Culture Diversity Within Ryanair

Culture Diversity Within Ryanair Main purpose of this assignment to show the importance of Ryan air airline management and leadership across culture. In this assignment I am going to show the theories of leadership and motivation and different leadership styles across different culture and different motivation technique across different culture, motivate across a different culture , the theories of leadership and motivation, different leadership styles across different culture , Manage culture diversity within an organisation, theories relating managing culture diversity, different needs and expectations culturally diverse guests, techniques for managing and building team with a culture diverse workforce of Ryanair Please do not refer to first person (I) Introduction Ryanair is the worlds most wanted airline working near fifteen hundred flights per day from low cost directions across twenty eight countries, involving over 168 terminuses. It was set up in 1985 Ryanair has a team of more than 8,500 people and assumes to carry over 80 million travellers in the present economic time. Its head office is located at Dublin Airport with its primary operational bases at Dublin and London Stansted Airports. It is Europes largest low cost airline and one of the most commercial, In spite of the hard business environment in which Ryan air worked in both 2011 and 2012, the airline has been characterized by rapid expansion, a result of the deregulationof the aviation industry in Europe in 1997 and the success of its low-cost business model. It was one of the first independent airlines in Ireland. In 2001, many believed that Ryan air was like the Wal-Mart and Southwest Airlines of Europe Barret, S. D. (2004) Task 1 Chapter 1 Lead and motivate across a different culture All cultures have beliefs which are mutual for all people in that culture. Many beliefs have same values consequently there are some arguments that no need to learn Indian cultural beliefs and American cultural beliefs. Equally both countries hold morality as faith in their culture no need to check it people only need to understand how these values are bought out in toward life over activities, manners, beliefs . In the modern age of enterprise culture, aggressive competition and strategic leadership for effectiveness in the market, Ryanair has structured its leadership and business classic to report the subjects of organizes an commercial method to the management of organisations for a transformational method established upon achievement. For Ryanair, these issues discovery expression in low-cost and generic factors. Basically these factors are answerable for Ryanairs success occurrence. In catching this transformational, change-oriented quantity of Ryanair. A distressing business ideal tests the strategies used by the present well-established organisations in the market. Its main attention is on price understanding of customers. , noticing these things that Michael OLeary, the CEO of Ryanair has been at the centre of economy and low-cost revolt that has produced an detonation in the airline industry. Ryanairs leadership success is contingent on the economic condition in the United Kingdom i n the stir of the de ruling strategy that allowed new entrants into the aircraft industry thereby opening the rule that completed air manageable partial preserve of the rich class, and the inflexible commercial spirit that OLeary displays(Arredondo, P., 2011) Motivation is a massive matter. The base of motivation may change in people. In the determination location, many have self-confidence in that the side by side of agreement at work is a durable negotiator. It is true that people alter throughout their life. A person who once was motivated by change may or not like it any shorter. Though, the person who beloveds lifelessness may essential to involvement alteration to obtain almost different in their lives, fairly new than what they been doing for many, several years. 1.1 Theories of leadership and motivation (Ryanair ) Interest in leadership improved for the period of the early twentieth century. Early leadership theories motivated on abilities notable between leaders and followers, whereas following theories considered at other variables such as situational features and proficiency levels. Although many diverse leadership theories have occurred, maximum can be confidential 1. Contingency Theories: Contingency theories of leadership focus on certain variables associated to the atmosphere that might determine which particular style of leadership is best appropriate for the condition. According to this theory, no leadership style is best in all states. Success is determined by a number of variables, including the leadership style, qualities of the followers and aspects of the situation. Contingency theory adopts no one accurate way to lead will fit all conditions. In this approach states that there is no perfect way to lead an establishment rather situations govern the way to lead at an assumed time. In addition, there is a serious correlation or affinity between situational and contingency theory of leadership. Both suggest that sets of structure to lead depend on the problem at hand. Contingency theory is a class of behavioural theory that claims that there is no best method to Ryanair or leads a government. Instead, the ideal progression of action is c ontingent on the internal and external factors or conditions. Thus, contingency approach to leadership pressures related factors as significant influence on leader success. Bass, B. M. (1985 4. Situational Theories: Situational theories recommend that leaders preference the best classification of attainment based upon situational variables. Different styles of leadership of Ryanair may be more appropriate for positive types of decision-making. That anxieties follower development, an extension, the point actuality strained is that there is a break from organizational model scientific management largely mistreated the impacts of the environmental factors as well as encouraged vertical management structure, a departure from flat management arrangement. Ryanairs contingency or situational leadership, the symbol is that it is based upon leader-match theory, Theories of Motivation Motivation is the different, internal method that strengthens, leads, and sustains behaviour. It is an individual strength that bases one to perform in a particular way .Most often, motivation is the term used to explain peoples behaviour. Effective directors are said to be highly encouraged. A team leader who eludes work is said to be unmotivated Equity Theory: Motivation theories can help directors understand how to motivate their staff. The equity theory of motivation is based on the fact that individuals are inspired first to achieve and then to preserve a sense of impartiality. Equity refers to the distribution of rewards in direct equality to the contribution of each employee to the organization (Ryan air). Everyone needs not to receive the same rewards, but the rewards should be in accordance with individual contributions. The idea of equity likes a development of an input-to-outcome ratio. Alavi, M (2000), Expectancy Theory: Expectancy theory, industrialized by Captor opportunity is a very difficult prototypical of incentive that is based on an uncertain assumption. According to expectancy theory, motivation is dependent on how much want something and on how likely to become it. Ryan air airline sales subjects managers who are applicants for advancement to one sales reservations managers job. Ryanair has had a very good sales year and always get good performance evaluations.D.R., 1997 Reinforcement Theory Reinforcement theory states that behavior that is pleased it is likely to be repeated, although behavior that has been criticized is less likely to remain. Ryan airs is a non-additional airline but it has a high business the assistant general Secretary Ryan air has a very suppressive government and they have very high staff income Ryan air and as result the company is recruiting now agreement labor from activities as far away .Pilots were lately told that in order to development from older airplanes to original aircraft 1.2 Different leadership styles across different culture Nowadays, people from different cultures and value systems are appointed by the business organizations across the world. Western leadership style is supplementary of a participative style somewhere the manager contains his team followers to a positive point in result making. But, in Asia the leadership style is a combination of autocratic and transactional leaderships. An effective leader who arrangements with another culture should recognize their work related social and cultural values to achieve business success. He should also have the ability to organize and main a workforce of diverse cultures. Mosakowski, E, (2000) The leadership style OLeary has started at Ryanair good deal form in a grouping of translation a movement from autocratic leadership to democratic one. Major styles of leadership democratic participative, autocratic repressive and laissez faire representative. OLeary has expanded the leadership base at the top organisation unit from. It is significant to communication that OLearys leadership style has to experience this evolution from 1988 till present in order to recover the then injured, unknown airline, Ryanair, from dripping cash and this essential aggressiveness, confidence, style of leadership that concluded in low cost and non-additional method. OLearys leadership structure as at when he joint Ryanair in 1988 as Tony Ryans particular enforcer to 1994 when he became the CEO of the airline and now has experienced distinction to ensemble different situations. Different leadership styles are desirable to manage with different situations the autocratic style marks logic when an ass ociation is in deep anxiety and needs to complete an express improvement that style would be counter productive when the association is in a growth situation Green, S. G. (2002 Ryanairs leadership style has developed the European air company industry has been unfavourably re-joined. Leadership change is primarily a function of leadership style. Also, it is doubtful from the analysis presented Ryanairs success story is blocked in its leadership style, which has observed a sort of evolution from autocratic to democratic. And the leadership theory that marks the possibility of this new organizational culture change is administered Therefore, even though OLearys leadership model has been successful, it is essentially contingent upon the deregulation strategy in place since its founding. In addition, in order to withstand this administrative success, Ryanair requirements to gain the opposition in the airline industry and alters itself for sustainability. 1.3 Different motivations across different culture Motivation has kept people in emergencies accepted during times. It has been the basis of improved principles of living, achievement, prosperity, and approval. Most leaders concluded olden days have used irregular systems of motivation. The same is accurate of successful managers. The role of motivation in the work environment has great value. Many readings have developed from one place to another various motivational techniques for leading employees towards desired goals. The success or failure of motivation time-outs not on the system itself but on managements capability to like the wants of people with appropriate rewards Objects are needs, which force people to move towards goals. Many theories of motivation have been established with the thoughtful of how workers performances can be strengthened confidently and how they can improve and focused to accomplish favourite ideas. Motivation training in diverse culture needs ID of the positive and negative culture based-factors. Grant, R.M. 2002, Contemporary concepts of culture Several organization examiners contributed to the opinion that perceives culture as- a mutual similar way of existence, calculating and doing which are ideas, shared by members of a cultural group. Culture involves of designs, clear and unspoken of and for behaviour acquired and conducted by signs, establishing the unique successes of human groups, including their expressions in objects; the important basic of culture involves of customs practices that only come into existence in relation to, and in contrast with, other cultural groups. Differences in cultural principles need additional skill when trying to motivate changes in Behaviour. Managers of Ryanair want to correctly understand the condition and strategy an approach that turns a persons morals and needs. The theory of motivation recommends that people are motivated to do belongings as of external honors. Humanistic Theory of Motivation: Humanistic theories of motivation are founded on the knowledge that people also have strong Perceptive clarifications to perform various actions. Once the minor level requests have been seen, the main motivator converts the requirement for the desire to fulfill ones specific possible Adapting to Environments Ryan air managers are said to be highly motivated. A team leader who circumvents work is said to be unenthusiastic. Many workers from the United Kingdom have port their occupations with Ryan air and as result the company is employing now contract labor from agencies. Pilots were newly told that in order to progress from older planes to newer aircraft, they would have to compensation for their own retraining. Politis, J. D. (2004 1.4 leadership strategies for an organization that operates across different culture Organizations are motivated by expert leadership to display them over unsurpassed modifications. Some of the best and most appreciated managements are weakening to adapt to change, implement their strategic plans successfully or prepare for a more indeterminate future. Many top directors complain the lack of leadership worktable strength in