American-Cuban Relations: A critical analysis

The American Cruise Line is a United States small ship company. Its operations are around Eastern Seaboard in the US. Its operations commencement is dated back in early 1970’s. However, the business stopped sometimes in 1980s due to a decreasing level of customers. Its operations either went in business again in 2000, by launching some three ship fleet with the American Eagle (49 – passenger capacity) being the first ship. Others launched in 2002 and 2005 where the American Glory (49 – passengers) and the American Sprit (98 – passengers) respectively. In 2007, the company is to launch the American Star.The owner had sold the company in late 1980’s before it went under due to operational inefficiencies. Since it’s rebirth in 2002, the company continues to embrace a big growth, with its operation expanding highly. The same rebirth followed an acquisition by the owner of the then former company which was operational in 1980’s. The company is a US based small ship company registered in Maine. Its operations are along the US coastal line form the Maine to Florida. Operational profile. The company owns a much larger fleet with a capacity of 220 square fleets.Its cabins are of a larger size than any other small ship company. In its fleet Profile, its currently operates with three cruise ships such as the American Eagle, American Glory and the American Spirit. Its current decision to launch the fourth ship (America Star) within the year is perhaps its greatest achievement. Its ships are profound in three characteristics which make it to adequately compete with its competitors at the market place. They are highly roomy, and of the most modern nature. (http://www. cruisecritic. com/reviews/cruiseline. cfm? CruiseLineID=57)Their ships have adequate privacy due to the large capacity, intimate relations for their relatively small size as well as allowing its passengers to be able to frequently meet within a week. Their dining room are located at the deck which primarily lowest at the stem point, where it has some windows on its three sides it has other two cabin sized lounges, with the tip deck making open cut facility for the remaining part of the ship. The four decks will then be linked together by an elevator. Many of the cabins have balconies which provide an attractive environment for the passengers on the coastal scenery while traveling.Those without balconies will have their windows painted large pictures which are then opened for free circulation of air and also the different sounds emanating form the sea. They also offer cabin facilities for persons who are single or disabled. Generally, the vessels will have identical features in regard to the facilities, decor and also layout. The passengers are free in their choice of cruise in terms of date or even itinerary without been forced to use a cruise without their choice. (Morgan, 2004) The decors are attractive and exciting, with both muted and a range of simple colors.Their close array is like that of a hotels generic lobby. Its main lounge has a specific location. This is underneath their bridges at a directly forward position. It has a set of tail windows in one of the three sides which are used for providing a way of viewing the attractive scenery while passing. However, the stringent maritime laws have worked to lower the company’s activities. These laws prescribe an attractive package in the certain conditions relating to capacity, modern, operating diameters, and other legal conditions on the cruise business.At one point, we can talk of the advantage into the nature of the business customers. However, the same laws may be argued as stumbling blocks into the cruise business where stringent legacies ought to be followed. Consequently, cruise businesses are required to have a layout of specific modalities in the operational system and the physical nature of their ships. Such conditions have been voted as been hig hly expensive leading to conditions of high operating costs. The company has the launch of the American Star in progress which is to be later in this year.Either, its development of Pearl Seas Cruises within the course of 2008, will find the company at the most competitive edge in the international waters. This would have the same similarities to the other ship models, though it’s highly sophisticated. With a regard to the environmental laws about water pollution, the company has been in the fore front to ensure Low rates of environmental pollution. The construction system of its ships follows a highly conventional manner in which high standards ships manufactured with lower cases of oil spill-over in the water.Either, it has various facilities for ensuring safe custodies for any emergency cases and accidents that would lead to oil spillages in the water. Above these parameters, its high advocacy to the travelers of frontiers that provides conditions for lower environmental p ollution has been ensured by the management. The company has continued to recognize and put in place various campaigns on environmental conservations, and reduction in water pollution. Through such a campaign, it has ensured high operational statuses which provide a hallmark in the conservation of the water environment through reduced pollution.(Sagers, 2006) Organizational structure and current operating environment. The company has provided a layout in terms of its organizations structure. A compliment of various stakeholders to be same structure is therefore available. It has the CEO as the highest rank in the structure. A panel of board of directors also accompanies the same structure. Elsewhere, various managerial staff positions provide management services to the different management offices. The current operating structure may be summarized under the aspect of ship board organizational structure.The shipboard organizational structure is comprised of system of controls into th e various activities and operations at the time of boarding a ship. Like any other organizational activity, the ship boarding activity is comprised of various activities that help an adequate environment for the operations. Different personnel have various delegated responsibilities, which help the smooth process of activities during the boarding time. (Hazell, Fitzpatrick, 2006) Various control persons are therefore delegated with various duties.These include; operations control who is capable of the communication process within the shipping process. The engineering control, who provide various engineering services for the shipboard process incase of mechanical breakdowns; the damage controller, who provide repairs and maintenance to any materials breakdown in the shipping process. The shipboard directors(s), who provides a package of directorship in the control layout systems of the ship board process. Above these profiles, the shipboard organizational structure is compounded by o ther systems of control / control officials.These are medical controls, finance officials, supervisors, safety officers, security control and quality assurance controls. All the controls play their relevant authorities and displiness in correspondence to the requirements of the shipboard process. Summarily therefore, shipboard organizational structure is comprised of a system of control that ensure adequacy in the company’s organization at the shipboard process. The shipboard operating structure is comprised of a system of control available at the process of its operations.While the ship is on its traveling process, there are various operating controls and processes that accompany it for adequate and safe traveling and services. At one level, the demographic population of the company can be echoed in a close perspective between the ships and the passenger volume they operate in. The demographic structure of the company depicts diversity in its clients in terms of geographical parameters. Clients are from the whole region. Generally, the number of children clients has been voted to be low.However, a higher volume of children is available during the summer within the Maine and the New England. Currently the company has its three ships with the American Star at the verge of been launched within this year. (Talley, 2000) The major nationalities working in the onboard process are Americans. The company has had dominance in the employment of Americans for its onboard activities. This is in attribute and understanding that fellow Americans can provide good customers relation in the onboard process during the ship traveling.However, the onboard process is accompanied by a number of activities on process where different personnel perform different roles. Firstly, the role and position of show excursions controller should not be overlooked. This is the controller person in charge of excursions in every port in which passengers are taken through to know the differ ent environments they are driving in. This is taken as a refresher course to the passengers in the long journey processes. Food and drinking personals (waiter) who are allied to the different schedules of the passenger feeding.With the long journey process, passengers are ideally provided with food, this is taken care of by the food controller. Like the shipboard organization structure, the on process is also accompanied by a system of control which includes quality assurance, finance, medical, security, administration, above others. At the onboard process, the persons are responsible for these controls. At the shore side either, a comprehensive, package of management structure, controls and human resources issues is highly pronounced to provide a higher and better environment of the shipping process.Majority of the characteristics of activities found at the shore side is a combination those at the shipboard organizational and operating structures above those of the onboard structur e. A combination of the relevant system of control relating to the various systems of control is therefore attributable to the shore side organizational structure. Marketing positioning The small ship industry in America is highly competitive. The company continue to get a high and stiff competition form its competitors around the world.The success to the company has however been through a package of providing relatively high quality products and services above other strategies which helps it to even pursue well in such a competitive market. It has however a highly developed and established system of itineraries which are found placed in the whole Eastern Seaboard covering the Penobscot Bay at the Maine up to the Florida. (Haigh, Nomikos, Bessler, 2004) The traveling system changes considerably during the various seasons of the year. The cruises allied to England Island have the Block Island as their stopping areas at the summer periods.They can also stop at Nantucket or Martha†™s Vineyard. Trips also change in the course of the year depending on the environmental conditions allied to the navigation process. There is the June offer of itineraries from the Chesapeake Bay which are allied to the Baltimore case. However, these are all short trip cases. The great passageway which is form the Baltimore to the peak of Florida is among its long paths. Elsewhere, the ships will sail via the Antebellum Itineraries, which is form the Jacksonville and the Charleston.This occurs at the periods form November throughout April. The Okeechobee trip is offered as an occasional trip. As the 2008 approaches, other cruises will be introduced by the Pearl Seas Cruises. There destinations are proposed to been Canadian Marmites, St. Lawrence Seaway Caribbean American itineraries and also the Central American itineraries. This 2008 activity plan is a clear indication of the high level of expansion by the company in their itineraries. (Still, 2001) The target market of the compa ny is to include the whole of the US costal line.However, this is only its immediate (short run goals) with the intensity into its expanding phenomena, the company is perhaps to embrace its final attribute of expanding to reach the various water ways and ports in the US coastal strip. Elsewhere, its greatest achievement would be expanding to the broad foreign market. Foreign market is seen as an attribute in which the company will develop in capacity to even reach the global market, through mergers, acquisitions, starting or even through Franchises. Miscellaneous details The American Cruise company has continued to embrace the sovereignty as one the largest small ship company in US.Over the last three years, it has had an average of reported profit amounting to $ 694 per annum. The price of it share in the American stock market has considerable been improving. Since is rebirth in 2002, it has continued to show an increasing level of profit. . References Cruise Review and News (2007) American Cruise Lines. Retrieved on 7th Nov. 2007 from http://www. cruisecritic. com/reviews/cruiseline. cfm? CruiseLineID=57 Haigh, M. S. , Nomikos, N. K. , & Bessler, D. A. (2004). Integration and Causality in International Freight Markets: Modeling with Error Correction and Directed Acyclic Graphs.Southern Economic Journal, 71(1), 145+. Retrieved November 6, 2007, from Questia database: http://www. questia. com/PM. qst? a=o&d=5006987575 Hazell, L. C. , & Fitzpatrick, S. M. (2006). The Maritime Transport of Prehistoric Megaliths in Micronesia. Archaeology in Oceania, 41(1), 12+. Retrieved November 6, 2007, from Questia database: http://www. questia. com/PM. qst? a=o&d=5015172724 Morgan, C. (2004). The Public Nature of Private Industry in Confederate Georgia. Civil War History, 50(1), 27+. Retrieved November 6, 2007, from Questia database: http://www. questia. com/PM. qst? a=o&d=5006500885Sagers, C. (2006). The Demise of Regulation in Ocean Shipping: A Study in the Evolution of Co mpetition Policy and the Predictive Power of Microeconomics. Vanderbilt Journal of Transnational Law, 39(3), 779+. Retrieved November 6, 2007, from Questia database: http://www. questia. com/PM. qst? a=o&d=5019554251 Still, C. (2001). Thinking outside the Box: The Application of COGSA's $500 Per-Package Limitation to Shipping Containers. Houston Journal of International Law, 24(1), 81+. Retrieved November 6, 2007, from Questia database: http://www. questia. com/PM. qst? a=o&d=5000945085 Talley, W.K. (2000). Ocean Container Shipping: Impacts of a Technological Improvement. Journal of Economic Issues, 34(4), 933. Retrieved November 6, 2007, from Questia database: http://www. questia. com/PM. qst? a=o&d=5001180959 The state of conflict that has come to define the relationship between the United Sates of America and the tiny island nation of Cuba is, unknown to many, as old as the history of Cuba as a nation state. The first signals of conflict came early in the life of Cuba as a Spanis h colony when in 1795 Negro slaves and whites came together to revolt against the Spanish overlords.That momentous occasion caused a great disquiet amongst slave owners in the American south, and thus attracted the keen attention of the American establishment, who did not desire such an example to be set too close to home. The first overt reaction of the American rulers at that time was to make overtures to Spain for the purchase of Cuba. In this respect, Thomas Jefferson, the American President, was reported to have said in 1809 that, â€Å"I candidly confess that I have ever looked upon Cuba as the most interesting addition that can be made to our system of States. †Though Spain persistently rejected the American request, the Americans never dropped their desire to annex Cuba by any possible means. This ardent American desire and policy on Cuba was summed up by the then American Secretary of State, John Quincy Adams, â€Å"These islands (Cuba and Puerto Rico) are natural a ppendages of the North American continent, and one of them (Cuba) almost within sight of our shores, from a multitude of considerations has become an object of transcendent importance to the commercial and political interests of our Union†¦ These are laws of political as well as physical gravitation.