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Basel II Summary – What is Important to Know About the Basel II Framework Money

What is Basel II? Who is behind it? Who has developed it? Is it an international law? Do we have to comply? Who has to comply? May I have a Basel II Summary? These are very important questions, and it is good to start from their answers.

The Basel II Framework (the official name is “International Convergence of Capital Measurement and Capital Standards: a Revised Framework”) is a new set of international standards and best practices that define the minimum capital requirements for internationally active banks. Banks have to maintain a minimum level of capital, to ensure that they can meet their obligations, they can cover unexpected losses, and can promote public confidence (which is of paramount importance for the international banking system).

Banks like to invest their money, not keep them for future risks. Regulatory capital (the minimum capital required) is an obligation. A low level of capital is a threat for the banking system itself: Banks may fail, depositors may lose their money, or they may not trust banks any more. This framework establishes an international minimum standard.

Basel II will be applied on a consolidated basis (combining the bank’s activities in the home country and in the host countries).

The framework has been developed by the Basel Committee on Banking Supervision (BCBS), which is a committee in the Bank for International Settlements (BIS), the world’s oldest international financial organization (established on 17 May 1930).

The Basel Committee on Banking Supervision was established by the G10 (Group of Ten countries) in 1974. These 10 countries (have become 11) are the rich and developed countries: Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States.

The G10 were behind the development of the previous (Basel i) framework, and now they have endorsed the new Basel II set of papers (the main paper and the many explanatory papers). Only banks in the G10 countries have to implement the framework, but more than 100 countries have volunteered to adopt these principles, or to take these principles into account, and use them as the basis for their national rulemaking process.

Basel i was not risk sensitive. All loans given to corporate borrowers were subject to the same capital requirement, without taking into account the ability of the counterparties to repay. We ignored the credit rating, the credit history, the risk management and the corporate governance structure of all corporate borrowers. They were all the same: Private corporations.

Basel II is much more risk sensitive, as it is aligning capital requirements to the risks of loss. Better risk management in a bank means that the bank may be able to allocate less regulatory capital.

In Basel II we have three Pillars:

Pillar 1 has to do with the calculation of the minimum capital requirements. There are different approaches:

The standardized approach to credit risk: Banks rely on external measures of credit risk (like the credit rating agencies) to assess the credit quality of their borrowers.

The Internal Ratings-Based (IRB) approaches too credit risk: Banks rely partly or fully on their own measures of a counterparty’s credit risk, and determine their capital requirements using internal models.

Banks have to allocate capital to cover the Operational Risk (risk of loss because of errors, fraud, disruption of IT systems, external events, litigation etc.). This can be a difficult exercise.

The Basic Indicator Approach links the capital charge to the gross income of the bank. In the Standardized Approach, we split the bank into 7 business lines, and we have 7 different capital allocations, one per business line. The Advanced Measurement Approaches are based on internal models and years of loss experience.

Pillar 2 covers the Supervisory Review Process. It describes the principles for effective supervision.

Supervisors have the obligation to evaluate the activities, corporate governance, risk management and risk profiles of banks to determine whether they have to change or to allocate more capital for their risks (called Pillar 2 capital).

Pillar 3 covers transparency and the obligation of banks to disclose meaningful information to all stakeholders. Clients and shareholders should have a sufficient understanding of the activities of banks, and the way they manage their risks.

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Disadvantages and Bad Habit Woes of Online Education Learning Money

Bad habits are deeply rooted and their change requires a deeper understanding. In all my years of writing about the beneficiaries of online education learning I have come across several disadvantages of online courses.

Modern lives require high-end careers. Kudos to online learning for it has eased the age old conventions of higher education. Now career goals are no longer limited to the handful. Online higher degrees are meant to cater the educational needs at large.