their companies and sensation what will happen every leader is conscious of the value of a precise business strategy. Without proper leadership, even the best and courageous strategies die on the plant, their probable never understood. The skill of an association to attain its areas does not be dependent completely on the strong point of will of an only great leader, even upon the efficiency of the organizations restraint of knowledge. A good leadership strategy takes all of these factors into explanation Politis, J. D. (2004 Strategic Leadership is a development, which certifications organisation to be active rather than reactive in shaping its own future. A concentrating organizational lead affords and launches unworkable leadership to Ryanair. A good organisational leader progresses a positive scheme to strategic management, where the management rather than just identifying and answering to alteration. The change in business environment unfair the strategy of Ryanair. New markets or introducing a new service and it also created sources of innovation like a change in market structure, Tie Leadership Development to Business Strategy. Leadership development should originate and end with the businesss strategy and objectives in mind. The respondents well-known that the establishment of an cohesive strategy and system for all managerial development was the leading significance of their learning and development establishments These results imitation an previous study as well Many corporate learning and development establishments The best businesses for leaders consistently execute on the strategies that make for good leadership development. They make enterprise wide standards, practices, and metrics for leadership;Martins, L.L. (1996) Organizational culture is the collective behavior of humans who are part of a society and the meanings that the people to their actions. Culture includes the organization values, visions, averages, working language attach, systems, symbols, principles. It is also the arrangement of such supportive behaviors and expectations that are taught to new executive members as a way of observing, and even thinking and sensation. Organizational culture moves the way people and collections interact with each other, with clients, and with sponsors Ryanair and Marketing Strategy Marketing strategy is very important in order to maintain modest advantage. It is important in order to maintain good relationship with the customers. This is mainly important in the service industry, as well as the hospitality and tourism sector. This is because of the fact that the entire industry is characterized by intensive competition, because of the growing number of competitors in the global market. In addition, the services actuality offered as well as the products being created are hard to differentiate, because the products and services to be offered towards the customers are practically the same Peterson, S. J. (2009) Ryanair were recognized by the Ryan family with an investment segment of a staff of 25. The company launched its first direction in July with daily flights which operate daily from Waterford in the southeast of Ireland to London Gatwick Ryanair is the worlds much-loved airline and works more than 1500 flights daily from 44 sources and more than 1100 low fare routes crossways more than 25 countries, which connect to over 160 terminuses. As a result, it is dynamic for company in this production the emergence of the Internet in the mid-1990s as well as the growth of Intranets and Extranets required airlines to progress their strategy on industrial innovations in order to increase their attractiveness. In addition, they progressively reinvented themselves to main technology suppliers for a wide range of tourism organisations including airlines, travel agencies and Internet travel portals. Cross-cultural understanding influences business relationships, and many training providers offer courses that outline the various basics of the cultural exchange and appropriate ways of doing business with abroad societies. Whilst this is highly applicable, it is valuable to specifically analyse the impact of cultural values on business performs in the tourism industry. Task 2 Chapter 2 Manage culture diversity within an organisation Diversity is much wider topic today Diversity is strangeness or those human capacities that are diverse from outside the sets, to which we belong, yet present in other individuals and groups. Its important to appreciate how these magnitudes affect presentation, inspiration, success, and interactions with others. Organized organizations and observes that have presented barriers to some dimensions of diversity should be examined, challenged, and removed.Diversity also incorporates a wide variety of other differences, including work experience, parental status, educational background, and managing diversity means more than simply observing legal and policy requirements. Managing diversity is defined as planning and executing administrative systems and performs to manage people so that the potential advantages of diversity are maximized Thomas, R.R., 1996 Managing Diversity. Managing diversity means identifying peoples alterations and make out these differences as valuable it improves good organization like Ryanair practices by stopping perception and promoting inclusiveness. Companies should completely redesign the working culture that make possible the scheming of a wide collection of posts that leads to give definition of how work gets done and how diverse markets are approached. All workforces should be held responsible for their performances and human resources results. Companies must create a post bureaucratic organization based upon trust and admiration in which diverse employees are valued and integrated into all aspects of the work. Diversity increases inspiration and innovation and advantages. Diversity helps administrations for inflowing the global arena. Diverse groups mark it possible to improve elasticity and fast reply to change. The cultural impact on management is exposed by humble ethics, attitudes, and beliefs of the people. Culture can mark skill allocation, managerial attitudes, managerial ideology and even government-business relationships. Hall, T. (2005 Managing Cultural Diversity: To manage successfully in a global diverse environment, that essential to identify the differences and learn to use them to improvement, reasonably simply allowing differences to cause difficulties somewhat directors should be skilled how to respect the differences at work and how to work with them to maximize the contribution of each employee, It is a global and diverse company, which works individuals of all confidences. To reproduce the protracted collection of principles followed by their employees they provide prayer facilities across the business and publish religious festivals information sheet on intranet site with the aim of raising awareness on the different cultures across the company. Some religions or beliefs have specific food needs. Ryanair provide a variety of dietary selections to confirm key rations are provided for and foods are considered. In addition, the Ryanair Uniform Committee has adapted the new uniform to ensure that it sustains the company image whilst allowing flexibility to meet key religious needs. Peterson, S. J. (2009) The Employment Equality (Age) Regulations have had a great impression through the Ryanair airline. Prior to the regulation, Ryanair ran attention assemblies to estimate workers views on the changes. There was an extensive choice of answers, maximum persons sensed that the age regulation was an optimistic period and that flexibility was the key to working for longer. Ryanair is working closely with the construction of Terminal 5 to confirm all phases of disability are protected. As a company they are dedicated to confirming that controlled employees can attain their full conceivable. Practical alterations are completed for employees if they are disabled to become disabled whilst working for Ryanair. They work in partnership with the Employers Setting on Disability. They also work with the Disability Rights Commission to support their disability strategy. Flexible working has become significant part of the technique they (Ryanair) work and represents part of a current change of attitude. Ryanair has introduced a number of elastic working enterprises that have progressive women who tend to undertake responsibility for most dependent care. One objective is to increase the focus on work-life balance to encourage women to return near work after maternity leave. It is a priority of our race equality strategy to listen to their ethnic minority employees. Ryanair encourage sharing ideas on how they can work on issues such as career progression, training and development, internal and external recruitment, harassment and bullying. Milliken, F.J.1996 2.1 Theories relating managing culture diversity Workforce diversity is a difficult work to achieve in an establishment. The organization of workforce diversity as a device to raise administrative success cannot be highlighted, especially with modern alterations wide crossways the world Workforce diversity is a main anxiety for maximise of the trades. Workforce diversity, incapacity, old age, human resource management, equal opportunity. The increased flexibility and contact of people from assorted circumstances as a result of better-quality economic and political systems and the acknowledgment of human rights has put most organizations under burden to hold diversity at the work place. The idea of diversity management of Ryanair increased kindness with globalisation and the requirement for more families to banquet globally to influence customers across the world. D.R., (1997) Managing diversity make a modest benefit to Ryanair. Possible benefits of this diversity contain well choices, more achievement in advertising to external and national cultural sectional groups, and an improved passage of economic chance culturally diverse groups comparative to similar groups are new active both in the contact method and work presentation these assistances arise after a diverse group has been together for old-fashioned. Ryanair succeed at diversity if the creativity to make, achieve and price the diverse workforce has the full sustenance of the highest management The organization must connect and worries for diversity to human resource management choices around staffing, group, project, sequence planning, presentation administration, and Managers must know their companys culture principal and then contrivance diversity plans allowing to that culture Diversity of Ryanair in administrations has its assistances but there are some disadvantages of workforce diversity. Some people feel helpless by working with people of a different age, sex, or culture. There is a rise in the cost of training. This increase originates from prices related with meetings, programs and addresses specified to encourage diversity in the company Theories of cultural values Mainly in the workplace, minions expect to be referred. In cultures with a high control distance, dissimilarity is more broadly recognised and power, which is thought by a marginal, is known by the needy majority of people. In a more manly culture leaders are expected to be critical and forceful and struggle is committed by aggressive Uncertainty deterrence rises to the vital for instructions and principles. Weak uncertainty avoidance comprises incentive by attainment and inspiration of inventive ideas and performance. Strong uncertainty escaping specifies a need for rules and some battle to state-of-the-art designs and behaviour. Motivation by safety is likely to be established in civilizations indicating strong uncertainty avoidance. Milliken, F.J.1996 2.2 Different needs and expectations culturally diverse guests Elastic working has becomean important part of the way Ryanair work and signifies part of an on-going change of attitude. There are clear benefits for passengers and for their business and they will continue to support flexible occupied solutions that are appropriate and meet our needs. They support a wide variety of elastic working possibilities that are aimed to meet different types of work. These solutions assist the employee to balance home and work life whilst contributing to the on-going changes wished by the organisation to assist cost reduction.Free and incapacity facilities governments essential to reflect the variety of their clients values, beliefs and cultural expectations. Religious practice Communal and debility facilities workers need to be watchful to the conceivable changes in sacred formal and the influence of a beings religious practice on their politics and value system. Central faith of Ryan air may admiration other beliefs as cults somewhat than official religions however people of any belief have a right to respect.Turner, J., 1985 Incapacity Ryan air needs to contemplate different cultural views of disability and look after of family members with incapacity, positioning the person before the disability, and facilities for people with a disability. Focus on the person, not the disability. Work performs may need to be modified to permit for dissimilar national views and conventions main contact and corporal exchange with the opposite gender. Culturally comprehensive practice It is impractical to assume public and disability services workforces at Ryan air to differentiate the cultural in a fast increasing and extremely modest global market, and in contradiction of the background of the current challenging economic climate, the pursuit of quality has become an organisational imperative for leisure industry trades. Different acuities of quality, yet, make its realisation more problematic, not least since of the very nature of the persons within the market the staff within vacation industry businesses and guests. Lawson, R., 2002 The relationship between cultural realization and superiority There is a correlation between the equal of national realization of the travel business and the following perception of product, service quality on the part of the tourist. Increased customer satisfaction is likely to follow as a result of improved staff cultural awareness and following development of ethnically appropriate products and services. It is significant for tourism businesses and purposes to take this into account in the provision of products and services. Cross-cultural understanding influences business relationships, and many training providers offer courses that outline the various basics of the cultural exchange and appropriate ways of doing business with abroad societies. Whilst this is highly applicable, it is valuable to specifically analyse the impact of cultural values on business performs in the tourism industry. Wendy. (2004, March Undoubtedly the tourism industry and culture are inextricably linked in that it is often the search for a cultural exchange that is an inherent part of the motivation for the tourist to travel. As already illustrated, to meet expectations there is a need for cultural awareness, both on the part of the individuals travelling and, equally importantly, tourism businesses. Customer loyalty is often affected by the perception of the level of service provision. Another aspect of culture is body language and whilst subtle, it is easily possible to offend through inappropriate gestures that demonstrate a lack of respect and subsequently undermine the business relationship. The National Centre for Languages stresses the requirement for cultural skills in business, specifically the tourism industry, indicating that cultural and language skills are beneficial for, amongst others, hotel reception, tourist attraction and restaurant staff, in welcoming guests, dealing with enquiries, taking bookings and guiding visitors. 