† It was therefore only a matter of time before the first real conflict over Cuba erupted. When it did, it did so in two fronts, one involved America and Spain while the other involved Cubans themselves, who desired independence from Spain. In 1823, US President Moore declared the Western Hemisphere, including Cuba, as an exclusive sphere of influence of the United States, warning European powers to take heed and steer clear of any interference in the affairs of any nations within the so declared ‘sphere of influence’.Subsequently, in 1898, Cuba became a theatre of war between the Americans and Spain, the Spanish American War. This was coincidentally at a period C uban revolutionaries claimed they were on the threshold of liberating Cuba from Spanish rule. The Americans won in the ensuing war and subsequently took control of the governance of Cuba as protectorate. What was to follow was a despoliation of the Cuban state by successive American appointed administrators, land speculators, profiteers, the Mafia and their local Cuban collaborators.Attendant to these was the economic emasculation of the Cuban nation as American colonists swooped on the island and acquired large swats of fertile farm land, marginalizing the local people, and in so doing sowed the seeds of the many conflicts that were later to help shape American-Cuban relations for almost the past half century. 2. 7. 1. The Actors General Fulgencio Batista Formerly a Sergeant in the Cuban Army, Batista came into limelight when he led a group of sergeants, ‘The Revolt of the Sergeants’ to overthrow a sitting government in 1933.Though he relinquished power shortly afterwa rds to become the army chief, he made himself the elector of the next president and subsequent five others until 1940 when he contested and won the presidency for himself. Successive American administrations found him a willing ally and were in tacit support of his conducts and rule over Cuba. Under Batista, the Miami mafia mob became the co-rulers of Cuba. Batista was to retire from presidency in 1944 only to make a quick come-back in 1948 when he was elected into the Cuban senate. Later in 1952 he sidestepped the elections and took over power in a coup.With the support of U. S administration of Harry Truman, Batista cancelled the elections all together and became the maximum leader. Fidel Castro was one of the contestants in that botched election. Fidel Alejandro Castro. The son of a wealthy Creole farmer, Castro was educated in Jesuit schools, and finally graduated from the Havana University with a law degree. Disillusioned with the poverty he saw around him and the display of we alth by the American colonists, Fidel joined the political movement with intent to stand for an election into the Cuban congress.When this desire of his was scuttled by the cancellation of the elections and the usurping of power by General Batista in 1952, he took up arms with other rebels, ‘The July 26 Movement’, including his brother Raul to wrest power out of Batista forcefully. Their attempt at rebellion in 1953 ended in disaster and the killing of most of the rebels. Fidel, his brother and a few others were arrested, tried and jailed, but later released. Castro was to strike again, and eventually defeated Batista’s soldiers to take over power in 1959.On assumption of power, Castro took several populist actions, which endeared hum to the down trodden Cuban masses. But his later actions of nationalizing all American run and owned businesses in Cuba, closing down all casinos, whore houses and sending the mafia on the run, as well as his switch to communism earn ed him powerful enemies in the American establishment. Ever since, American Cuban relations can be effectively summed up in two this short term- mutual hostility. Dwight D.Eisenhower. Two-term president of the U. S, 1953-1961, Eisenhower was in power at the height of the Castro rebellion, which ousted General Batista from power. Eisenhower was the architect of initial American policy response to the Castro challenge. Hostility was the initial and consistent response to the Castro regime. This response was later to be institutionalized, thus setting the mood for subsequent US-Cuban relations. Eisenhower took far-reaching steps to checkmate Castro.Some of these steps were the authorization of the CIA to train Cuban exiles to form a force that could overthrow Castro and install a more acceptable regime in Cuba, cancellation of American orders for Cuban sugar, prohibition of American exports to Cuba, putting pressure on European banks to cancel loans meant for Cuba, blacklisting of nava l vessels carrying cargo to or from Cuba, massive propaganda offensive to discredit the Cuban regime, liaisons with and use of mafia links to try to assassinate Castro or destabilize Cuba. J. F.Kennedy. He succeeded Eisenhower as American President, and true to his election campaign pledge to ‘do something about Castro’, Kennedy went a step further by authorizing and sponsoring the failed Bay of Pigs invasion of Cuba in 1961 by Cuban dissidents. This was in addition to other US sponsored covert and overt terrorist attacks against Cuban interests and attempts on Castro’s life. Kennedy followed up late with the termination of diplomatic relation with Cuba in 1961. Some other attempts by Kennedy to deal with Castro included:Operation Mongoose, whose aim was to overthrow Castro through acts of terrorism and subversion; The invoking of US military intervention to â€Å"overthrow the Castro regime; Operation Peter Pan, (1960-62) in which the US colluded with the Catho lic Church transport 14,048 unaccompanied children between 6 and 18 years old out of Cuba for the US; Institution of a full trade embargo against Cuba; Punishment and denial of US aid for third countries which allowed assistance or commerce with Cuba; Imposition of travel to Cuba on US citizens;Though President Kennedy was assassinated in circumstances which some speculations have linked to the Castro issue, the US policy direction on Cuba did not change, but had rather intensified with successive US regimes. 2. 7. 2. Issues Basically the Issues at stake in American-Cuban relations could be described as both ideological and territorial.The United States on the one hand had a long standing interest to annex or control Cuba and to have the island nation come under its capitalist mode of operation, whereas Cuba had traditionally resisted any such designs by the Americans and had under Fidel Castro towed the communist line of production and ideology. 2. 7. 3. The Underlying factors Many recent commentators on the unending face-off between Cuba and the United States have wondered why the US has found it difficult to accommodate the Cubans and their communist form of government at a time that they have normalized relations with such other communist regimes as China and Vietnam.`It is quite obvious that such commentators have failed to take into account the full weight of the underlying factors that have helped shape and instruct American policy direction on Cuba. Some of these factors can be discussed below: 1. The ideological war: Capitalism vs Communism. It is an established fact that the United States is as rabidly capitalist as the former Soviet Union was Communist. So when Castro concluded his revolution by tilting towards communism he inadvertently touched America at it sorest point.It was a declaration that an enemy was at its back door. Thus Cuban American relations were ab initio anchored on diametrically opposing posts the moment Castro took over power. 2. Proximity. Cuba’s proximity to the US which put it within the so-called American sphere of influence in the Western Hemisphere precluded that the US must, as a matter of national security, have interest in what happens in its back waters. And what the American administrations loathed most was for Cuba to become an example which other Western hemisphere counties could look up to and copy.3. Interest groups. Most of the American business interests that were nationalized by Castro are today part of the dominant group ruling the United States, and dictating state policy. They have not forgiven Castro and will never forgive him for disrupting their lucrative business operations in Cuba. The same is true of the mafia elements within the Cuban exile groups. 4. Resistance from ordinary Cubans. Having witnessed firsthand what unbridled capitalism and corrupt did to them the first time they came under U.S rule, ordinary Cubans are loathe to again welcome any American hegemony over the m. 2. 7. 4. Scope The scope and ramifications of US-Cuban relations crossed national and continental boundaries in the 70’s and 80’s when Cuba embarked on shoring up leftist regimes or groups in South America and Africa. These attempts brought them into direct conflict with the US; with disastrous effects in Nicaragua, Grenada, Angola, Ethiopia and Congo democratic republic.Consequently, local conflicts were internationalized, protracted and resulted in tremendous human tolls. The effect of almost fifty years of American economic embargoes on Cuba has also been horrendous on Cubans. 2. 7. 5. Previous Attempts at Settlements The first known attempt at settling the disputes between the US and Cuba was in 1964 when Cuba offered to desist from exporting revolutionary ideals to South America if the US would halt its hostile actions against Cuba. The US refused, urging Cuba to first stop close relations with the USSR.It was also speculated that Kennedy had intended to engage Castro in negotiations shortly before he was assassinated in 1965. Another secret attempt was made at reconciliation in 1974, but was supposedly cancelled after Cuba got involved in Angola. President Ford at that time linked normalization of relations with Cuba with its voluntary pull out from Angola. It was under Jimmy Carter that the most real attempts at the normalization of relations with Cuba were initiated when he lifted the travel embargo on Cuba.A maritime boundary and fishing accord was signed by both countries during this period, while diplomatic interest sections were opened by both countries in Havana and Washington, respectively. Other bilateral negotiations were started; the American Congress also repealed the provision of the Foreign Assistance Act of 1961 banning aid to countries permitting their vessels to trade with Cuba. The National Security Council also rescinded the ship blacklist. 2. 7. 6. Phases and IntensityThe Kennedy era was perhaps marked zenith of Ameri can-Cuban hostility. It was then that the botched Pay of Pigs invasion of Cuba was carried out in 1961, same as the Cuban missile crisis, which involved the installation of Soviet nuclear missiles in Cuba in 1962. Though the missile crisis was eventually resolved, when the Soviets willingly dismantled the missiles, the crisis almost precipitated a nuclear war between the US and the Kruschev-led Soviet Union. Several U.S instigated attempts were also made during that same era to assassinate Fidel Castro, but the climax was the assassination of President Kennedy himself. The other high intensity points in American-Cuban relations were in the 70’s and 80’s when Cuba actively supported leftist insurrections against American backed dictatorships in Africa and South America. The most notable of these countries where Cuban forces played direct combat role were Angola, Ethiopia, Grenada, El Salvador and Nicaragua. The U. S countered these Cuban moves by pouring in massive supp ort to the opposing groups.However, the relations between the have traditionally been known to experience upward and down swings in response to the parties in power in Washington- much more favorable under the Democrats and less so under the Republicans. 2. 7. 7. Balance of Power In territorial size and resources, Cuba is no match to the United States, but the active support of the Soviet Union at the start of the Castro revolution and until the collapse of the Soviet Union brought a semblance of balance of powers between the two feuding neighbors- U. S and Cuba.However, at the collapse of the Soviet Union, there were expectations that Cuba would falter and collapse, but world public opinion and the support of Canada, the European Union, China and of late Venezuela have helped stabilize Cuba ideologically and materially. 2. 7. 8. Capacity and Resource There is no room for comparison of the resources and capacities of both countries, the U. S is way ahead of Cuba in all respects, but as explained earlier what Cuba has going for it are favorable world opinion and the resilience of its leadership and people. 2. 7. 9.State of the Relationship The support for the continuing US embargo of the island nation have been completely eroded, as many of the nations of Europe, Latin America, Asia and Africa have since normalized relations with Cuba. Even fellow North American countries of Canada and Mexico have consistently opposed US embargoes on Cuba, especially as it affected US subsidiary companies within these two nations. Even many Americans have come to question the wisdom of continuing with the hostilities when it is obvious that Cuba, at present, poses no threat to U.S national security. Visits have been made of late by sitting congressmen and other influential Americans in efforts to settle the disputes between the two neighbors that are so close but yet so far apart. Works Consulted Chadwick Ian. History of Cuban American relations. Retrieved March 30, 2007 from h ttp://www. ianchadwick. com/essays/cubahistory. html Siera J. A. Compilations of History of Cuba. Retrieved March 30, 2007 from http://www. historyofcuba. com/history/batista. htm