  • Low Motivation – Acquiring online learning experience requires motivation, dedication and sincere endeavors. Students with low motivation and bad study habits can find it difficult to complete an online study. It requires self-motivation as the student has to study on her own and there is hardly any pressure from the part of the tutor.
  • Too Much Time – E-courses require more time than courses in colleges or higher educational institutions. Giving ample time to students is actually a disadvantage. Students with bad habits feel lethargic to attend regular interactive classes and keep postponing the time schedule.
  • Lack of planning – To earn from online education which is well planned may be easy. But the study patterns are not that easy and have to be well planned. Improper study planning added to bad study habits can derail the process of learning. However, the course activities have to be planned if possible with an expert help.
  • Traditional Class Formats Are Missing – Students too familiar and dependent on traditional classes can find it difficult to cope with virtual online classes. Traditional class formats are missing that may lead to confusion. Online classes therefore require more attention and prioritizing.
  • No Availability of Personal Tutorial Help – The tutorial guidance sometimes may not suffice or satisfy the educational needs of the students. So, the student may feel the absence of personal tutorial guidance. An online video class may fulfill the requirement to some extent.
  • Isolation from instructor and classmates – In an online class a learner may feel isolated from the instructor and classmates. Classroom like environment, proper test timings, semesters and project submission within a particular deadline are all missing in virtual classes. Therefore an online learner may feel sluggish to work and study on her own.
  • Lab Work Is missing – Lab work is difficult to mange in virtual classroom rather it is missing. The absence of laboratory work is a serious disadvantage particularly in disciplines like physical or biological science.
  • Self-Learning – Online learning is almost like self learning where a person has to take responsibility of his or her own course of studies.

Limited interactions and missing out on non-verbal communications are potential disadvantages that can only add to the bad habit woes.

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The Strategic Use of Information Technology Money

TEACHER: Hello, Student. What do you know about Information Technology (IT)?

STUDENT: Well, I know that most software is full of “bugs”! By the way, why are these errors in programs called “bugs”?

TEACHER: Computer “bugs” have been around since malfunctions in a 1945 Mark II were blamed (facetiously) on a moth trapped in a relay. Nowadays the term refers to programming flaws -commands that don’t accomplish the desired result. But I am sure you must know more about IT than the fact that programs have bugs!

STUDENT: Recently I read an interesting article written by John Diebold years ago. Allow me to quote from it:

“Information technology . . . is becoming increasingly the key to national economic well being, affecting virtually every industry and service. One would be hard-pressed to name a business that does not depend on the effective use of information: to design products and services, to track and respond to market demands, or to make well-informed decisions. Information technology will change the world more permanently and more profoundly than any technology so far seen in the history and will bring about a transformation of civilization to match.”

TEACHER: Interesting. There is no doubt that information technology is currently a major force with the potential to affect a range of organizations in fundamental ways.

The impact of information technology on business operations has been enormous and will increase substantially.

There is no doubt that a shift from an industrial economy to an information oriented service economy is under way; and no one knows when the process will slow down.

In essence, scale and the conventional dimensions of time, space, and mass will no longer be constraints on the products of the information age. Unlike the standardized product created for the mass market of the industrial age, the electronic delivery of banking services, for example, is scale-independent and intangible, provides instantaneous service, and is not bound by the physical location of the bank.

STUDENT: AmbaiU’s online courses are a good example! Students from all over the world can instantly access the courseware. The dramatic growth of the Internet’s WWW service has naturally been an important factor in the growth of IT in general.

TEACHER: True indeed. Environmental trends like globalization and heightened international competition are speeding the movement toward increased IT use by corporations. The exigencies of worldwide coordination of operations and the need to react rapidly to global competitive threats have emphasized the importance of IT in the current business context. Dramatic technological developments in hardware, software, databases, and telecommunications have simultaneously pushed the utilization of IT further along.

STUDENT: So, is the sky the limit for IT?