2.3 Techniques for managing and building team with a culture diverse workforce Teambuilding Insignificant businesses depend on teamwork, objective as significant as their improved accompaniments. When a minor group of people starts employed to near common goals and making results that improve up to more than the amount of the portions, it becomes a team. Positive team employed gets consequences in all areas, including auctions, IT, problem solving and handling new projects. People work more effectively and their inspiration and loyalty to business are also increased. Starting and conference the team, important sides, Positive side assemblies, solving problems. Cultural Diversity in the Workplace, Paglis, L. L. (2002) gradually various incomplete work to the globalization of profitable, nationwide competence is conceivably the most leading ability for effective work presentation in this century. Social competence is the ability to collaborate successfully with persons from different beliefs. This capability of Ryanair is needy on awareness of ones own cultural worldview, information of worldviews, compliant to cultural variations, and multicultural services. Managing culture diverse workforce Developed cultural capability consequences in capability to appreciate, connect with, and efficiently cooperate with peoples crossways cultures, work with varying culture calendar Communication:Providing evidence precisely and punctually is dangerous to effective effort and team presentation.

Impact of the Credit Crunch in the UK

Impact of the Credit Crunch in the UK Factors Influencing the Financial Institutions in the UK With Particular Reference to Credit Crunch A Comparative Study between Barclays and Northern Rock Bank I- Abstract Banks acts as intermediaries between surplus units depositing funds and investors or individuals seeking capital for investments. Thus, banks role is important in maintaining the flow of fund between these different parties. Banks like any other profit maximising firms are influenced by various factors that represent risks or opportunities. Therefore, banks business decisions are founded on aspects such as confidence in the market, the level of risks, the state of the economy, and their competitive strength. Regulation is essential for assuring compliance and integrity in the financial system, but rigid rules stifles the dynamicity of the banking industry and the financial sector as whole. Moreover, Central Bank role as a lender of last resort can rise the issue moral hazard by helping imprudent banks, however because banks are financial intermediaries, the impact of bank failure can have a detrimental effect on the financial system (systemic risk), and also on clients and customers, therefore bank supervision is vital due to their sensitive important role and their extensive impact. Furthermore, the development of events in the US financial market particularly the high default rate of subprime mortgage market led to a decrease in demand for tradable securities. This has affected confidence in the US and the global financial market, and consequently some financial institutions and banks such as northern rock in the UK faced difficulties in obtaining the necessary funds to maintain the business operation and remain solvent due to lack of short term liquidity. However, other banks faced similar difficulties but are using various methods to improve their balance sheets to overcome the current credit crisis. Moreover, governments and regulatory bodies are all taking the necessary measure to stimulate the market and tackle the core sources of the current credit crisis. II- Introduction Sustained economic development is often linked to efficient management of fund that is used to finance investments, which are projected to further create more wealth and opportunities for states, corporate and individual investors. Banks acts as intermediaries between surplus units depositing funds and investors seeking capital for investments. Thus, banks role is fundamental in maintaining the flow of fund between these different parties. Furthermore, the stability of financial and banking system is vital for the sustainability of economic growth and the preserve of investors confidence. Banks like any other profit maximising firms are influenced by various factors, these includes internal and external factors, which represent risks or advantages. Therefore, banks decisions are based on elements such as confidence in the market, the measurement and management of risks, the state of the economy, and their competitive power and market share. This study will look onto various factors influencing the financial institutions in the UK, with particular reference to Credit Crunch. This literature will comprise the banks management of risks, the role of authorities regulating and supervising the financial system, and explore the regulation of the banking industry and the financial system as a whole, in addition of the effect of regulation on banks performances. The analysis will include a comparative study between Barclays and Northern Rock Bank, taking into accounts the differences in their structure, size, as well as their reaction to changes in global financial markets. Furthermore, the Research will examine the fast moving global effect of the credit crunch; discuss the two banks business model, and explore their activities and behaviours. The study will also investigate the two banks high exposure to credit risks arising from risky investments, highlight the consequences of the heavy reliance on money market, and the use of securitisation for liquidity sources. IV- Methodology The research objective is to investigate the various factors that influence financial institutions in the UK, notably the banking industry. This research was based mainly on secondary research, the gathered data and information was sufficient for this research topic. However, sensitive data regarding the value of risk were not disclosed in both banks publication, such data is useful for the researcher to scrutinise banks estimation of risk and how realistic are the projections. Nevertheless, information about estimation of risks may be obtained directly from banks for further analysis of this specified area of banks management of risk. Research material relevant to the topic was collected from various academic sources; this is to explore issues and arguments regarding the regulation and supervision of the banking system. The two banks internet site was used to gather the background information along with the financial statements of the last six years, which were used in the research analysis to perform the comparison between Barclays and Northern Rock bank business strategies and financial performance. Publications from the Bank of England website were collected to study the central bank regulation and the management of the UK banking system, in addition to the historical data regarding interest, LOBOR, and inflation rate changes. Furthermore, articles from the Financial Services Authority (FSA) were gathered to study the role of the organisation and its contribution in supervising and stabilising the UK financial system. Recent publications from the Bank of International Settlement (BIS) were collected to study the role, the objectives and the effect of Basel directives on banks. Besides research the progress of current Basel II implementation along with the development of new requirements arising from the present credit crunch. Recent newspaper articles and various other media sources were gathered to collect the latest information regarding the development of the present credit crunch and its effect on banking industry, these includes sources such as BBC business, yahoo finance and the Financial Times website, and follow recent actions of regulators and banks management of the current crisis. Moreover, data from the two banks financial statements was collected to perform the Gap Analysis using Microsoft excel package to conduct a series of calculations. Other methods could have been used to assess bank risks such as value at risk (VaR) using regression analysis by utilising a computer package such as Microsoft Excel. The regression result will determine the degree of risk that the researched banks possess in their portfolio. However, the banks seldom disclose such sensitive information in published financial statements. This is to avoid adverse reaction by investors and credit rating agencies, which could therefore affect the banks stock prices, their reputation and confidence in the capital market. V- Literature review (Part I): The nature of banking The term bank can be applied to a wide range of financial institutions, from large banks to smallest mutually owned building society in the UK. The provision of deposit and loan distinguishes Banks from other financial institutions. Deposits products supply money on demand or following time notice. Deposits are liabilities for banks, thus must be well managed if banks want to make profit. Similarly, banks manage assets created through lending. Therefore, Banks main activity is being an intermediary between depositors and borrowers. Other non banks financial institutions, such as building societies and stockbrokers, also act as intermediaries; however it is the provision of loans and taking of deposits that distinguishes banks, though many banks provide various other financial services. 1) Management of risks in banking The fact is that bankers are in the business of managing risk. Pure and simple, that is the business of banking. (Walter Winston, former CEO of Citibank; the Economist, 10 April 1993). Banks, like all profit maximising firms, have to deal with macroeconomic risks, such as recession, inflation level, as well as other micro economic risks including political pressure, commercial breakdown of core customers or suppliers, natural disaster, in addition to the emergence of new competitive threats. From a finance theory viewpoint, Bank risk management is primarily composed of four main balance sheet risks, which includes liquidity risk, interest rate risk, credit risk, and capital risk (Hempel et al, 1989). Credit risk has been recognised as the principal risk in its effect on bank performance (Sinkey, 1992, p. 279) and bank failure (Spadaford, 1988). The primary reason why the correct management of credit risk is essential is because banks have restricted ability to absorb loan losses. Generally, the ability of a bank to absorb a loan loss is originated firstly from generated income of other profitable loans, and secondly by bank own capital. 