New Hire Communication Essay

†¢Planning ? Define the purpose. To communicate the company culture, process, procedures, and general information for a new hire. ?Define the audience. New Hires. ?Identify the channel(s) of communication and why you selected that channel. The channel of communication that I selected for the new hire communication is email. I chose to send the new hire communication by email because it is instantly sent to the new hire at no cost to the company. †¢Writing ? Create the message. Welcome to Dutch Bros Coffee,Congratulations on your new position with Dutch Bros. We are truly pleased that you have chosen us as your employer. Since being founded in 1992, our goal remains to ensure that our customers are always satisfied with their beverage purchases. Here at Dutch Bros. , we believe in lovin’ life and keeping it positive. We strive to pass the good vibes on to our employees and customers. At Dutch Bros. We serve up a variety of beverages that can be infused with a number of different flavors. This fast paced work environment requires staff to work side by side as a team to successfully keep the line moving and the coffee and drinks flowing. Again, I want to welcome you to the Dutch family. We are truly pleased NEW HIRE COMMUNICATION 3 that you have accepted this opportunity to serve up a cup of sunshine to the wonderful citizens of Phoenix, AZ †¢Completing ? Proofread, revise, and submit. Welcome to Dutch Bros Coffee, Congratulations on your new position with Dutch Bros. We are truly pleased that you have chosen us as your employer. Since being founded in 1992, our goal remains to ensure that our customers are always satisfied with their beverage purchases. At Dutch Bros. We serve up a variety of beverages that can be infused with a number of different flavors. This fast paced work environment requires staff to work side by side as a team to successfully keep the line moving and the coffee and drinks flowing. We strive to pass the good vibes on to our employees and customers. Here at Dutch Bros. , we believe in lovin’ life and keeping it positive. We expect our employees to arrive on time at work in clean casual clothes and a positive work attitude. Again, I want to welcome you to the Dutch family. We are truly pleased that you have accepted this opportunity to serve up a cup of sunshine to the wonderful citizens of Phoenix, AZ Kelli Woodruff NEW HIRE COMMUNICATION 4 References Dutch Bros Coffee. (1992-2014). Retrieved from http://dutchbros. com/AboutUs/.