TEACHER: Not exactly. At the same time, several factors are militating against the rapid deployment of IT. Among these are the still-slow development of appropriate software, long-standing difficulties in quantifying IT benefits (for justifying IT investment), issues of database integration, and the lack of standards (for the purposes of inter-organizational connectivity).

STUDENT: I also think that there was “over-investment” in IT in the last decade of the 20th. century and even at the beginning of the 21st. And what about IT and Strategic Management?

TEACHER. True, we are primarily concerned with the likely impact of information technologies on the practice of strategic management. The reason for adopting such a perspective reflects a fundamental belief that information technologies can potentially influence the core of a firms activities: Choices pertaining to products, markets, and technologies (the corporate strategy level), as well as competitive methods within each of the product-market segments (the business strategy level).

STUDENT: I assume this is why the role of information technology is becoming broader than that of the traditional Information Systems (IS) function, and is becoming a general management concern and challenge.

TEACHER: Good observation. We will consider three linkages that interconnect three important concepts -strategic management (SM), information technology (IT), and the management information systems (IS) function.

* Link 1: Management Information Systems with Information Technology

According to the traditional view, IS is a service function (just as accounting, human resources, or industrial relations) which is charged with the task of efficient data processing and administration of the management reporting and control systems. According to such views, systems are designed to cater to the informational requirements of different managerial roles and are identified using standard informational requirements assessment methodologies. In consequence, systems are evaluated using criteria such as timeliness, format quality, and reliability, reflecting the technical capability of the system. The implication is that the role of IT was conceived largely as the technical core of the MIS function.

Consequently, the important characteristics of this linkage were hardware and software support for the information architecture, and flexibility of design to support minor modifications in the information requirements or to respond to the fast-changing technical core of the system’s hardware.

The strategic planning level, by virtue of its unstructured nature of decision making, received minimal support from the traditional conceptualizations and role definitions of IS.

Link 2: Strategic Management with Information Systems

The description of Link 1 reflects a view that the charter of the IS function was derived directly from the informational resource assessment and had no explicit linkages with strategic choices at the corporate and business levels. This view was representative of the actual situation until the late 1960s and early 1970s, when the need to tailor the design of MIS to the requirements of the organizational strategic context gained currency. In 1968, McKinsey & Co. published a report titled Unlocking the Computer’s Profit Potential that called for a formal link between the design and implementation of MIS and the firms strategies and objectives. This publication urged managers to visualize the role of computers in business organizations as something beyond a data processing resource at the operational level of the organization and more as a mechanism that supports their strategy.

STUDENT: Even before that McKinsey report, William King proposed that the “IS-strategy set (composed of IS objectives, IS constraints, and IS design strategies) should be derived from the “organization’s strategy set” (composed of organizational mission, objectives, and strategies).

TEACHER: You are a well read student, indeed!

STUDENT: You might remember that I come from an “IT family.” And I keep hearing a complaint from my IT relatives: while there is concern within the MIS discipline to ensure that MIS is designed in accordance with the strategic contexts of the firm, the link in the other direction, from the corporate strategic context to MIS, is still largely ignored.

TEACHER: True, but this is changing rapidly. Also, several authors have called attention to the possibility of exploiting information and information systems for strategic advantages. As William King noted in an editorial comment in the Management Information Systems Quarterly,— Information (and IS) has the potential to be a primary source of (competitive) advantage in the marketplace rather than merely as a resource to be efficiently managed or a service that is periodically turned on and off as needed.

STUDENT: Can we then assume that many see the link between strategic management and IS today as a bi-directional, mutually interconnected link, implying a strategic role for the IS function?

TEACHER: Certainly, and it was about time. In a transition toward a strategic role, the goals and tasks of the management information systems function undergo an important transformation. The systems are no longer viewed in terms of informational support for operational decisions, but rather in terms of the realization of the organization’s strategic objectives, especially the achievement of competitive superiority in the marketplace.