2) Factors influencing financial institutions Banks and other profit maximising firms are influenced by various factors; financial institutions in particular are susceptible to a range of changes that may affect their projected growth. Some of these changes are internal changes, this occurs subsequent to restructuring program that a bank adopt following an expansion strategy such as in mergers and acquisitions or as a defensive strategy to remain competitive and maintain market share and fight competitive predators from acquiring the bank. Moreover, there are other external factors that can influence financial institutions, these includes a countys government monetary policy, the economic condition, the financial stability and the level of confidence in the market, the inflation rate, in addition to other risks such as credit and market risks. There are a range of risks that a bank may encounter, these includes the followings: a) Credit risk and counterparty risk: counterparty risk refers to the risks that after the creation of two parties contract, one party will renege the terms of the contract, while credit risk is the risk that a loan or an asset becomes lost due to default. b) Liquidity or funding risk: these are similar terms that refer to the risk of shortage of liquidity for maintaining operational commitments, that is the ability for the bank to cover its liabilities at due date. A shortage of sufficient liquid assets is often the trigger of financial distress, as it is increasingly difficult for the bank to obtain funds from the wholesale markets. Thus funding risk is the inability for the bank to maintain its daily operations. c) Market or price risk: this type of risk refers to the risk linked to over the counter instruments or traded stocks in a non liquid market, such as equities and bonds. Thus if a bank hold these items in its portfolio, then it is vulnerable to market or price risk, this is the risk that the price of these items is unstable, which is caused by systematic (movement of prices in all traded market instruments, for instance due to changes in economic policy) or specific market risks (the movement of a particular instrument is opposite to the rest of similar instruments, for example, this may be caused by unfavourable information about the issuer of that instrument). d) Interest rate risk: this is similar to price risk, because interest rate is price of money, it represent the opportunity cost of keeping money. This occurs because of interest rate mismatches between assets and liabilities, which differ in volume and maturity arising from the banks performing asset transformation. e) Capital or gearing risk: because banks are highly leveraged firms, they have to set aside some capital to cover the losses. The size of capital is proportional to the level of risk taken by the banks. Basel risk asset ratio principle requires banks to hold up to 8%. Besides, settlement or payments risk. This is when one party in the contract deliver assets or makes payment in advance, which creates exposure to potential loss. Furthermore, operational risk refers to risks from human capital, legal risks such as law suits, fraud, and physical capital. While sovereign and political risk refers to the risk that a government default on its debt obligation to a bank. Moreover, financial regulators has identified three main risks linked to banks, these includes market risks such as risks from exchange rates, interest rates, operational risk, commodity and equity prices. 3) The Asset-Liability Management (ALM) technique Because the fundamental and the primary activity of a bank is intermediation between surplus units that makes deposits and those that seek capital, which acquire fund from the bank, thus this payment system gives the bank the role of intermediation , where the intermediation is key activity, risk management is founded principally on a sound asset liability management (ALM). Furthermore, the ALM is a technique practiced by banks to effectively manage their risks, which was largely utilised by banks in the post war period up to the 1980s. The ALM method was the main tool used to manage banks books, it is essential that the bank maintain its assets and liabilities under control to minimise risks and remain solvent. Besides, banks are keeping their managers updated with newer techniques and skills to maintain their efficiency and competitiveness for the future, for instance, ALMA is an association that comprise around 40 financial institutions, which are international and local banking groups and building societies, mostly UK and Irish. However it is growing its membership and links around Europe. Its objective is to offer an informal and inclusive forum regarding the balance sheet management issues (Byrne, J. 2004). Due to the development of banking activities, innovative instrument became increasingly used by banks to manage their assets such as off balance sheet instruments, where banks moved from interest earning income products to non-interest income sources, thus this required that banks risk management should adopt newer techniques other then just the ALM to includes the risks originating from the off balance sheet instruments. Moreover, one of the new methods included in managing market and then credit risks is the Value at Risk (VaR), which involves giving an estimate of losses arising from the volatility of banks assets. 4) Credit Culture A recent research conducted by the Australian institute of bankers on the issue of Improving Asset Quality (Brice, 1992), which focused on the significance of credit culture. The great emphasis on credit culture was due to its influence on bank performance and in some occurrences bank failure ( Spadaford (1988) and Brice (1992)). Spadaford (1988) stated in his study of 162 bank failures in the United States that the analysis showed that 98% of bank failure occurred due to asset quality problems, among these problems are poor management of loan policy, inadequate systems to ensure compliance with internal rules and procedures, and the lack of supervision on senior and key management members in the organisation. McKinley (1991) has defined four main cultures that influence bank performance. predominantly the immediate performance-driven, which emphasis on earnings targets, followed by Market share/production-driven that focuses on being the biggest with greater production volume, along with Values-driven that balances between credit quality and generated income. In addition to the Unfocused (current priority-driven) bank, such bank lacks vision and appropriate strategy often set short term targets which consequently lead to unsuccessful ventures. VI- Literature review (Part II): Banks regulation The base of regulating financial institutions is founded on three broad frameworks. Primarily, the consumer protection argument, this is based on the notion that investors and depositors cannot be demanded to perform risk assessment of financial institutions they deal with, nor monitor standard of service or performance of these institutions. The consumer protection underlying principle is based on three types of regulation; firstly, compensation schemes created to repay all or part of losses caused by the insolvency of financial institutions; secondly, rules and regulations such as capital adequacy requirements designed to prevent insolvency; and lastly promote fairness in business or market practices by setting rules and standards. The latter regulation reveals market imperfections arising from principle agent problems, asymmetric information, and the issue of determining the true value of financial products or services, which are established well after the transaction or contract was formed (Dale, R and Wolfe, S. 1998). Furthermore, there are other concerns associated with consumer protection rationale. The provision of compensation to depositors and investors for losses sustained from the insolvency of financial institutions will further encourage these institutions to pursue risky investment decisions, thus there will be minimal or no incentive for prudence. This indicates that risky firms will be able to attract trade with identical terms and ease as prudent institutions, thus affecting financial market standards and discipline, and rising potential insolvency incidences. Therefore, the resulting losses must be covered by the deposit insurance scheme, investor protection fund, or in some cases by the tax payer. Thus, prudential controls on financial institutions are essential to minimise losses and to balance the regulatory incentives with the excessive risk-taking. The third aim of financial regulation is to promote integrity of markets, encompassing various issues such as market manipulation, fraud, transparency, and fairness; market integrity emphasis on organising the market as whole beyond just the relationship between financial firms and their consumers. Supervisors implementing the financial regulation consider systematic risk as the factor that causes great concerns. That is the risk that failure of one or more distressed financial institution could spread and cause a contagion effect, which could cause the collapse of other prudent institutions. It is their vulnerability to the contagion effect that single out financial institutions from other non financial firms. 1) Targets of regulation The major objectives of Financial regulation is to set guidelines for the activities of Banks, insurance companies, investment firms, exchanges, and fund management companies. The diverse principles for financial regulation mentioned above vary in their relation to these various institutions of the financial services sector. Banks are distinguished by what is referred to as short- term and unsecured value certain liabilities (deposits) and illiquid value-uncertain assets (loans). Banks conforms to deposits insurance and other type of consumer protection, partly because banks balance sheet consists of a variety of complex instruments and depositors are not capable to measure the riskiness of their deposits. However, depositor protection creates moral hazard problem. Furthermore, banks regulation focuses more on systemic risk. That is the possibility of a bank run that can spread to a number of banks and trigger a wider instability in the financial system. According to this notion, bank runs are the result of action by depositors retrieving their funds in response to amounting fear and uncertainty of the bank future arising from bank asset losses that could render it insolvent. Due to potential risk of losing all or some of their assets, depositors tend to make a run when initial signs indicate some troubles. Moreover, recent research found that the occurrence of a bank run can not be entirety explained by the decline of banks underlying assets (LaWare, J.1991.p34), (Diamond and Dybvig, 1983).The emphasis is on a banks maturity transformation notably the transfer of illiquid assets (bank loans) into liquid claims (bank deposits), taking into account that the banks loan portfolio substantially decline in value in an event of liquidation than on going concern. What triggers a rational bank run is that the uncertainty and the higher probability that the loan portfolio liquid value is less than the value of liquid deposits. This notion demonstrates how bank runs can possibly arise and affect even healthy banks. Thus distressed bank have to liberate its assets at liquidation value, therefore leading to possible insolvency. 2) Techniques of regulation While procedures of conduct of business regulation do not differ among various types of institutions, but in terms of prudential regulation there are fundamental differences that reveal the distinctive risk features of banks, insurance firms, and investment companies. Because bank failure has a greater effect on the whole market, and can create systemic crisis, governments and central banks have set bank regulation for creating extra protection in provision of extra fund by setting the lender of last resorts facilities, and deposit protection, however, these facilities creates moral hazard. Moreover, the deposit protection fund may exceeds the available protection from deposits insurance schemes, demonstrating policymakers greater emphasis for protecting the banking institutions rather then just depositors, as well showing the regulatory objectives of sustaining the banking system, while preventive regulation focuses more on tackling excessive risk taking by setting capital adequacy requirements for assets. Institutional regulation varies between states; in the UK for instance there was a single mega regulator, all regulation is institutional, each group/ institution have a diversified activity which all work under a single agency that overlook the supervision. Alternatively, in a system of multiple regulatory agencies specialised by duty, a fixed institutional regulation is unattainable due to the fact that these agencies are divers in functions, which calls for the appointment of a lead regulator for diversified groups (Taylor, M. 1995). 3) Regulation of the financial system By tradition banks are providers of loans among other services to firms and individual investors, temporary banks falls in deficits when their expenditure exceeds receipts; however banks generally adjust their liquidity position by using capital or wholesale market. Problems occur when banks capital is misused in funding high risk investments; this is often the consequences of bad governance by senior management in controlling the banks assets or it is the outcome of a contagion effect resulting from systemic risk. Moreover, the central bank controls and monitor commercial banks activities and set rules to regulate the banking system. This is to create stability and to promote confidence in financial market, which are vital elements in maintaining steady economic growth. 4) Bank failure Regulation of banks must be explored in context of bank failure. As any substantial problem produces the need for the introduction of changes in the regulatory framework, because the regulators attempt to correct any loophole in the system. Major bank failures in the history of banking occurred in the US in the year 1929. At that period there were 25,000 operating banks, however by 1934 the number had reduced to 14,000. These incidences consequently led to the implementation of more restrictive bank rules, such as single state operations, which until recently remained the feature of the US banking system. The subsequent major bank failure was the fringe banking crisis in the UK in the year 1973. 