Basel Norms in India

Challenges In India ver since its introduction in 1988, capital adequacy ratio has become an important benchmark to assess the financial strength and soundness of banks. It has been successful in enhancing competitive equality by ensuring level playing field for banks of different nationality. A survey conducted for 129 countries participating in the ninth International Conference of Banking Supervision showed that in 1996, more than 90% of the 129 countries applied Basel-like risk weighted capital adequacy requirement.Reserve Bank of India introduced risk assets ratio system as a capital adequacy measure in 1992, in line with the capital measurement system introduced by the Basel Committee in 1988, which takes into account the risk element in various types of funded balance sheet items as well as non-funded off-balance sheet exposures. Capital adequacy ratio is calculated on the basis of various degrees of risk weights attributed to different types of assets. As per current RBI guid elines, Indian banks are required to achieve capital adequacy ratio of 9% (as against the Basel Committee stipulation of 8%). E Swapan BakshiImplementation of Basel II has been described as a long journey rather than a destination by itself. RBI has decided to follow a consultative process while implementing Basel II norms and move in a gradual, sequential and co-ordinated manner. BASEL CAPITAL ACCORD However, the present accord has been criticized as being inflexible due to focus on primarily credit risk and treating all types of borrowers under one risk category irrespective of credit rating. The major criticism against the existing accord stems from its ? Broad-brush approach – irrespective of quality of counter party or credit ?Encouraging regulatory arbitrage by cherry picking ? Lack of incentives for credit risk mitigation techniques ? Not covering operational risk Moreover, years have passed since the introduction of the present accord. The business of banking, risk ma nagement practices, supervisory approaches and financial markets have undergone significant transformation since then. Therefore, the Basel Committee on Banking Supervision thought it desirable that the present accord is replaced by a more risk-sensitive framework. The new accord aims to overcome the anomalies of the present system.It emphasizes on bank’s own internal methodologies, supervisory review and market discipline. (The author is a member of the Institute. He can be reached at [email  protected] co. in THE CHARTERED ACCOUNTANT 426 OCTOBER 2004 BASEL II The new proposal is based on three mutually reinforcing pillars that allow banks and supervisors to evaluate properly the various risks that banks face and realign regulatory capital more closely with underlying risks. Each of these three pillars has risk mitigation as its central plank. The new risk sensitive approach seeks to strengthen the safety and soundness of the industry by focussing on: ? ? more elaborate th an the current accord. It proposes, for the first time, a measure for operational risk, while the market risk measure remains unchanged. The new proposal is based on three mutually reinforcing pillars that allow banks and supervisors to evaluate properly the various risks that banks face and realign regulatory capital more closelyThe Second Pillar with underlying risks. – Supervisory Review Process Supervisory review process has been introduced to ensure not only that banks have adequate capital to support all the risks, but also to encourage them o develop and use better risk management techniques in monitoring and managing their risks. Pillar III The process has Market four key princiDiscipline ples a) Banks should have a process for assessing their overall capital adequacy in relation to their risk profile and a strategy for monitoring their capital levels. b) Supervisors should review and evaluate bank’s internal capital adequacy assessment and strategies, as well as their ability to monitor and ensure their compliance with regulatory capital ratios. ) Supervisors should expect banks to operate above the minimum regulatory capital ratios and should have the ability to require banks to hold capital in excess of the minimum. d) Supervisors should seek to intervene at an early stage to prevent capital from falling below minimum level and should require rapid remedial action if capital is not mentioned or restored. Risk based capital (Pillar 1) Risk based supervision (Pillar 2) Risk disclosure to enforce market discipline (Pillar 3) Basel II Framework Pillar I Minimum Capital Requirements Pillar II Supervisory Review Process The First Pillar – Minimum Capital RequirementsThe first pillar sets out minimum capital requirement. The new framework maintains minimum capital requirement of 8% of risk assets. Under the new accord capital adequacy ratio will be measured as under— Total capital (unchanged) = (Tier I+Tier II+Tier III) Risk Wei ghed Assets = Credit risk + Market risk + Operational risk (Tier III capital has not yet been introduced in India. ) Basel II focuses on improvement in measurement of risks. The revised credit risk measurement methods are The Third Pillar – Market Discipline Market discipline imposes strong incentives to banks to conduct their business in a safe, sound and effective manner.It is proposed to be effected through a series of disclosure requirements on capital, risk exposure etc. so that market participants can assess a bank’s capital adequacy. These disclosures should be made at least semi-annually and more frequently if appropriate. Qualitative disclosures such as risk management objectives and policies, definitions etc. may be published annually. THE CHARTERED ACCOUNTANT 427 OCTOBER 2004 BASEL II Timeframe for Implementation The Basel Committee first released the proposal to replace the 1988 Accord with a more risk sensitive framework in June 1999, on which more than 20 0 comments were received.Reflecting on those comments the Committee presented a more concrete proposal in January 2001 seeking more comments from interested parties. The third consultative paper was released in April 2003. Furthermore Credit the Committee conducted three Assessment quantitative impact studies to assess the impact of the new proposals. Sovereign (Govt. Thereafter, the final version of the & Central Bank) New Accord has been published on Claims on Banks June 26, 2004, which is designed to Option 1 establish minimum level of capital for internationally active banks.The Option 2a new framework is to be made Option 2b applicable from 2006 end. The more advanced approaches will be impleCorporates mented by the end of year 2007. COMPUTATION OF CAPITAL REQUIREMENT Capital Requirement for Credit Risk: The New Accord provided for the following alternative methods for computing capital requirement for credit risk Credit Risk – The Standardized Approach: The standardized approach is conceptually the same as the present accord, but is more risk sensitive. The bank allocates a risk weight to each of its assets and off-balance sheet positions and produces a sum of riskweighted asset values.A risk weight of 100% means that an exposure is included in the calculation of risk weighted assets value, which translates into a capital Credit Risk charge equal to 9% of that value. Individual risk weight currently depends on the broad category of borrower (i. e. sovereign, banks or corporates). Under the new accord, the risk weights are to be refined by reference to a rating provided by an external credit assessment institution (such as rating agency) that meets strict standards. Proposed Risk Weight Table AAA to A+ to BBB+ AAA- to BBB0% 20% 50% BB+ to B100% Below Unrated B150% 100% 20% 20% 20% 20% 50% 50% 20% 50% 100% 50% 20% 100% 00% 100% 50% to 150% 150% 150% 150% 100% 50% 20% 100% Option 1 = Risk weights based on risk weight of the country Option 2a = Risk w eight based on assessment of individual bank Option 2b = Risk weight based on assessment of individual banks with claims of original maturity of less than 6 months. Retail Portfolio (subject to qualifying criteria) 75% Claims secured by residential property 35% Non-performing assets: If specific provision is less than 20% 150% If specific provision is more than 20% 100% The Committee has not proposed significant change in respect of off-balance Sheet items except for commitment to extend credit.The Internal Rating Based Approach (IRB): Under the IRB approach, banks will be allowed by the supervisors to use their internal estimates of risk components to assess credit risk in their portfolios, subject to strict methodological and disclosure standards. A bank estimates each borrower’s creditworthiness and the results are translated into estimates of a future potential loss amount, which form the basis of minimum capital requirements. The risk components include measures of ? Sta ndardized Approach Internal Rating Based approach Securitization Framework Foundation IRB Advanced IRBProbability of Default (PD), THE CHARTERED ACCOUNTANT 428 OCTOBER 2004 BASEL II ? ? ? Loss Given Default (LGD), Exposure At Default (EAD) and Effective Maturity (M) standardized approach under the securitization framework. Similarly, banks that have received approval to use IRB approach for the type of underlying exposure, must use the IRB approach for the securitization. The differences between foundation IRB and advanced IRB have been captured in the following table: Data Input Probability of Default Foundation IRB Provided by bank based on own estimates Capital Charge for Market RiskAlthough the Basel Committee issued â€Å"Amendment to the Capital Accord to incorporate Market Risks† in 1996, RBI as an interim measure, advised banks to assign an additional risk weight of 2. 5% on the entire investment portfolio. RBI feels that over the years, bank’s ability to ident ify and measure market risk has improved and therefore, decided to assign explicit capital charge for market risk in a phased manner over a two year period as under -. Advanced IRB Provided by bank based on own estimates Provided by bank based on own estimates Provided by bank based on own estimates Provided by bank based on own estimatesLoss Supervisory values set Given Default by the Committee Exposure at Default Effective Maturity Supervisory values set by the Committee Supervisory values set by the Committee Or At the national discretion, provided by bank – based on own estimates The IRB approach is based on measures of Unexpected Loss (UL) and Expected Loss (EL). While capital requirement provides for UL portion, EL component is taken care of by provisioning. Securitization Framework: Banks must apply the securitization framework for determining regulatory capital requirement on exposure arising from securitization.Banks that apply the standardized approach to credit ris k for the underlying exposure, must use the a. Banks would be required to maintain capital charge for market risk in respect of their trading book exposure (including derivatives) by March 2005. b. Banks would be required to maintain capital charge for market risk in respect of securities under available for sale category by March 2006. Market Risk Approaches Market Risk Standardized Approach Internal Model Based approach Maturity Based Duration Based RBI has issued detailed guidelines for computation of capital charge on Market Risk in June 2004.The guidelines seek to address the issues involved in com- THE CHARTERED ACCOUNTANT 429 OCTOBER 2004 BASEL II puting capital charge for interest rate related instruments in the trading book, equities in the trading book and foreign exchange risk (including gold and precious metals) in both trading and banking book. Trading book will include: Securities included under the Held for Trading category Securities included under the Available for Sale category ? Open gold position limits ? Open foreign exchange position limits ? Trading position in derivatives and derivatives entered into for hedging trading book exposures.As per the guidelines, minimum capital requirement is expressed in terms of two separately calculated charges: a. Specific Risk and b. General Market Risk Specific Risk: Capital charge for specific risk is designed to protect against an adverse movement in price of an individual security due to factors related to individual issuer. This is similar to credit risk. The specific risk charges are divided into various categories such as investments in Govt securities, claims on Banks, investments in mortgage backed securities, securitized papers etc. nd capital charge for each category specified. General Market Risk: Capital charge for general market risk is designed to capture the risk of loss arising from changes in market interest rates. The Basel Committee suggested two broad methodologies for computation o f capital charge for market risk, i. e. , Standardized Method and Internal Risk Management Model Method. As Banks in India are still in a nascent stage of developing internal risk management models, in the guidelines, it is proposed that to start with, the Banks may adopt the Standardized Method.Again, under Standardized Method, there are two principle methods for measuring market risk – maturity method and duration method. As duration method is a more accurate method of measuring interest rate risk, RBI prefers that Banks measure all of their general market risk by calculating the price sensitivity (modified duration) of each position separately. For this purpose detailed mechanics to be followed, time bands, assumed changes in yield etc. have been provided by RBI. Capital Charge for Equities: Capital charge for specific risk will be 9% of the Bank’s gross equity position. The general market risk charge will also be 9%.Thus the Bank will have to maintain capital equal to 18% of investment in equities (twice the present minimum requirement). Capital Charge for Foreign Exchange Risk: ? ? Foreign exchange open position and gold open position are at present risk weighted at 100%. Capital charge for foreign exchange and gold open position would continue to be computed at 9% as hitherto. Risk Aggregation: The capital charge for specific risk, general market risk and equity and forex position will be added up and the resultant figure will be multiplied by 11. 