Information systems with a charter to achieve competitive superiority are called “strategic information systems” and differentiated from the more operationally focused MIS. Indeed, MIS has been traditionally concerned with the operational control systems for relatively structured decisions based on readily available, internal data. In contrast, strategic information systems are designed to support relatively unstructured decisions, especially those that are intricately tied to the activities of the market-place.

STUDENT: I hear that usually such decisions require a combination of internal and external data that: are neither well structured nor completely specified.

TEACHER: Exactly. Although a perfect demarcation between management information systems and strategic information systems cannot always be made, the conceptual distinction is important enough to be recognized just as the conceptual distinction between strategic and operational decisions.

Let me mention some examples of strategic information systems operating at real companies:

American Airlines : SABRE reservation System -installed in most travel agents for booking airline, hotel, and rental car reservations.

American Hospital Supply Co.: ASAP-order entry system-installed in over 4500 medical establishments to order supplies on-line. The system is internally interconnected to several supporting systems

Citicorp Extensive use of automated teller machines and global transaction network. Several systems that support their strategies for electronic banking services.

McKesson Corp. Economost -order entry system that supports customers with inventory control and analysis of sales.

United Airlines APOLLO-Travel agency reservation system with several augmented services installed in about 7700 agencies.

Student, can you think of specific strategic objectives any of these companies have achieved through IS?

STUDENT: Well, I am sure that SABRE provides American Airlines with critical operating data that can be used for strategic decisions; travel agents hooked on to SABRE are likely to book on American more than other airlines.

TEACHER: Yes, some much so that the US government has stepped in and put some limit’s on SABRE’s propensity to favor AA!

Strategic information systems achieve their objectives through several mechanisms, but two deserve special attention. These are: (1) the reconfiguration of the information flows within an organization to provide competitive advantages relative to competition, and/or (2) development of inter-organizational systems that extend beyond the traditional boundaries of a single focal organization.

STUDENT: Are these modes are mutually exclusive?

TEACHER: No, but we will discuss them independently.

Reconfiguration of Information Flows

Let us consider the case of an airline that uses timely data to increase its load factor -perhaps the single most critical factor for achieving success in the airline industry. By developing a strategic information system designed not only to continually collect data on flight bookings, but also to compare current sales against historical patterns, the airline can instruct its own ticketing agents (as well as travel agents) to modify the number of discount seats available on a particular flight depending on the current level of advance bookings.

STUDENT: By the same token, I guess that similar benefits can accrue to a hotel, where a key determinant of competitive performance is the occupancy ratio.

TEACHER: Correct. And the basic notion of timeliness of information can be extended from the context of the service sector to the manufacturing sector. Consider the case of an oil company which is able to communicate with its dealers directly and instantaneously as oil prices change to ensure minimum delay between the setting of prices in the headquarters and its realization at retail outlets.

STUDENT: But in these illustrations IT does not influence the fundamental strategic business choices.

TEACHER. Correct. However, the implementation of such decisions through organizational hierarchy and channels is facilitated through the use of IT, leading to improved strategic results.

Inter-organizational Systems Inter-organizational IT applications highlight the potential to achieve competitive success that extends beyond intra-organizational informational flows to the deploying and exploiting of information-based links with diverse actors in the marketplace.

STUDENT: Your are using rather complicated phrases today! In simple terms, what you mean is that an inter-organizational strategic information system is a system that extends beyond the boundaries of a single focal organization to link multiple organizations.

TEACHER: Glad to see that you understood! The potential todevelop such links (and the consequent benefits to achieve competitive advantage) is perhaps the single most important reason for the, increased attention to informational systems from a strategic management point of view.

The railroad industry, which has one of the highest levels of “penetration” of electronic data interchange (EDI) among all industries, displays several levels of inter-organizational systems use. And relatively new industries such as couriers (FedEx, UPS, etc.) are good examples too.