5) Reasons for regulating banks The principle reason is the systemic risk, because the financial system is susceptible to level of confidence, therefore external regulation is essential in maintaining the stability and reduces further volatility. The second reason represents the social cost that a failure of bank causes, which have a greater impact then a failure an ordinary firm. The insolvency of a firm affects the shareholders, while the failure of a bank will have a greater number of affected customers (depositors), which could also be spread across larger geographical locations. As well as the effect it will have on providing savings for potential investors which will have a detrimental impact on the economic growth. The third reason is the possible lack of knowledge by the public, it is suggested that they lack the necessary background information to distinguish between safe and risky investments partly due to asymmetric information because depositors do not have access to the same information available for banks. Thus comprehensive risk assessments necessitate additional information to that included in financial reports. Hence for this particular reason regulators had introduced depositor protection. Although the above arguments support regulation, however there should be some caution on the use of excessive control over banks. It is primarily the issue of sustained cost in terms of resources on banks and the regulators. Because the central bank has to set teams of experts to perform the prudential control, likewise banks have to employ skilled resources capable to produce the necessary required returns to the regulator. Such costs can be large, thus it is a matter of cost benefit analysis to establish whether the gain of applying prudential control exceeds the incurred costs. Other possible dangers of excessive regulation are the fall of competition, increase in costs and the diminishing pace of financial innovation and development. Furthermore, heavy regulation on a particular centre may lead to the migration of the activities to locations that have lenient regulation, which has been the principle factor in the development of offshore banking centres that led to the need for a global regulation system for international banks, which is known as a level playing field. 6) The supervision of the financial system in the UK The above arguments about prudential regulation are based on banks but it can also be applied on various other financial institutions. Furthermore, the current UK financial regulation system utilise the same measures in authorising and supervising financial institutions without a distinction between insurance firms, building societies, or banks. The FSA is the principle regulator of the financial system in the UK. The FSA was established in 1997, succeeding the Securities and Investments Board (SIB), which was supervising the investment industry. However, the FSA has progressively thought to become the main controller responsible for regulating insurance and investment industry, building societies, and banks. In addition to regulating financial exchanges such as Euronext.liffe and the Stock exchange besides clearing houses, along with other functions such as the responsibility of regulating the access of companies to Official List in cooperation with the UK Listing Authority. The initial development occurred in 1998, when the Bank of England transferred its responsibility of regulation and supervision of banking to the FSA, which was succeeded with the passing of the Financial Services and Markets Act (FSMA) 2000 that provided the FSA with full power as the main regulator. The FSMA requires the FSA to attain the following objectives: Promote public awareness of financial system Maintain confidence in the UK financial market Secure consumer protection Reduce financial crime. 7) The FSA approach to supervision The FSA approach to supervision is risk based; the primary phase is to assess the risks associated with four objectives above. The FSA attain this through gathering information from various sources including customers and supervision of firms. The secondary phase is risk weighing and estimating impact, by giving each risk the probability of occurring, thus giving it a score or value. Thus firms with high magnitude impact require greater supervision. This is to reduce systemic risk and consumer losses. However, firms that possess highly sophisticated and effective risk assessment systems require less supervision by the FSA. Finally, after the risks are identified, assessed and weighted, the FSA select the appropriate measures to respond using various tools, which can be summed as follows: Those aimed to influence the behaviour of consumers, operators, and the industry Those aimed to influence the behaviour particular firms. The first category encompasses consumer education, the discloser of information, and compensation method, while the second category includes the provision of authorisations to firms and discipline, in addition to reimbursement of losses. 8) Capital adequacy (Basel Capital Accord, 1988). Liquidity is essential for any firm to maintain its daily operation, whereas solvency refers to the ability of a bank to meet its commitments in terms of liabilities at due time. However, there is a distinction between liquidity and solvency. There is a general understanding that if a bank is thought to remain solvent then it should be able to borrow fund from open market to meet its short term liquidity requirements. Likewise, the presence of liquidity problems that cannot be resolved through the wholesale market suggests that other lenders believe that the risk of insolvency of that particular bank is great. Furthermore, if a bank struggle to find short term funds in the markets, it will face difficulties in paying its claims. Therefore the Bank of England and the FSA requires banks to efficiently managing their liquidity as a principal policy element of reducing the risk of insolvency. The Basel committee on Banking Supervision has introduced Basel Capital Accord II; it included new amendments to the assessment of capital adequacy of banks. This new approach was ought to be implemented in year 2006, which contains three pillars: Minimum capital requirements Supervisory review of capital adequacy Public disclosure. Basel II accord focuses on credit risk and market risk. In pillar 1, the treatment of market risk was not altered but changes were made on the treatment of credit risk notably operational risk. The bank for international settlement and the Basel committee on banking supervision have founded the financial stability institute (FSI) to assist central banks across the world to improve their financial systems. The new Basel II requirements set challenges on banks to develop and increase efficiency on their capital management. In this section, there is a discussion of the effect of Basel II on Banks in Europe and North America, and how the new directives are going to improve the cohesion of trade between the International Banks. Furthermore, this study will examine the banks resource capability to meet Basel II requirements, and discuss the impact and the implementation of the proposed guidelines. The Basel II framework is a tool that international financial institutions have created to be used by banks around the world as a common standard. The principle of Basel II is that banks are required to hold in reserve certain level of capital as a protection to maintain bank operation when making losses. It promotes transparency of banks activities and encourages efficient management of capital. It is estimated to total 8% of bank assets. The Basel II framework has set standards for banks in managing their capital and requires the discloser of information to detect any risks. The guidelines promote efficien Impact of the Credit Crunch in the UK Impact of the Credit Crunch in the UK Factors Influencing the Financial Institutions in the UK With Particular Reference to Credit Crunch A Comparative Study between Barclays and Northern Rock Bank I- Abstract Banks acts as intermediaries between surplus units depositing funds and investors or individuals seeking capital for investments. Thus, banks role is important in maintaining the flow of fund between these different parties. Banks like any other profit maximising firms are influenced by various factors that represent risks or opportunities. Therefore, banks business decisions are founded on aspects such as confidence in the market, the level of risks, the state of the economy, and their competitive strength. Regulation is essential for assuring compliance and integrity in the financial system, but rigid rules stifles the dynamicity of the banking industry and the financial sector as whole. Moreover, Central Bank role as a lender of last resort can rise the issue moral hazard by helping imprudent banks, however because banks are financial intermediaries, the impact of bank failure can have a detrimental effect on the financial system (systemic risk), and also on clients and customers, therefore bank supervision is vital due to their sensitive important role and their extensive impact. Furthermore, the development of events in the US financial market particularly the high default rate of subprime mortgage market led to a decrease in demand for tradable securities. This has affected confidence in the US and the global financial market, and consequently some financial institutions and banks such as northern rock in the UK faced difficulties in obtaining the necessary funds to maintain the business operation and remain solvent due to lack of short term liquidity. However, other banks faced similar difficulties but are using various methods to improve their balance sheets to overcome the current credit crisis. Moreover, governments and regulatory bodies are all taking the necessary measure to stimulate the market and tackle the core sources of the current credit crisis. II- Introduction Sustained economic development is often linked to efficient management of fund that is used to finance investments, which are projected to further create more wealth and opportunities for states, corporate and individual investors. Banks acts as intermediaries between surplus units depositing funds and investors seeking capital for investments. Thus, banks role is fundamental in maintaining the flow of fund between these different parties. Furthermore, the stability of financial and banking system is vital for the sustainability of economic growth and the preserve of investors confidence. Banks like any other profit maximising firms are influenced by various factors, these includes internal and external factors, which represent risks or advantages. Therefore, banks decisions are based on elements such as confidence in the market, the measurement and management of risks, the state of the economy, and their competitive power and market share. This study will look onto various factors influencing the financial institutions in the UK, with particular reference to Credit Crunch. This literature will comprise the banks management of risks, the role of authorities regulating and supervising the financial system, and explore the regulation of the banking industry and the financial system as a whole, in addition of the effect of regulation on banks performances. The analysis will include a comparative study between Barclays and Northern Rock Bank, taking into accounts the differences in their structure, size, as well as their reaction to changes in global financial markets. Furthermore, the Research will examine the fast moving global effect of the credit crunch; discuss the two banks business model, and explore their activities and behaviours. The study will also investigate the two banks high exposure to credit risks arising from risky investments, highlight the consequences of the heavy reliance on money market, and the use of securitisation for liquidity sources. IV- Methodology The research objective is to investigate the various factors that influence financial institutions in the UK, notably the banking industry. This research was based mainly on secondary research, the gathered data and information was sufficient for this research topic. However, sensitive data regarding the value of risk were not disclosed in both banks publication, such data is useful for the researcher to scrutinise banks estimation of risk and how realistic are the projections. Nevertheless, information about estimation of risks may be obtained directly from banks for further analysis of this specified area of banks management of risk. Research material relevant to the topic was collected from various academic sources; this is to explore issues and arguments regarding the regulation and supervision of the banking system. The two banks internet site was used to gather the background information along with the financial statements of the last six years, which were used in the research analysis to perform the comparison between Barclays and Northern Rock bank business strategies and financial performance. Publications from the Bank of England website were collected to study the central bank regulation and the management of the UK banking system, in addition to the historical data regarding interest, LOBOR, and inflation rate changes. Furthermore, articles from the Financial Services Authority (FSA) were gathered to study the role of the organisation and its contribution in supervising and stabilising the UK financial system. Recent publications from the Bank of International Settlement (BIS) were collected to study the role, the objectives and the effect of Basel directives on banks. Besides research the progress of current Basel II implementation along with the development of new requirements arising from the present credit crunch. Recent newspaper articles and various other media sources were gathered to collect the latest information regarding the development of the present credit crunch and its effect on banking industry, these includes sources such as BBC business, yahoo finance and the Financial Times website, and follow recent actions of regulators and banks management of the current crisis. Moreover, data from the two banks financial statements was collected to perform the Gap Analysis using Microsoft excel package to conduct a series of calculations. Other methods could have been used to assess bank risks such as value at risk (VaR) using regression analysis by utilising a computer package such as Microsoft Excel. The regression result will determine the degree of risk that the researched banks possess in their portfolio. However, the banks seldom disclose such sensitive information in published financial statements. This is to avoid adverse reaction by investors and credit rating agencies, which could therefore affect the banks stock prices, their reputation and confidence in the capital market. V- Literature review (Part I): The nature of banking The term bank can be applied to a wide range of financial institutions, from large banks to smallest mutually owned building society in the UK. The provision of deposit and loan distinguishes Banks from other financial institutions. Deposits products supply money on demand or following time notice. Deposits are liabilities for banks, thus must be well managed if banks want to make profit. Similarly, banks manage assets created through lending. Therefore, Banks main activity is being an intermediary between depositors and borrowers. Other non banks financial institutions, such as building societies and stockbrokers, also act as intermediaries; however it is the provision of loans and taking of deposits that distinguishes banks, though many banks provide various other financial services. 