11 (inverse of 9%) to arrive at the notional risk weighted assets.Capital Charge for Operational Risk The Basel Committee has defined the Operational Risk as â€Å"the risk of loss 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. The objective of the operational risk management is to reduce the expected operational losses using a set of key risk indicators to measure and control risk on continuous basis and provide risk capital on operational risk for ensuring financial soundness of the Bank. Operational Risk Approaches Operational RiskBasic Indicator Approach Standardized Approach Advanced Measurement Approach Basic Indicator Approach Under the basic indicator approach, Banks are required to hold capital for operational risk equal to the average over the previous three years of a fixed percentage (15% – denoted as alpha) of annual gross income. Gross income is defined as net interest income plus net non-interest income, excluding realized profit/losses from the sale of securities in the banking book and extraordinary and irregular items. Standardized Approach Under the standardized approach, bank’s activities are divided into eight business lines.Within each business line, gross income is considered as a broad indicator for the likely scale of operational risk. Capital charge for each business line is calculated by multip lying gross income by a factor (denoted beta) assigned to THE CHARTERED ACCOUNTANT 430 OCTOBER 2004 BASEL II This partly explains the current trend of consolidation in the banking industry. Profitability: Competition among banks for highly rated corporates needing lower amount of capital may exert pressure on already thinning interest spread. Further, huge implementation cost may also impact profitability for smaller banks.Risk Management Architecture: The new standards are an amalgam of international best practices and calls for introduction of advanced risk management system with wider application throughout the organization. It would be a daunting task to create the required level of technological architecture and human skill across the institution. Rating Requirement: Although there are a few credit rating agencies in India – the level of rating penetration is very low. A study revealed that in 1999, out of 9640 borrowers enjoying fund-based working capital facilities fro m banks – only 300 were rated by major agencies.Further, rating is a lagging indicator of the credit risk and the agencies have poor track record in this respect. There is a possibility of rating blackmail through unsolicited rating. Moreover rating in India is restricted to issues and not issuers. Encouraging rating of issuers would be a challenge. Choice of Alternative Approaches: The new framework provides for alternative approaches for computation of capital requirement of various risks. However, competitive advantage of IRB approach may lead to domination of this approach among big banks. Banks adopting IRB approach will be more sensitive than those adopting standardized approach.This may result in high-risk assets flowing to banks on standardized approach – as they would require lesser capital for these assets than banks on IRB approach. Hence, the system as a whole may maintain lower capital than warranted and become more vulnerable. It is to be considered wheth er in our quest for perfect standards, we have lost the only universally accepted standard. Absence of Historical Database: Computation of probability of default, loss given default, migration mapping and supervisory validation require creation of historical database, which is a time consuming process and may require initial support from the supervisor.Incentive to Remain Unrated: In case of unrated sovereigns, banks and corporates the prescribed risk weight is 100%, whereas in case of those entities with lowest ratting, the risk weight is 150%. This may create incentive for the category of counterparties, which anticipate lower rating to remain unrated. Supervisory Framework: Implementation of The final version of the New Accord has been published on June 26, 2004, which is designed to establish minimum level of capital for internationally active banks. The new framework is to be made applicable from 2006 end.The more advanced approaches will be implemented by the end of year 2007. that business line. Total capital charge is calculated as the three-year average of the simple summations of the regulatory capital across each of the business line in each year. The values of the betas prescribed for each business line are as under: Business Line Corporate finance Trading and sales Retail banking Commercial banking Payment and settlement Agency services Asset management Retail brokerage Beta Factor 18% 18% 12% 15% 18% 15% 12% 12%Advanced Measurement Approach Under advanced measurement approach, the regulatory capital will be equal to the risk measures generated by the bank’s internal risk measurement system using the prescribed quantitative and qualitative criteria. ISSUES AND CHALLENGES While there is no second opinion regarding the purpose, necessity and usefulness of the proposed new accord – the techniques and methods suggested in the consultative document would pose considerable implementational challenges for the banks especially in a developin g country like India.Capital Requirement: The new norms will almost invariably increase capital requirement in all banks across the board. Although capital requirement for credit risk may go down due to adoption of more risk sensitive models – such advantage will be more than offset by additional capital charge for operational risk and increased capital requirement for market risk. THE CHARTERED ACCOUNTANT 431 OCTOBER 2004 BASEL II Basel II norms will prove a challenging task for the bank supervisors as well.Given the paucity of supervisory resources – there is a need to reorient the resource deployment strategy. Supervisory cadre has to be properly trained for understanding of critical issues for risk profiling of supervised entities and validating and guiding development of complex IRB models. Corporate Governance Issues: Basel II proposals underscore the interaction between sound risk management practices and corporate good governance. The bank’s board of dir ectors has the responsibility for setting the basic tolerance levels for various types of risk.It should also ensure that management establishes a framework for assessing the risks, develop a system to relate risk to the bank’s capital levels and establish a method for monitoring compliance with internal policies. National Discretion: Basel II norms set out a number of areas where national supervisor will need to determine the specific definitions, approaches or thresholds that wish to adopt in implementing the proposals. The criteria used by supervisors in making these determinations should draw upon domestic market practice and experience and be consistent with the objectives of Basel II norms.Disclosure Regime: Pillar 3 purports to enforce market discipline through stricter disclosure requirement. While admitting that such disclosure may be useful for supervisory authorities and rating agencies – the expertise and ability of the general public to comprehend and inte rpret disclosed information is open to question. Moreover, too much disclosure may cause information overload and may even damage financial position of bank. Disadvantage for Smaller Banks: The new framework is very complex and difficult to understand.It calls for revamping the entire management information system and allocation of substantial resources. Therefore, it may be out of reach for many smaller banks. As Moody’s Investors Services puts it, â€Å"It is unlikely that these banks will have the financial resources, intellectual capital, skills and large scale commitment that larger competitors have to build sophisticated systems to allocate regulatory capital optimally for both credit and operational risks. Discriminatory against Developing Countries: Developing counties have high concentration of lower rated borrowers. The calibration of IRB has lesser incentives to lend to such borrowers. This, alongwith withdrawal of uniform risk weight of 0% on sovereign claims may result in overall reduction in lending by internationally active banks in developing countries and increase their cost of borrowing.Although the Basel Committee issued â€Å"Amendment to the Capital Accord to incorporate Market Risks† in 1996, RBI as an interim measure, advised banks to assign an additional risk weight of 2. 5% on the entire investment portfolio. External and Internal Auditors: The working Group set up by the Basel Committee to look into implemetational issues observed that supervisors may wish to involve third parties, such a external auditors, internal auditors and consultants to assist them carrying out some of the duties under Basel II.The precondition is that there should be a suitably developed national accounting and auditing standards and framework, which are in line with the best international practices. A minimum qualifying criteria for firms should be those that have a dedicated financial services or banking division that is properly researched an d have proven ability to respond to training and upgrades required of its own staff to complete the tasks adequately.With the implementation of the new framework, internal auditors may become increasingly involved in various processes, including validation and of the accuracy of the data inputs, review of activities performed by credit functions and assessment of a bank’s capital assessment process. CONCLUSION Implementation of Basel II has been described as a long journey rather than a destination by itself. Undoubtedly, it would require commitment of substantial capital and human resources on the part of both banks and the supervisors.RBI has decided to follow a consultative process while implementing Basel II norms and move in a gradual, sequential and co-ordinated manner. For this purpose, dialogue has already been initiated with the stakeholders. As envisaged by the Basel Committee, the accounting profession too, will make a positive contribution in this respect to make Indian banking system stronger.  ¦ THE CHARTERED ACCOUNTANT 432 OCTOBER 2004 Basel Norms in India Challenges In India ver since its introduction in 1988, capital adequacy ratio has become an important benchmark to assess the financial strength and soundness of banks. It has been successful in enhancing competitive equality by ensuring level playing field for banks of different nationality. A survey conducted for 129 countries participating in the ninth International Conference of Banking Supervision showed that in 1996, more than 90% of the 129 countries applied Basel-like risk weighted capital adequacy requirement.Reserve Bank of India introduced risk assets ratio system as a capital adequacy measure in 1992, in line with the capital measurement system introduced by the Basel Committee in 1988, which takes into account the risk element in various types of funded balance sheet items as well as non-funded off-balance sheet exposures. Capital adequacy ratio is calculated on the basis of various degrees of risk weights attributed to different types of assets. As per current RBI guid elines, Indian banks are required to achieve capital adequacy ratio of 9% (as against the Basel Committee stipulation of 8%). E Swapan BakshiImplementation of Basel II has been described as a long journey rather than a destination by itself. RBI has decided to follow a consultative process while implementing Basel II norms and move in a gradual, sequential and co-ordinated manner. BASEL CAPITAL ACCORD However, the present accord has been criticized as being inflexible due to focus on primarily credit risk and treating all types of borrowers under one risk category irrespective of credit rating. The major criticism against the existing accord stems from its ? Broad-brush approach – irrespective of quality of counter party or credit ?Encouraging regulatory arbitrage by cherry picking ? Lack of incentives for credit risk mitigation techniques ? Not covering operational risk Moreover, years have passed since the introduction of the present accord. The business of banking, risk ma nagement practices, supervisory approaches and financial markets have undergone significant transformation since then. Therefore, the Basel Committee on Banking Supervision thought it desirable that the present accord is replaced by a more risk-sensitive framework. The new accord aims to overcome the anomalies of the present system.It emphasizes on bank’s own internal methodologies, supervisory review and market discipline. (The author is a member of the Institute. He can be reached at [email  protected] co. in THE CHARTERED ACCOUNTANT 426 OCTOBER 2004 BASEL II The new proposal is based on three mutually reinforcing pillars that allow banks and supervisors to evaluate properly the various risks that banks face and realign regulatory capital more closely with underlying risks. Each of these three pillars has risk mitigation as its central plank. The new risk sensitive approach seeks to strengthen the safety and soundness of the industry by focussing on: ? ? more elaborate th an the current accord. It proposes, for the first time, a measure for operational risk, while the market risk measure remains unchanged. The new proposal is based on three mutually reinforcing pillars that allow banks and supervisors to evaluate properly the various risks that banks face and realign regulatory capital more closelyThe Second Pillar with underlying risks. – Supervisory Review Process Supervisory review process has been introduced to ensure not only that banks have adequate capital to support all the risks, but also to encourage them o develop and use better risk management techniques in monitoring and managing their risks. Pillar III The process has Market four key princiDiscipline ples a) Banks should have a process for assessing their overall capital adequacy in relation to their risk profile and a strategy for monitoring their capital levels. b) Supervisors should review and evaluate bank’s internal capital adequacy assessment and strategies, as well as their ability to monitor and ensure their compliance with regulatory capital ratios. ) Supervisors should expect banks to operate above the minimum regulatory capital ratios and should have the ability to require banks to hold capital in excess of the minimum. d) Supervisors should seek to intervene at an early stage to prevent capital from falling below minimum level and should require rapid remedial action if capital is not mentioned or restored. Risk based capital (Pillar 1) Risk based supervision (Pillar 2) Risk disclosure to enforce market discipline (Pillar 3) Basel II Framework Pillar I Minimum Capital Requirements Pillar II Supervisory Review Process The First Pillar – Minimum Capital RequirementsThe first pillar sets out minimum capital requirement. The new framework maintains minimum capital requirement of 8% of risk assets. Under the new accord capital adequacy ratio will be measured as under— Total capital (unchanged) = (Tier I+Tier II+Tier III) Risk Wei ghed Assets = Credit risk + Market risk + Operational risk (Tier III capital has not yet been introduced in India. ) Basel II focuses on improvement in measurement of risks. The revised credit risk measurement methods are The Third Pillar – Market Discipline Market discipline imposes strong incentives to banks to conduct their business in a safe, sound and effective manner.It is proposed to be effected through a series of disclosure requirements on capital, risk exposure etc. so that market participants can assess a bank’s capital adequacy. These disclosures should be made at least semi-annually and more frequently if appropriate. Qualitative disclosures such as risk management objectives and policies, definitions etc. may be published annually. THE CHARTERED ACCOUNTANT 427 OCTOBER 2004 BASEL II Timeframe for Implementation The Basel Committee first released the proposal to replace the 1988 Accord with a more risk sensitive framework in June 1999, on which more than 20 0 comments were received.Reflecting on those comments the Committee presented a more concrete proposal in January 2001 seeking more comments from interested parties. The third consultative paper was released in April 2003. Furthermore Credit the Committee conducted three Assessment quantitative impact studies to assess the impact of the new proposals. Sovereign (Govt. Thereafter, the final version of the & Central Bank) New Accord has been published on Claims on Banks June 26, 2004, which is designed to Option 1 establish minimum level of capital for internationally active banks.The Option 2a new framework is to be made Option 2b applicable from 2006 end. The more advanced approaches will be impleCorporates mented by the end of year 2007. COMPUTATION OF CAPITAL REQUIREMENT Capital Requirement for Credit Risk: The New Accord provided for the following alternative methods for computing capital requirement for credit risk Credit Risk – The Standardized Approach: The standardized approach is conceptually the same as the present accord, but is more risk sensitive. The bank allocates a risk weight to each of its assets and off-balance sheet positions and produces a sum of riskweighted asset values.A risk weight of 100% means that an exposure is included in the calculation of risk weighted assets value, which translates into a capital Credit Risk charge equal to 9% of that value. Individual risk weight currently depends on the broad category of borrower (i. e. sovereign, banks or corporates). Under the new accord, the risk weights are to be refined by reference to a rating provided by an external credit assessment institution (such as rating agency) that meets strict standards. Proposed Risk Weight Table AAA to A+ to BBB+ AAA- to BBB0% 20% 50% BB+ to B100% Below Unrated B150% 100% 20% 20% 20% 20% 50% 50% 20% 50% 100% 50% 20% 100% 00% 100% 50% to 150% 150% 150% 150% 100% 50% 20% 100% Option 1 = Risk weights based on risk weight of the country Option 2a = Risk w eight based on assessment of individual bank Option 2b = Risk weight based on assessment of individual banks with claims of original maturity of less than 6 months. Retail Portfolio (subject to qualifying criteria) 75% Claims secured by residential property 35% Non-performing assets: If specific provision is less than 20% 150% If specific provision is more than 20% 100% The Committee has not proposed significant change in respect of off-balance Sheet items except for commitment to extend credit.The Internal Rating Based Approach (IRB): Under the IRB approach, banks will be allowed by the supervisors to use their internal estimates of risk components to assess credit risk in their portfolios, subject to strict methodological and disclosure standards. A bank estimates each borrower’s creditworthiness and the results are translated into estimates of a future potential loss amount, which form the basis of minimum capital requirements. The risk components include measures of ? Sta ndardized Approach Internal Rating Based approach Securitization Framework Foundation IRB Advanced IRBProbability of Default (PD), THE CHARTERED ACCOUNTANT 428 OCTOBER 2004 BASEL II ? ? ? Loss Given Default (LGD), Exposure At Default (EAD) and Effective Maturity (M) standardized approach under the securitization framework. Similarly, banks that have received approval to use IRB approach for the type of underlying exposure, must use the IRB approach for the securitization. The differences between foundation IRB and advanced IRB have been captured in the following table: Data Input Probability of Default Foundation IRB Provided by bank based on own estimates Capital Charge for Market RiskAlthough the Basel Committee issued â€Å"Amendment to the Capital Accord to incorporate Market Risks† in 1996, RBI as an interim measure, advised banks to assign an additional risk weight of 2. 