Let me also mention the McKesson Drug Company. The case of McKesson is frequently quoted as one of the most successful examples of business transformation using information technology capabilities. McKesson is a US national pharmaceutical distributor that receives close to 100 percent of its orders electronically from drugstores through its Economost systems. A customer orders by making a single pass through the store with a hand-held order entry device, keying in a product identifier or using a bar code scanner. Reorder quantities are indicated on shelf tags. When the complete order has been entered, it is transmitted to the data processing service.

McKesson clearly achieved operational efficiency benefits to improve its profitability. Although the company apparently did not gain share relative to its major distributor competition, it achieved significant strategic benefits in sales and market share gains relative to its larger competition. The system also achieved “increased tying of the customer to McKesson” which is a substantial strategic advantage. Moreover, McKesson offers a number of other services based on the data it obtains from the order entry system.

The company also provides other firms in the health care business with specialized strategic systems. The following announcement is a good example:

In May 2003, McKesson Corporation announced that LibertyHealth in Jersey City, N.J., signed an eight-year, $47 million agreement for products and services designed to transform the use of clinical information to support patient care in its three-hospital system. LibertyHealth contracted for McKesson’s Horizon Clinicals(TM) suite (of programs) to enhance patient safety, reduce medication errors and increase patient referrals by providing physicians and other caregivers with better access to information.

“We have a once-in-a-lifetime opportunity to reinvent the use of IT to support patient care and enhance quality as we open our new hospital,” said Dr. Jonathan Metsch, LibertyHealth’s president and chief executive officer. “To create the best environment of care, it’s a given that we must provide the latest medical equipment. But, just as importantly, we must provide the most advanced clinical IT solutions to support our 900 doctors and nurses as they provide healthcare for this community of 600,000 people. That’s why we’ve partnered with McKesson — we get superb, advanced clinical applications.”

Link 3: Strategic Management with Information Technology

Over the last years, several new and powerful forces in the technological and market environment compel one to recognize the link between strategic management and information technology in terms of the fundamental role played by IT in influencing the formulation of a firm’s strategy rather than merely supporting its implementation.

The potential for innovative modes of competing as well as new products and services made possible through IT provides managers with an entirely different spectrum of opportunities and threats. Given the general explosion of computing power and communications capabilities (integrated voice and data, the Internet), several new business applications can be (and have been) developed in those areas that directly enhance efficiency and effectiveness in the market-place.

Example: Merrill Lynch Merrill Lynch’s strategy demonstrates the potential offered by information technologies to develop superior substitute products (or services) as well as altering the definition and domain of business operations. The introduction of Cash Management Account (CMA) by Merrill Lynch represented a revolution in terms of redefining the concept of financial services in a marketplace that was dominated by the traditional banking institutions. The new business concept was built around integrating diverse financial instruments under one common umbrella such that the individual investor is able to enjoy the convenience of moving money across them as well as benefit from the “float” that the banks traditionally enjoyed. This account permitted the integration of four basic services to investors: (1) automatic investment of cash and dividends in a money market account, (2) credit through a standard margin account, (3) cash withdrawal by check or debit card, and (4) investment advice in managing and diversifying the account.

The strategy could not be implemented without the use of information technology, for it requires daily swaps across different accounts to post the credit card charges, checks, securities, and deposits, as well as to develop a daily updated credit limit for each account holder. This complex data processing operation is not incidental to the business concept but is fundamental to its conceptualization and operation. The importance of IT in this strategy is perhaps best emphasized by the fact that Merrill Lynch obtained a patent for the cash management account system. The annual fees generated by this product for Merrill Lynch were quite substantial.

Although several variations (circurnventing the patent protection) of this basic concept have appeared in recent years, none has so far matched the success of Merrill Lynch’s product.

Other firms which have utilized IT to break down traditional industry borders in the services sector include Sears, now an integrated financial services provider; Citicorp, now an investment and realty firm as well as a bank; and American Express, always strong in the travel business, now making a play in international banking, insurance, and securities, in addition, to becoming a financial and information supermarket. Indeed, the entire industry is being transformed due to parallel but related forces: deregulation and technology.