1) Management of risks in banking The fact is that bankers are in the business of managing risk. Pure and simple, that is the business of banking. (Walter Winston, former CEO of Citibank; the Economist, 10 April 1993). Banks, like all profit maximising firms, have to deal with macroeconomic risks, such as recession, inflation level, as well as other micro economic risks including political pressure, commercial breakdown of core customers or suppliers, natural disaster, in addition to the emergence of new competitive threats. From a finance theory viewpoint, Bank risk management is primarily composed of four main balance sheet risks, which includes liquidity risk, interest rate risk, credit risk, and capital risk (Hempel et al, 1989). Credit risk has been recognised as the principal risk in its effect on bank performance (Sinkey, 1992, p. 279) and bank failure (Spadaford, 1988). The primary reason why the correct management of credit risk is essential is because banks have restricted ability to absorb loan losses. Generally, the ability of a bank to absorb a loan loss is originated firstly from generated income of other profitable loans, and secondly by bank own capital. 2) Factors influencing financial institutions Banks and other profit maximising firms are influenced by various factors; financial institutions in particular are susceptible to a range of changes that may affect their projected growth. Some of these changes are internal changes, this occurs subsequent to restructuring program that a bank adopt following an expansion strategy such as in mergers and acquisitions or as a defensive strategy to remain competitive and maintain market share and fight competitive predators from acquiring the bank. Moreover, there are other external factors that can influence financial institutions, these includes a countys government monetary policy, the economic condition, the financial stability and the level of confidence in the market, the inflation rate, in addition to other risks such as credit and market risks. There are a range of risks that a bank may encounter, these includes the followings: a) Credit risk and counterparty risk: counterparty risk refers to the risks that after the creation of two parties contract, one party will renege the terms of the contract, while credit risk is the risk that a loan or an asset becomes lost due to default. b) Liquidity or funding risk: these are similar terms that refer to the risk of shortage of liquidity for maintaining operational commitments, that is the ability for the bank to cover its liabilities at due date. A shortage of sufficient liquid assets is often the trigger of financial distress, as it is increasingly difficult for the bank to obtain funds from the wholesale markets. Thus funding risk is the inability for the bank to maintain its daily operations. c) Market or price risk: this type of risk refers to the risk linked to over the counter instruments or traded stocks in a non liquid market, such as equities and bonds. Thus if a bank hold these items in its portfolio, then it is vulnerable to market or price risk, this is the risk that the price of these items is unstable, which is caused by systematic (movement of prices in all traded market instruments, for instance due to changes in economic policy) or specific market risks (the movement of a particular instrument is opposite to the rest of similar instruments, for example, this may be caused by unfavourable information about the issuer of that instrument). d) Interest rate risk: this is similar to price risk, because interest rate is price of money, it represent the opportunity cost of keeping money. This occurs because of interest rate mismatches between assets and liabilities, which differ in volume and maturity arising from the banks performing asset transformation. e) Capital or gearing risk: because banks are highly leveraged firms, they have to set aside some capital to cover the losses. The size of capital is proportional to the level of risk taken by the banks. Basel risk asset ratio principle requires banks to hold up to 8%. Besides, settlement or payments risk. This is when one party in the contract deliver assets or makes payment in advance, which creates exposure to potential loss. Furthermore, operational risk refers to risks from human capital, legal risks such as law suits, fraud, and physical capital. While sovereign and political risk refers to the risk that a government default on its debt obligation to a bank. Moreover, financial regulators has identified three main risks linked to banks, these includes market risks such as risks from exchange rates, interest rates, operational risk, commodity and equity prices. 3) The Asset-Liability Management (ALM) technique Because the fundamental and the primary activity of a bank is intermediation between surplus units that makes deposits and those that seek capital, which acquire fund from the bank, thus this payment system gives the bank the role of intermediation , where the intermediation is key activity, risk management is founded principally on a sound asset liability management (ALM). Furthermore, the ALM is a technique practiced by banks to effectively manage their risks, which was largely utilised by banks in the post war period up to the 1980s. The ALM method was the main tool used to manage banks books, it is essential that the bank maintain its assets and liabilities under control to minimise risks and remain solvent. Besides, banks are keeping their managers updated with newer techniques and skills to maintain their efficiency and competitiveness for the future, for instance, ALMA is an association that comprise around 40 financial institutions, which are international and local banking groups and building societies, mostly UK and Irish. However it is growing its membership and links around Europe. Its objective is to offer an informal and inclusive forum regarding the balance sheet management issues (Byrne, J. 2004). Due to the development of banking activities, innovative instrument became increasingly used by banks to manage their assets such as off balance sheet instruments, where banks moved from interest earning income products to non-interest income sources, thus this required that banks risk management should adopt newer techniques other then just the ALM to includes the risks originating from the off balance sheet instruments. Moreover, one of the new methods included in managing market and then credit risks is the Value at Risk (VaR), which involves giving an estimate of losses arising from the volatility of banks assets. 4) Credit Culture A recent research conducted by the Australian institute of bankers on the issue of Improving Asset Quality (Brice, 1992), which focused on the significance of credit culture. The great emphasis on credit culture was due to its influence on bank performance and in some occurrences bank failure ( Spadaford (1988) and Brice (1992)). Spadaford (1988) stated in his study of 162 bank failures in the United States that the analysis showed that 98% of bank failure occurred due to asset quality problems, among these problems are poor management of loan policy, inadequate systems to ensure compliance with internal rules and procedures, and the lack of supervision on senior and key management members in the organisation. McKinley (1991) has defined four main cultures that influence bank performance. predominantly the immediate performance-driven, which emphasis on earnings targets, followed by Market share/production-driven that focuses on being the biggest with greater production volume, along with Values-driven that balances between credit quality and generated income. In addition to the Unfocused (current priority-driven) bank, such bank lacks vision and appropriate strategy often set short term targets which consequently lead to unsuccessful ventures. VI- Literature review (Part II): Banks regulation The base of regulating financial institutions is founded on three broad frameworks. Primarily, the consumer protection argument, this is based on the notion that investors and depositors cannot be demanded to perform risk assessment of financial institutions they deal with, nor monitor standard of service or performance of these institutions. The consumer protection underlying principle is based on three types of regulation; firstly, compensation schemes created to repay all or part of losses caused by the insolvency of financial institutions; secondly, rules and regulations such as capital adequacy requirements designed to prevent insolvency; and lastly promote fairness in business or market practices by setting rules and standards. The latter regulation reveals market imperfections arising from principle agent problems, asymmetric information, and the issue of determining the true value of financial products or services, which are established well after the transaction or contract was formed (Dale, R and Wolfe, S. 1998). Furthermore, there are other concerns associated with consumer protection rationale. The provision of compensation to depositors and investors for losses sustained from the insolvency of financial institutions will further encourage these institutions to pursue risky investment decisions, thus there will be minimal or no incentive for prudence. This indicates that risky firms will be able to attract trade with identical terms and ease as prudent institutions, thus affecting financial market standards and discipline, and rising potential insolvency incidences. Therefore, the resulting losses must be covered by the deposit insurance scheme, investor protection fund, or in some cases by the tax payer. Thus, prudential controls on financial institutions are essential to minimise losses and to balance the regulatory incentives with the excessive risk-taking. The third aim of financial regulation is to promote integrity of markets, encompassing various issues such as market manipulation, fraud, transparency, and fairness; market integrity emphasis on organising the market as whole beyond just the relationship between financial firms and their consumers. Supervisors implementing the financial regulation consider systematic risk as the factor that causes great concerns. That is the risk that failure of one or more distressed financial institution could spread and cause a contagion effect, which could cause the collapse of other prudent institutions. It is their vulnerability to the contagion effect that single out financial institutions from other non financial firms. 1) Targets of regulation The major objectives of Financial regulation is to set guidelines for the activities of Banks, insurance companies, investment firms, exchanges, and fund management companies. The diverse principles for financial regulation mentioned above vary in their relation to these various institutions of the financial services sector. Banks are distinguished by what is referred to as short- term and unsecured value certain liabilities (deposits) and illiquid value-uncertain assets (loans). Banks conforms to deposits insurance and other type of consumer protection, partly because banks balance sheet consists of a variety of complex instruments and depositors are not capable to measure the riskiness of their deposits. However, depositor protection creates moral hazard problem. Furthermore, banks regulation focuses more on systemic risk. That is the possibility of a bank run that can spread to a number of banks and trigger a wider instability in the financial system. According to this notion, bank runs are the result of action by depositors retrieving their funds in response to amounting fear and uncertainty of the bank future arising from bank asset losses that could render it insolvent. Due to potential risk of losing all or some of their assets, depositors tend to make a run when initial signs indicate some troubles. Moreover, recent research found that the occurrence of a bank run can not be entirety explained by the decline of banks underlying assets (LaWare, J.1991.p34), (Diamond and Dybvig, 1983).The emphasis is on a banks maturity transformation notably the transfer of illiquid assets (bank loans) into liquid claims (bank deposits), taking into account that the banks loan portfolio substantially decline in value in an event of liquidation than on going concern. What triggers a rational bank run is that the uncertainty and the higher probability that the loan portfolio liquid value is less than the value of liquid deposits. This notion demonstrates how bank runs can possibly arise and affect even healthy banks. Thus distressed bank have to liberate its assets at liquidation value, therefore leading to possible insolvency. 