5% on the entire investment portfolio. RBI feels that over the years, bank’s ability to ident ify and measure market risk has improved and therefore, decided to assign explicit capital charge for market risk in a phased manner over a two year period as under -. Advanced IRB Provided by bank based on own estimates Provided by bank based on own estimates Provided by bank based on own estimates Provided by bank based on own estimatesLoss Supervisory values set Given Default by the Committee Exposure at Default Effective Maturity Supervisory values set by the Committee Supervisory values set by the Committee Or At the national discretion, provided by bank – based on own estimates The IRB approach is based on measures of Unexpected Loss (UL) and Expected Loss (EL). While capital requirement provides for UL portion, EL component is taken care of by provisioning. Securitization Framework: Banks must apply the securitization framework for determining regulatory capital requirement on exposure arising from securitization.Banks that apply the standardized approach to credit ris k for the underlying exposure, must use the a. Banks would be required to maintain capital charge for market risk in respect of their trading book exposure (including derivatives) by March 2005. b. Banks would be required to maintain capital charge for market risk in respect of securities under available for sale category by March 2006. Market Risk Approaches Market Risk Standardized Approach Internal Model Based approach Maturity Based Duration Based RBI has issued detailed guidelines for computation of capital charge on Market Risk in June 2004.The guidelines seek to address the issues involved in com- THE CHARTERED ACCOUNTANT 429 OCTOBER 2004 BASEL II puting capital charge for interest rate related instruments in the trading book, equities in the trading book and foreign exchange risk (including gold and precious metals) in both trading and banking book. Trading book will include: Securities included under the Held for Trading category Securities included under the Available for Sale category ? Open gold position limits ? Open foreign exchange position limits ? Trading position in derivatives and derivatives entered into for hedging trading book exposures.As per the guidelines, minimum capital requirement is expressed in terms of two separately calculated charges: a. Specific Risk and b. General Market Risk Specific Risk: Capital charge for specific risk is designed to protect against an adverse movement in price of an individual security due to factors related to individual issuer. This is similar to credit risk. The specific risk charges are divided into various categories such as investments in Govt securities, claims on Banks, investments in mortgage backed securities, securitized papers etc. nd capital charge for each category specified. General Market Risk: Capital charge for general market risk is designed to capture the risk of loss arising from changes in market interest rates. The Basel Committee suggested two broad methodologies for computation o f capital charge for market risk, i. e. , Standardized Method and Internal Risk Management Model Method. As Banks in India are still in a nascent stage of developing internal risk management models, in the guidelines, it is proposed that to start with, the Banks may adopt the Standardized Method.Again, under Standardized Method, there are two principle methods for measuring market risk – maturity method and duration method. As duration method is a more accurate method of measuring interest rate risk, RBI prefers that Banks measure all of their general market risk by calculating the price sensitivity (modified duration) of each position separately. For this purpose detailed mechanics to be followed, time bands, assumed changes in yield etc. have been provided by RBI. Capital Charge for Equities: Capital charge for specific risk will be 9% of the Bank’s gross equity position. The general market risk charge will also be 9%.Thus the Bank will have to maintain capital equal to 18% of investment in equities (twice the present minimum requirement). Capital Charge for Foreign Exchange Risk: ? ? Foreign exchange open position and gold open position are at present risk weighted at 100%. Capital charge for foreign exchange and gold open position would continue to be computed at 9% as hitherto. Risk Aggregation: The capital charge for specific risk, general market risk and equity and forex position will be added up and the resultant figure will be multiplied by 11. 11 (inverse of 9%) to arrive at the notional risk weighted assets.Capital Charge for Operational Risk The Basel Committee has defined the Operational Risk as â€Å"the risk of loss 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. The objective of the operational risk management is to reduce the expected operational losses using a set of key risk indicators to measure and control risk on continuous basis and provide risk capital on operational risk for ensuring financial soundness of the Bank. Operational Risk Approaches Operational RiskBasic Indicator Approach Standardized Approach Advanced Measurement Approach Basic Indicator Approach Under the basic indicator approach, Banks are required to hold capital for operational risk equal to the average over the previous three years of a fixed percentage (15% – denoted as alpha) of annual gross income. Gross income is defined as net interest income plus net non-interest income, excluding realized profit/losses from the sale of securities in the banking book and extraordinary and irregular items. Standardized Approach Under the standardized approach, bank’s activities are divided into eight business lines.Within each business line, gross income is considered as a broad indicator for the likely scale of operational risk. Capital charge for each business line is calculated by multip lying gross income by a factor (denoted beta) assigned to THE CHARTERED ACCOUNTANT 430 OCTOBER 2004 BASEL II This partly explains the current trend of consolidation in the banking industry. Profitability: Competition among banks for highly rated corporates needing lower amount of capital may exert pressure on already thinning interest spread. Further, huge implementation cost may also impact profitability for smaller banks.Risk Management Architecture: The new standards are an amalgam of international best practices and calls for introduction of advanced risk management system with wider application throughout the organization. It would be a daunting task to create the required level of technological architecture and human skill across the institution. Rating Requirement: Although there are a few credit rating agencies in India – the level of rating penetration is very low. A study revealed that in 1999, out of 9640 borrowers enjoying fund-based working capital facilities fro m banks – only 300 were rated by major agencies.Further, rating is a lagging indicator of the credit risk and the agencies have poor track record in this respect. There is a possibility of rating blackmail through unsolicited rating. Moreover rating in India is restricted to issues and not issuers. Encouraging rating of issuers would be a challenge. Choice of Alternative Approaches: The new framework provides for alternative approaches for computation of capital requirement of various risks. However, competitive advantage of IRB approach may lead to domination of this approach among big banks. Banks adopting IRB approach will be more sensitive than those adopting standardized approach.This may result in high-risk assets flowing to banks on standardized approach – as they would require lesser capital for these assets than banks on IRB approach. Hence, the system as a whole may maintain lower capital than warranted and become more vulnerable. It is to be considered wheth er in our quest for perfect standards, we have lost the only universally accepted standard. Absence of Historical Database: Computation of probability of default, loss given default, migration mapping and supervisory validation require creation of historical database, which is a time consuming process and may require initial support from the supervisor.Incentive to Remain Unrated: In case of unrated sovereigns, banks and corporates the prescribed risk weight is 100%, whereas in case of those entities with lowest ratting, the risk weight is 150%. This may create incentive for the category of counterparties, which anticipate lower rating to remain unrated. Supervisory Framework: Implementation of The final version of the New Accord has been published on June 26, 2004, which is designed to establish minimum level of capital for internationally active banks. The new framework is to be made applicable from 2006 end.The more advanced approaches will be implemented by the end of year 2007. that business line. Total capital charge is calculated as the three-year average of the simple summations of the regulatory capital across each of the business line in each year. The values of the betas prescribed for each business line are as under: Business Line Corporate finance Trading and sales Retail banking Commercial banking Payment and settlement Agency services Asset management Retail brokerage Beta Factor 18% 18% 12% 15% 18% 15% 12% 12%Advanced Measurement Approach Under advanced measurement approach, the regulatory capital will be equal to the risk measures generated by the bank’s internal risk measurement system using the prescribed quantitative and qualitative criteria. ISSUES AND CHALLENGES While there is no second opinion regarding the purpose, necessity and usefulness of the proposed new accord – the techniques and methods suggested in the consultative document would pose considerable implementational challenges for the banks especially in a developin g country like India.Capital Requirement: The new norms will almost invariably increase capital requirement in all banks across the board. Although capital requirement for credit risk may go down due to adoption of more risk sensitive models – such advantage will be more than offset by additional capital charge for operational risk and increased capital requirement for market risk. THE CHARTERED ACCOUNTANT 431 OCTOBER 2004 BASEL II Basel II norms will prove a challenging task for the bank supervisors as well.Given the paucity of supervisory resources – there is a need to reorient the resource deployment strategy. Supervisory cadre has to be properly trained for understanding of critical issues for risk profiling of supervised entities and validating and guiding development of complex IRB models. Corporate Governance Issues: Basel II proposals underscore the interaction between sound risk management practices and corporate good governance. The bank’s board of dir ectors has the responsibility for setting the basic tolerance levels for various types of risk.It should also ensure that management establishes a framework for assessing the risks, develop a system to relate risk to the bank’s capital levels and establish a method for monitoring compliance with internal policies. National Discretion: Basel II norms set out a number of areas where national supervisor will need to determine the specific definitions, approaches or thresholds that wish to adopt in implementing the proposals. The criteria used by supervisors in making these determinations should draw upon domestic market practice and experience and be consistent with the objectives of Basel II norms.Disclosure Regime: Pillar 3 purports to enforce market discipline through stricter disclosure requirement. While admitting that such disclosure may be useful for supervisory authorities and rating agencies – the expertise and ability of the general public to comprehend and inte rpret disclosed information is open to question. Moreover, too much disclosure may cause information overload and may even damage financial position of bank. Disadvantage for Smaller Banks: The new framework is very complex and difficult to understand.It calls for revamping the entire management information system and allocation of substantial resources. Therefore, it may be out of reach for many smaller banks. As Moody’s Investors Services puts it, â€Å"It is unlikely that these banks will have the financial resources, intellectual capital, skills and large scale commitment that larger competitors have to build sophisticated systems to allocate regulatory capital optimally for both credit and operational risks. Discriminatory against Developing Countries: Developing counties have high concentration of lower rated borrowers. The calibration of IRB has lesser incentives to lend to such borrowers. This, alongwith withdrawal of uniform risk weight of 0% on sovereign claims may result in overall reduction in lending by internationally active banks in developing countries and increase their cost of borrowing.Although the Basel Committee issued â€Å"Amendment to the Capital Accord to incorporate Market Risks† in 1996, RBI as an interim measure, advised banks to assign an additional risk weight of 2. 5% on the entire investment portfolio. External and Internal Auditors: The working Group set up by the Basel Committee to look into implemetational issues observed that supervisors may wish to involve third parties, such a external auditors, internal auditors and consultants to assist them carrying out some of the duties under Basel II.The precondition is that there should be a suitably developed national accounting and auditing standards and framework, which are in line with the best international practices. A minimum qualifying criteria for firms should be those that have a dedicated financial services or banking division that is properly researched an d have proven ability to respond to training and upgrades required of its own staff to complete the tasks adequately.With the implementation of the new framework, internal auditors may become increasingly involved in various processes, including validation and of the accuracy of the data inputs, review of activities performed by credit functions and assessment of a bank’s capital assessment process. CONCLUSION Implementation of Basel II has been described as a long journey rather than a destination by itself. Undoubtedly, it would require commitment of substantial capital and human resources on the part of both banks and the supervisors.RBI has decided to follow a consultative process while implementing Basel II norms and move in a gradual, sequential and co-ordinated manner. For this purpose, dialogue has already been initiated with the stakeholders. As envisaged by the Basel Committee, the accounting profession too, will make a positive contribution in this respect to make Indian banking system stronger.  ¦ THE CHARTERED ACCOUNTANT 432 OCTOBER 2004