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How Much Does a Nursing Continuing Education Course Cost? Money

Many nurses are well aware of the necessity to take continuing education courses. Not only do employers love to see a continuously updated education, but the vast majority, if not all, states mandate that nurses take continuing education courses to be eligible for re-licensing. Put another way, without taking a certain number of continuing education units (or CEUs for short), a nurse cannot renew their license to practice in the state. So, clearly, taking courses is of absolute necessity to all nurses. However, the big question that most people have is how much does a nursing continuing education course cost? Unfortunately, there’s no simple answer to this question as the prices vary greatly between institutions. With that said, it is often possible to break down the prices into a couple of major categories: those taken at professional nursing associations and those taken from extraneous online places.

A professional nursing continuing education course offered by a respected association such as the American Nursing Credentialing Center will likely run you in the $100s, if not more. Online PowerPoint courses are typically the cheapest with the rates starting from a hundred or two and working up from there. Conferences are easily the most expensive as they encompass an entry fee plus plane fare if the conference isn’t being hosted in your home city. Of course, the cash isn’t necessarily wasted. Conferences are often one of the best continuing education opportunities that are available as they are usually filled with speakers who are experts in their respective field.

Online courses taken from “random” web sites are often significantly cheaper. Many sites that are credentialed by a major association offer subscription services. This means that you can take as many CEUs in a year as you’d like for a dirt cheap price of probably under $100 per year. Naturally, in terms of the education, you get what you pay for. They certainly won’t have the same informative level as you’d expect from a leader in the field giving a seminar on his/her area of expertise. However, if its the credit hours you’re after, these sites will offer a nursing continuing education course at extremely low prices. Just make sure that you verify that the site is credentialed by an association that your state accepts. If you don’t check this out, you may find that you end up wasting a lot of time and effort without much return.

So, the answer to the question “how much does a nursing continuing education course cost?” is very difficult to answer as it highly depends on what you’re looking for. On the one hand, you can get dirt cheap credit hours that may not be particularly informative or substantial. On the other hand, if you’re looking for highly engaging events, you might be better served by looking at your association for conferences and other meetings that are happening in your area. These will usually provide better information than online sites.

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How to Start Your Own Mobile Tire Installation Service Business Money

You could start your own mobile tire installation service business, and be in business for yourself! You could offer your service, by contacting certain tire dealers, in your neighborhood. Talk to them, and let them know, you want to start your own business, and you would like to get a discount on tires from them, if you become a regular customer for them, and better them, than their competition, up the street.

Tires stores are just about everywhere these days! Everyone needs tires eventually, just no way around it, and that is good for you! It is a hassle, for most people to take their car to a tire dealer, wait sometimes forever, if they are busy, and then get shoddy service, and hidden extra charges, almost all the time.

If you take that worry away from your customer, you will do good! If your customer had to pay $500 for a set of tires from the same dealer you just made a deal with, to get them, say, for example, $400, you would make an instant $100 profit on that, and then if you install them, and charge another $100 for that, you could make $200, in just one or two hours time! Walk around any neighborhood, and look at the cars you see in the driveways, or on the road. You could go threw any parking lot in America, and look at the tires on cars as you walk around. The cars with the bald tires will be your best customers!

Let them know you will take care of everything. In the beginning, you can come to their house, put their car up on jacks, take the tires to the tire dealer, have them put the new tires on, and take them back, and install them, back on their car, and your customer will be happy, that they did not even have to leave the house!

You could later, after you get more experience, and a better truck, you could get your own tire machine, and do the tires yourself, right in the back of your truck, and pick the tires up ahead of time, for your customer, so their car, is not up on stands for too long. You would want to have signs made up for your vehicle, and pass out business cards to all the cars you see with bald tires!

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