2) Techniques of regulation While procedures of conduct of business regulation do not differ among various types of institutions, but in terms of prudential regulation there are fundamental differences that reveal the distinctive risk features of banks, insurance firms, and investment companies. Because bank failure has a greater effect on the whole market, and can create systemic crisis, governments and central banks have set bank regulation for creating extra protection in provision of extra fund by setting the lender of last resorts facilities, and deposit protection, however, these facilities creates moral hazard. Moreover, the deposit protection fund may exceeds the available protection from deposits insurance schemes, demonstrating policymakers greater emphasis for protecting the banking institutions rather then just depositors, as well showing the regulatory objectives of sustaining the banking system, while preventive regulation focuses more on tackling excessive risk taking by setting capital adequacy requirements for assets. Institutional regulation varies between states; in the UK for instance there was a single mega regulator, all regulation is institutional, each group/ institution have a diversified activity which all work under a single agency that overlook the supervision. Alternatively, in a system of multiple regulatory agencies specialised by duty, a fixed institutional regulation is unattainable due to the fact that these agencies are divers in functions, which calls for the appointment of a lead regulator for diversified groups (Taylor, M. 1995). 3) Regulation of the financial system By tradition banks are providers of loans among other services to firms and individual investors, temporary banks falls in deficits when their expenditure exceeds receipts; however banks generally adjust their liquidity position by using capital or wholesale market. Problems occur when banks capital is misused in funding high risk investments; this is often the consequences of bad governance by senior management in controlling the banks assets or it is the outcome of a contagion effect resulting from systemic risk. Moreover, the central bank controls and monitor commercial banks activities and set rules to regulate the banking system. This is to create stability and to promote confidence in financial market, which are vital elements in maintaining steady economic growth. 4) Bank failure Regulation of banks must be explored in context of bank failure. As any substantial problem produces the need for the introduction of changes in the regulatory framework, because the regulators attempt to correct any loophole in the system. Major bank failures in the history of banking occurred in the US in the year 1929. At that period there were 25,000 operating banks, however by 1934 the number had reduced to 14,000. These incidences consequently led to the implementation of more restrictive bank rules, such as single state operations, which until recently remained the feature of the US banking system. The subsequent major bank failure was the fringe banking crisis in the UK in the year 1973. 5) Reasons for regulating banks The principle reason is the systemic risk, because the financial system is susceptible to level of confidence, therefore external regulation is essential in maintaining the stability and reduces further volatility. The second reason represents the social cost that a failure of bank causes, which have a greater impact then a failure an ordinary firm. The insolvency of a firm affects the shareholders, while the failure of a bank will have a greater number of affected customers (depositors), which could also be spread across larger geographical locations. As well as the effect it will have on providing savings for potential investors which will have a detrimental impact on the economic growth. The third reason is the possible lack of knowledge by the public, it is suggested that they lack the necessary background information to distinguish between safe and risky investments partly due to asymmetric information because depositors do not have access to the same information available for banks. Thus comprehensive risk assessments necessitate additional information to that included in financial reports. Hence for this particular reason regulators had introduced depositor protection. Although the above arguments support regulation, however there should be some caution on the use of excessive control over banks. It is primarily the issue of sustained cost in terms of resources on banks and the regulators. Because the central bank has to set teams of experts to perform the prudential control, likewise banks have to employ skilled resources capable to produce the necessary required returns to the regulator. Such costs can be large, thus it is a matter of cost benefit analysis to establish whether the gain of applying prudential control exceeds the incurred costs. Other possible dangers of excessive regulation are the fall of competition, increase in costs and the diminishing pace of financial innovation and development. Furthermore, heavy regulation on a particular centre may lead to the migration of the activities to locations that have lenient regulation, which has been the principle factor in the development of offshore banking centres that led to the need for a global regulation system for international banks, which is known as a level playing field. 6) The supervision of the financial system in the UK The above arguments about prudential regulation are based on banks but it can also be applied on various other financial institutions. Furthermore, the current UK financial regulation system utilise the same measures in authorising and supervising financial institutions without a distinction between insurance firms, building societies, or banks. The FSA is the principle regulator of the financial system in the UK. The FSA was established in 1997, succeeding the Securities and Investments Board (SIB), which was supervising the investment industry. However, the FSA has progressively thought to become the main controller responsible for regulating insurance and investment industry, building societies, and banks. In addition to regulating financial exchanges such as Euronext.liffe and the Stock exchange besides clearing houses, along with other functions such as the responsibility of regulating the access of companies to Official List in cooperation with the UK Listing Authority. The initial development occurred in 1998, when the Bank of England transferred its responsibility of regulation and supervision of banking to the FSA, which was succeeded with the passing of the Financial Services and Markets Act (FSMA) 2000 that provided the FSA with full power as the main regulator. The FSMA requires the FSA to attain the following objectives: Promote public awareness of financial system Maintain confidence in the UK financial market Secure consumer protection Reduce financial crime. 7) The FSA approach to supervision The FSA approach to supervision is risk based; the primary phase is to assess the risks associated with four objectives above. The FSA attain this through gathering information from various sources including customers and supervision of firms. The secondary phase is risk weighing and estimating impact, by giving each risk the probability of occurring, thus giving it a score or value. Thus firms with high magnitude impact require greater supervision. This is to reduce systemic risk and consumer losses. However, firms that possess highly sophisticated and effective risk assessment systems require less supervision by the FSA. Finally, after the risks are identified, assessed and weighted, the FSA select the appropriate measures to respond using various tools, which can be summed as follows: Those aimed to influence the behaviour of consumers, operators, and the industry Those aimed to influence the behaviour particular firms. The first category encompasses consumer education, the discloser of information, and compensation method, while the second category includes the provision of authorisations to firms and discipline, in addition to reimbursement of losses. 8) Capital adequacy (Basel Capital Accord, 1988). Liquidity is essential for any firm to maintain its daily operation, whereas solvency refers to the ability of a bank to meet its commitments in terms of liabilities at due time. However, there is a distinction between liquidity and solvency. There is a general understanding that if a bank is thought to remain solvent then it should be able to borrow fund from open market to meet its short term liquidity requirements. Likewise, the presence of liquidity problems that cannot be resolved through the wholesale market suggests that other lenders believe that the risk of insolvency of that particular bank is great. Furthermore, if a bank struggle to find short term funds in the markets, it will face difficulties in paying its claims. Therefore the Bank of England and the FSA requires banks to efficiently managing their liquidity as a principal policy element of reducing the risk of insolvency. The Basel committee on Banking Supervision has introduced Basel Capital Accord II; it included new amendments to the assessment of capital adequacy of banks. This new approach was ought to be implemented in year 2006, which contains three pillars: Minimum capital requirements Supervisory review of capital adequacy Public disclosure. Basel II accord focuses on credit risk and market risk. In pillar 1, the treatment of market risk was not altered but changes were made on the treatment of credit risk notably operational risk. The bank for international settlement and the Basel committee on banking supervision have founded the financial stability institute (FSI) to assist central banks across the world to improve their financial systems. The new Basel II requirements set challenges on banks to develop and increase efficiency on their capital management. In this section, there is a discussion of the effect of Basel II on Banks in Europe and North America, and how the new directives are going to improve the cohesion of trade between the International Banks. Furthermore, this study will examine the banks resource capability to meet Basel II requirements, and discuss the impact and the implementation of the proposed guidelines. The Basel II framework is a tool that international financial institutions have created to be used by banks around the world as a common standard. The principle of Basel II is that banks are required to hold in reserve certain level of capital as a protection to maintain bank operation when making losses. It promotes transparency of banks activities and encourages efficient management of capital. It is estimated to total 8% of bank assets. The Basel II framework has set standards for banks in managing their capital and requires the discloser of information to detect any risks. The guidelines promote efficien

Disability Essay -- essays research papers

In today’s society men have an attraction towards skinny women. The most gorgeous super models are thin and when other girls look at them, they get jealous. Many girls see this, and view themselves as being overweight and have a complex and a desire, which is to be skinny, this disease is called Anorexia. Anorexia is a disease, which affects mostly women and sometimes men. Anorexia is when you think you are fat, and you deprive yourself of food in order to be skinny. They see themselves as being fat and want to strive to be better than the "norm", and by that, being as skinny as possible. The glamorous women are skinny and we see this everywhere in movies, fashion shows, television, magazines etc†¦ Lennard Davis describes normalcy as "Each of us endeavors to be normal or else deliberates tries to avoid that state". (p47 Davis) We humans do everything by comparison, whether it be comparisons between cars, weight, looks, money, and pretty much anything else you can think of. Mostly all us strive to be better than "normal". Anorexia is a disease, which exists when a person has a goal, a goal to look better than anyone else does. Anorexia in itself is a disability because they are unable to function like a normal person should. Their bodies physically deteriorate and they have a complex that is practically incurable. Anorexia physically ruins your skin because you are not consuming any oils and the skin dries out. With prolong Anorexia, females are prone to losing their ability to give birth because of malnutrition. Mentally it kills you because all you think about is how you look, and looks aren’t that important in comparison to your personality. It is called the incurable disease because once someone has this complex they can never really let they eat a fatty food, or ever see them even a pound heavier than they are. When my sister was Anorexic, her doctor asked her, "What would you do if I forced you to eat a Burger Kingâ„ ¢ french fry?" She responded "I’d kill myself". At one point she weighed 97 pounds, and was 5 feet 10 inches tall. My sister fortunately has technically been cured because she eats normally but she still watches what she eats extremely carefully. "Any bell curve will always have at its extremities those characteristics that deviate from the norm. So, with the concept of the norm come... ...are over weight and starve themselves. Society categorizes people in basically two groups, pretty and ugly. Although I do not agree with this, many people are rude to many people who are over weight. If you go to a school where the average girl weighs 160lbs and you weigh 140lbs you may be placed in a category with the "pretty" group. On the other hand if the situation is reversed and the average girl weighs 115lbs, and you weigh 120lbs you may be in the "ugly" group which causes many people to become self conscious and go anorexic. In my sisters case she used to hang out with a group of girls who were very pretty and she had a complex and wanted to look better than the rest of them. Her way was starvation, and once she got to her best looking stage, the "ideal" point, she kept on starving herself leading to detrimental consequences. Many people have many different ideas about anorexia and how it is trying to be more like the "norm" by removing a stigma of being overweight, like in my sisters case except she was never really overweight. Ideology plays a big role in this as well because they never get to their ideal state causing problems.