To what extent is marketing a hindrance or help to democracy in the Essay

To what extent is marketing a hindrance or help to democracy in the 21st century - Essay Example How can we explain the effects of marketing in a democratic political system? This question cannot be addressed without establishing marketing as a concept and its relationship with the dynamic social, technological and economic landscape of the 21st century. The terms, mass-market, consumer culture, commodification, among others, characterize the 21st century societies. This underscored how marketing dominates the public sphere with the advent of technology. Here, the masses are either homogenized and heterogenised by marketing through technologies and media platforms that could deliver messages to a whole population simultaneously and real time. The consumer seduction has been so successful that economic models such as Fordism was able to develop expansionist strategies wherein mass markets have worked against the perpetuation of material class distinctions as economies of scale expanded the size and composition of the consuming population. (Dunn 1998: 119) Schumpeter (1976) talked about this agglomeration of people as some phenomenon that deprives individuals from their capacity to reflect rationally, arguing that when gathered together, people are easily worked into a state of excitement in which primitive impulses, infantilisms and criminal propensities’ replace moral restraints and civilised modes of thinking. (pp. 257) In relating this phenomenon to democracy and politics, we have the fact that leaders compete for votes in the same way that business people compete for customers. Subsequent application of economic theory to politics reached similar, if not identical, conclusions. John Corner and Dick Pels (2003), for instance, drew attention to the impact of imperfect information on political behaviour in a democracy, to quote: In a situation where views of voters are not immediately transparent to parties and party policy is unclear to voters, each has to incur costs in finding out information. Such costs have to be weighed against the benefits of the

Reflective Journal Essay Example | Topics and Well Written Essays - 2500 words

Reflective Journal - Essay Example The introductory parts of this lesson was important in the sense that it provides some insight into some of the common factors that affect the access to good healthcare by minority groups. Cultural factors, disparities in resource distribution, and low income status are some of the issues that afflict the lives of these groups. Culture is a broad term that affects the lives of people. It determines actions, systems, and priorities of people (Stidsen, 2006). Matters of diet and hygiene are conditioned by cultural beliefs. As a result people tend to lead lives in the way that is conditioned by cultural values. The diet practices of the indigenous communities, for instance will determine the kind of health that they will attain. As a result it becomes important for the nursing profession to consider cultural issues in light of the many issues that relate to the beliefs and values of individuals, groups, communities and nations. The introduction to the subject of indigenous people attrac ted a lot of my interest because I have always been fascinated by the broad subject of this people as relates to original populations. Particularly, a closer exploration of the conditions and issues related to the aboriginal populations of Australia is one that engages my interest at different levels. In this week’s lesson, we examined on some of the similarities and differences of various indigenous populations around the globe. One of the issues that require specific attention is that these groups’ exhibit similar characteristics in terms of world view but may have their unique needs and requirements when it comes to some specific details of matters of healthcare and community organization. Although the aborigines of Australia are among the oldest civilizations that still exist in modern history, there still exist multiple challenges on issues of healthcare which require closer attention from modern medical scholars. Generally, systematic negligence, discrimination, and poor policies are some of the issues that have been explored in terms of the inequalities that affect the status of healthcare for the aboriginal populations. However, further studies must examine the place of tradition, culture and custom as important attendant issues that affect the health of the aboriginal community. Effective nursing requires a deeper connection with the cultural challenges of populations in order to develop methods and strategies that are aimed at addressing these issues. I have always desired to gain a deeper insight into the lifestyles and challenges of the aboriginal community as they relate with the wider Australian community. I am also aware of multiple literatures, which has been developed to attend to the same subject. In this week’s lesson, one of the important issues that the professor trained his focus on is the matter of health. In many indigenous populations, policies of health have always elicited multiple issues because populations are, by their very nature, conditioned by cultural factors. Week 2 Reflective Journal I would contend that the explanation on culture as provided by Dr Marion Kickett and Mr. Kim Scott was an eye opener into an alternative understanding of the concept of culture. After the lesson, I can now appreciate the cultural life of indigenous people from a very informative perspective. At the same time,

Media planning for advertising Essay Example | Topics and Well Written Essays - 2500 words

Media planning for advertising - Essay Example Taking this into account, it is logical to think that the huge emphasis is laid nowadays on the quality of the advertising message transmitted to the potential buyers via various types of existing media, because the impact produced by this message determines the success of the campaign and – eventually – sales level. As the result, enormous amounts of efforts and financial expenses are involved in advertising industry, because creating a persuasive advertising message is considered to be crucial for consumers to make decisions in favor of this or that company. However, a bare advertising message is unlikely to guarantee success for a brand: â€Å"a great advertising message in front of the wrong audience is a total waste of time and effort† (Kelley and Jugenheimer, 2008, p. 5). For a successful promotion campaign, message strategies must be combined with wise media strategies for a message to reach the audience in the most effective way. Media strategies should b e always highly flexible and capable of complying with the changes in preferences and behavior of consumers. â€Å"When consumers change their consumption patterns, the marketing communications strategy to reach these consumers must change as well† (Và ­glundsson and Halldà ³rsson, 2012, p.1). It is also important to adjust media communication strategies to the patterns of media consumption and change (or enhance) them, if new media emerge or gain popularity among consumers. In the recent decades, rapid technological progress has shown dependence of marketing on the innovations in communication technologies. â€Å"For the advertiser and agency, this technological revolution has meant radical re-thinking and redeployment of how messages and incentives are distributed to relevant marketplace customers and prospects† (American Academy Of Advertising Conference Proceedings, 2013, p.

