother Earth’s and could not be owned, the English claimed land as theirs every chance they got. Another difference between the Powhatan Indians and the Settlers was resources and how they were used. The Natives, for example, used hand-made weapons and tools that were made of stone. With the English, though, came their knowledge of metal, meaning that they had more advanced tools and weapons made of this material. There was a difference in the types of foods as well. Back in England, when one referred to â€Å"corn†, it was meant as anything in the wheat family. When the English came to the New World, though, they were introduced to the Indians’ version of corn: maize. This wasn’t the best thing, because when the settlers ate the maize, they became very sick, as they weren’t used to it. The two parties in some ways had similar living environments. For instance,  both the Indians and the English had religious gathering areas. For the English, there was a large church where everyone gathered for prayer. The Indians, on the other hand, had a dance circle where the people gathered. Houses in the two environments were different as well. The Indians built semi-permanent houses called Yehakins. The Yehakins had a hut-like structure to them with fire-pits in the center. The English had more structured houses that were shaped just like houses seen today. They were rectangular with straight roofs on top, and a fireplace rather than a fire-pit. Because of differences in their housing structures, they also had different cooking procedures. The Indians cooked things using an open fire outside. The Colonists used a technique in their fireplaces called â€Å"down-hearth cooking.† Eventually more and more English came to live the new life in the New World. With them they brought more and more of the English culture, making more conflicts between them and the Powhatan Indians. The Settlers starting claiming a little more of the native land every day, making it hard for the Indians to live in such a small space. Although there was a lot of potential for both parties to grow from each other, differences got in the way, in some cases causing more diminishing of the cultures than growth.