The Meansure of a Man (A Closer Look at Five Great Men) :: essays research papers

How does one determine the measure of a man? His accomplishments? His ancestry? His financial worth? Or do we look deep into the heart and soul of that man and determine the weight of his values, his dreams and what he has stood for in the grand scheme of things?   Ã‚  Ã‚  Ã‚  Ã‚  We will appraise the lives of six important figures in the shaping of our country. With this evaluation, we risk becoming critic and judge, but in an attempt to go beyond those things both tangible and measurable, perhaps we will be forgiven.   Ã‚  Ã‚  Ã‚  Ã‚  Thomas Jefferson called him, â€Å"†¦a wise, a good and a great man.† Patrick Henry, when asked who he thought was the greatest man in Congress, replied, †¦Ã¢â‚¬ if you speak of solid information and sound judgment, Colonel Washington is the greatest man on that floor.† Despite his height and noble bearing, Washington was a quiet man who pondered long before decisions. Even with little schooling, he was an avid student of math and science. At a very early age, he was aware and respectful of decorum and manners. At 13, he copied the one hundred and ten â€Å"Rules of Civility and Decent Behavior in Company and Conversations,† and lived by them. His mathematical and science skills coupled with attributes of respect, responsibility and strength secured him a position as a surveyor in Virginia at only sixteen.   Ã‚  Ã‚  Ã‚  Ã‚  These same qualities, planted as deeply into his soul as the trees on his father’s farm, are what gave him the courage and perseverance to plunge headlong into a life filled with some of the greatest achievements in American history.   Ã‚  Ã‚  Ã‚  Ã‚  At 20 years old, Washington was plodding through one thousand miles of snow, swimming ice-clogged rivers and dodging the bullets of angry Native Americans only to carry a warning message to an unwelcoming French commander in the Ohio River Valley. He was shot once, and walked one hundred miles when his horse got too weak to go on. But he finished the task laid before him. In this first mission, courage and perseverance were metals he earned to wear on his heart.   Ã‚  Ã‚  Ã‚  Ã‚  Two years later he commanded the British army in the French and Indian War. As Lieutenant Colonel of the Virginia forces, he captured twenty-one French and killed ten, loosing only one man in the process. In this, he added two metals, strength and wisdom.   Ã‚  Ã‚  Ã‚  Ã‚  Military battles dominated Washington’s years, and the battles both won and lost created the warp and weft of the fabric of his life.

Investment and Equity Cost

2. Suppose the market portfolio has an expected return of 10% and a volatility of 20%, while Microsoft’s stock has a volatility of 30%. A. Given its higher volatility, should we expect Microsoft to have an equity cost of capital that is higher than 10%? No, Microsoft is diversifiable and it will not be affected by the changes in the market. We do not expect Microsoft’s equity cost of capital to be higher than 10%. Each stock carries its own weight. B. What would have to be true for Microsoft’s equity cost of capital to be equal to 10%? In order for Microsoft’s equity cost of capital to be 10% its beta will have to be 1. 4. Suppose all possible investment opportunities in the world are limited to the five stocks listed in the table below. What does the market portfolio consist of (what are the portfolio weights)? Stock Price/Share ($) Number of Shares Outstanding (millions) A 10 10 B 20 12 C 8 3 D 50 1 E 45 20 Total value of the market = 10Ãâ€"10+20Ãâ€"12+8Ãâ€"3+50Ãâ€"1+45Ãâ€"20= $1. 314 billion Stock Portfolio Weight A 10Ãâ€"10=100 100/1314 =0. 0761 x 100 = 7. 61% B 20Ãâ€"12= 240 240/1314 =0. 1826 x 100= 18. 6% C 8Ãâ€"3= 24 24/1314= 0. 0183 x 100 = 1. 83% D 50x 1 = 50 50/1314=0. 03381 x 100 = 3. 81% E 45Ãâ€"20 = 900 900/1314= 0. 6859 x 100 = 68. 49% Total = 100% 5. Using the data in Problem 4, suppose you are holding a market portfolio, and have invested $12,000 in Stock C. A. How much have you invested in Stock A? 12,000x(10Ãâ€"10)/(8Ãâ€"3)=$50,000

Love Is a Mixtape

The playback: late night, Brooklyn, a pot of coffee, and a chair by the window. I'm listening too mix tape from 1993. † This is Sheffield first line in his story of how his life is the connection to not only the world but the love of his life. The love of music is a connection most everyone finds themselves having. Rob Sheffield book Love Is a MIX Tape connects his passion for music and the only other thing that meant Just as much to him, his wife Renee.Sheffield has mix tapes to remind him of every part of his life that's worth remembering not only alone but of the life he spent with Renee. Rob and Renee were two totally deferent people. Rob was an Irish Catholic geek from Boston, and Renee was a country girl three months older than Rob. They grew up living two totally different lives with the same passion for one thing, Music. â€Å"We had nothing in common, except we both loved music. It was the first connection we had, and we depended on It to keep us together. We did a lo t of work to meet in the middle. Music brought us together.So now music was stuck with us. † Sheffield peg. 6. â€Å"Nothing connects to the moment like music† Sheffield peg. 12. This sentence in the book is nothing but true. Most people remember the memories thieve had or the time something took place because of the song they heard or were listening to during that event. Many of times I have related things to music and brought the musical connection into my life. Sheffield talks about how there were many of different mix tapes for different things like tapes for making out, dancing, falling asleep, doing the sizes and even walking the dog.I can personally connect to what he Is stating because I have a plastic for most of the things I do: working out, driving In my car, â€Å"depressing† plastic, playbills for certain concerts I'm going to, shower plastic and so many more. I believe people have these playbills or mix tapes for certain things because it Just goes with that moment in time and it seems like it Just fits, so I totally understand where Sheffield Is coming from. In the book Sheffield says, â€Å"Missy wrote a note to biggie in her booklet: â€Å"Rest in peace, Big.I hope you can hear my album, wherever you rest. † I felt the same way. † Sheffield peg. 1 68. This hit me in a deferent way than it may have hit other people. My friend committed seclude and every time I listen to his favorite songs or songs that were played at his funeral I wonder if he's looking down at me seeing me jam out to the songs and knowing I still care and think about him all the time. I also am the same way with my Great Grandma, every time I hear the song played at her funeral, I sit there and Just think about all of the great times we had when she was here.I feel like I had a special connection to Sheffield at this part of the book. Although some people use music as a connection to their lives, other people find 1 OFF something else that mea ner a lot to them to connect their elite too. A lot to people use books, writing, television shows and even reading to connect themselves to the world. Personally I use music as a connector to the world and Just life itself because like Sheffield stated in his book, every mix tape tells a story, if you put it together all music has a story to tell.I couldn't agree more. Some people may not look at it that way, and everyone is entitled to their own opinion, but I couldn't have said it a better way. Music may be taken in a different perspective by everyone, but no matter who you are, where you want to go in life, or what may be going on in your life right now, there will always be a song that can help you cope with your feelings. Even if music isn't your getaway, there will always be something you can relate to and lean on when things get a little harder than you expected.