Accounting Career Problem Research Paper Example | Topics and Well Written Essays - 2000 words

Accounting Career Problem - Research Paper Example However, the thing is that having a career in accounting does not only come with advantages. The career also has some challenges. One of the most common challenges faced by accountants in their careers is the challenge of coping with pressure from organizations’ management to create balance sheets and financial statements that can cope with the current high rate of competition in various industries and anger for success. This paper aims at discussing pressure from management as a challenge commonly faced by accountants. Being an accountant, there are always many ethical issues that are always surrounding everything that you do. Many business managers are usually willing to do anything so that they might emerge as successful. As a result, there are always some stress and pressure that is placed on accountings when it comes to their responsibilities of creation of financial statements and balance sheets. Accountants are always expected to give a true and clear report on an organization’s profit, liabilities and assets. It is always a challenge in making sure that that record on a company’s profit, assets, and liabilities even in situations that the true records might not be very good in terms of the success of the business organization (Woolf & Hindson, 2013). The situation is always further amplified if the mangers involved insist that the records should be altered so that they can serve the interests of the business organization. In such a situation an accountant will find themselves having the dilemma to choose between following the ethical standards expected of them as accountants and altering the records in order to please their employers. If they choose to alter the records they might end up losing their credibility if in any case it is realized that they had involved in unethical conducts. On the other side if they decide to go against the will of the managers and deal with the right

Male divine article Example | Topics and Well Written Essays - 500 words

Male divine - Article Example Key features of the character Superman are mapped on to Biblical texts. So, for example, Superman is descended from non-human holographic entity called â€Å"Jor-El† and destined to find a new life among strangers in a strange land (Earth) â€Å"like a diaspora Jew† (p. 5). A clear parallel is made between the extra-terrestial Superman and â€Å"an intelligence greater than our own.† (p. 6) Depiction of the infant with outstretched arms recalls the crucifixion, and the piercing blue eyes of Christopher Reeve are â€Å"part of a long tradition of celluloid saviors having blue eyes† (p. 8) The color blue, which is the main color in Superman’s costume is also linked with heaven, since the sky is blue. A number of stylistic references link Superman with Jewish culture, for example the mock religious oath â€Å"Holy Mackerel† and the ending â€Å"man† in â€Å"Superman† which is â€Å"a suffix common to many contemporary Jewish name s e.g. Silverman, Freedman, etc)† (p. 13) .

Sidewalk Repair Ordinance Essay Example | Topics and Well Written Essays - 500 words

Sidewalk Repair Ordinance - Essay Example The quality of the sidewalks reflects on the quality of life for all the citizens of the city as well as the visitors who come here. It is only reasonable to have the burden of the repair costs shouldered by the city. The sidewalk is not the property of the owner of the adjacent property. The tactics of the Department of Public Works have been abusive, as they have threatened property owners with fines and unreasonable deadlines. The city should find taxpayer money to finance the repairs and leave the property owners alone. The estimated cost of repairing the nearly 5,200 blocks of city sidewalk has been quoted as $1.5 million. This is a reasonable amount and the city would benefit from this improvement. However, the cost of enforcing the ordinance has been put at $1.3 million. Instead of spending the money on enforcement, the city should spend the money to do the needed repairs. It does not make sense to spend $1.3 million to enforce a law that will only save the city $1.5 million. Financially, this is a break-even proposition. However, it will cause hardship to those citizens that are required to pay for the repairs. It will leave bitterness and resentment in its wake as property owners get slapped with a bill for a public works project. I am proud of our fine city and am fully in support of the efforts to renovate and repair

Disease process Essay Example | Topics and Well Written Essays - 750 words

Disease process - Essay Example It has been noted that diabetes mellitus is a major cause of cardiovascular diseases (CVD) which will include congestive heart failure, coronary heart diseases, peripheral artery disease, cardiomyopathy and stroke. The risk of coronary artery diseases and congestive heart failure is relatively high in persons diagnosed with diabetes than in those without. Risk is also increased in patients who suffer from hypertension and dyslipidaemia or in those who smoke cigarettes and use alcohol. People with diabetes have frequent occurrences of hypertension which is a major risk factor for getting a cardiovascular disease. Diabetes mellitus also causes urinary incontinence which is a common problem encountered. It is a indication of primary malfunction of the urinary bladder and urethra that basically causes the patient to pass urine at the wrong place at the wrong time. It causes weakened urethra muscles that will render the patient helpless in controlling their own urine passing. Another urin ary incontinence caused by diabetes mellitus is neurogenic bladder which is also called cystopathy. It is reflected as a form of autonomic neuropathy which begins with the damage of the autonomic afferent nerves therefore leaving the motor function unbroken and undamaged but damaging the awareness of bladder fullness which will consequently result in diminished urinary regularity. It is therefore evident that diabetes disrupts the loops for regulation of micturition which will vastly affect the patient’s urinary system by causing urinary dysfunctions of different levels. Studies have also shown that patients with chronic obstructive pulmonary disease also have diabetes. It is not evident whether diabetes is a major risk factor in contracting chronic obstructive pulmonary disease but it has shown that patients who suffer from chronic obstructive pulmonary disease will be at a major risk of getting diabetes than those without. The co-existence of these two diseases will put the patient at a high risk of mortality due to inflammation and exacerbation of the chronic obstructive pulmonary disease. This is also heightened to individuals who smoke cigarettes and use alcohol. Diabetes mellitus is also a major cause of hyperglycaemia which is linked to impaired lung function therefore negatively affecting the patient’s respiratory system. Diabetes is also a major factor in integumentary system diseases. Diabetes can leave the skin of a patient predisposed to bacterial and fungal infections. It will affect blood vessels that cause the skin to appear like it has scaly rough patches of skin which usually located on the front part of the patient’s legs. Other integumentary diseases are such as atherosclerosis where the blood vessels of the patient are narrowed which will cause the skin to be hairless and also makes it appear shiny. Diabetes will also cause acanthosis nigricans which is a skin disorder that create a black or brown, dark, thick, poorly d efined, velvety hyperpigmentation of the skin which is normally found on the folds for instance in the armpits, groin area and folds of the neck. The skin darkening is also evident in the joints of the fingers and toes. Due to the lack of insulin experienced in diabetes mellitus, a patient suffering from diabetes mellitus will be at a higher risk of contracting acanthosis nigricans. Diabetes mellitus also causes damage in nerves which will create a symptom called neuropathy.

Drug Use at Workplace Essay Example | Topics and Well Written Essays - 750 words

Drug Use at Workplace - Essay Example Additionally, the "meth" epidemic really was not properly categorized at all. Actually, the issue is the use of stimulants, not so much crystal meth. Meth use takes a terrible toll on the mind and body of the user. The devastating physical effects of using this extremely addicting drug range from mildly debilitating to severely incapacitating and potentially lethal. Common side effects for using meth include facial disfigurement, rotting teeth (meth mouth), anorexia, body tremors, convulsions, high blood pressure, and seizures. But it is the destructive psychological and neurological effects on the addict that make meth an issue for the entire workplace. Even short-term meth use can cause severe mood swings, depression, paranoia, and emotional instability in the user, increasing the potential for violence in the workplace. Americans are working harder and longer, and now some people are turning to drugs for a quick boost--with dire consequences. Drugs in the workplace may not be a new phenomenon, but there's a new poison taking precedence: Workplace methamphetamine abuse rose 68 percent in 2003. Meth use and stimulus amphetamine injestion can cause serious damage to employees and the overall work environment. While high on meth, employees may think they're in control, but it's a false sense of security. Employees are not completely aware of their environment and are apt to have more on-the-job accidents. Signs of meth addiction include dizziness, irritability, sudden weight loss, inability to get along with co-workers or supervisors, and a possible tendency toward violence. b) What are the tangible benefits of resolving the problem Sadly, the article does not speak to solving the problem. Rather it readily admits that researchers haven't a clue as to how to treat meth addiction. My own independent research indicates the rampant effects of methamphetamine addiction at work. Clearly there are no tangible benefits to the employer. Tragically, it appears that the main benefit is to protect the workplace from the addict. 4) Describe and evaluate any solutions provided in the article. The article did not offer any solutions at all. It readily admits that there is a paucity of information available on how to treat this latest epidemic in the world of drug