Management of risks to prevent huge losses - Free Essay Example

Sample details Pages: 5 Words: 1419 Downloads: 6 Date added: 2017/06/26 Category Management Essay Type Analytical essay Did you like this example? In every business there is always risk and if the risk is not well managed by the company, it will lead to the huge losses and eventually will make the company bankrupt. Hence, the tool to manage the risk is introduced called derivatives. There are many types of derivatives and the most commonly use are options, futures and forwards. However, there are many cases of company incurred huge losses because of the derivatives. One of the popular cases on derivatives debacles is the bankruptcy of the Barings Bank in 1995. This is one of the popular cases since it is involve the oldest bank in London and the fall is cause by the action of only one employee base at the small office in Singapore. Barings Bank had suffered a loss of 827 million ($1.3 billion) plus the collapse cost which is 100 millions. The person who was responsible for the fall of Barings Bank is Nick Leeson. Don’t waste time! Our writers will create an original "Management of risks to prevent huge losses" essay for you Create order Barings bank was founded by Francis Barings and his silent partner, John which is his older brother at 1762. Barings bank had financed the 1803 Louisiana Purchase, the Erie Canal and also helped the British government battle against Napoleon in finance aspect. In the battle of British and Napoleon, the bank gave loan and raise money to pay the armies, and buy the equipment for the battle. In 1992, the Barings have decided to send one of their employees to Asian to do the derivatives trading. Since derivatives are something new at that time, not many people know how to deal with it. So, the Baring chose one of their employees named Nick Lesson who had performed well in his job in Jakarta. Nick Lesson was sent to Singapore in 1993 as the general manager of Barings Futures (Singapore) and his job is to run the banks Singapore International Monetary Exchange (SIMEX) activities. Besides, he also had to manage the back-office which actually should be managed by different people. At the beginning of his job as a trader, he had done the arbitraging which is take advantages at the difference of equivalent underlying assets price between two exchanges- buy at the lower price and sell at the higher price. He took positions in Nikkei 225 and Japanese Government Bonds (JGB) as well as options on Nikkei. One year of his work as a general manager in Singapore, he gave the profit of 10 million to the Barings. This had made the trust of the Barings to become stronger than before. However, what Nick Leeson showed to the top management of Barings Bank is the profit only and he hid the loss he had incurred in the secret account. The 88888 account have been made by Leeson in order to cover the loss that have incurred. At first, this account is use to hide the 20, 000 loss made by one of his staff. But, this account later is use for him because in the year 1994 he is not lucky. The largest part of his losses is on the Nikkei 225 that he bought. By December 1994, the 88888 account have made a total loss of 200million but, he reported to the British tax authorities that he gain 102 million. Although, Leeson had stressed because of the loss, he still bets that the Nikkei index would rise and not fall below 19, 000. So, on 16th January, in the Osaka Securities Exchange (OSE) and SIMEX, he had placed a short straddle. However, his expectation that suppose to gift profit had turned to be a nightmare when Kobe, Japan got attack by an earthquake on 17th January 1995. Because of the 7.2 Ritcher scale of earthquake in Kobe, the Nikkei index had fall 7% in a week. Three days after the earthquake, he was not stopped taking positions in the Nikkei index. Unfortunately, the loss that he had incurred was too large and cannot be hidden anymore. The huge amount of losses had made no exit for the Nick Leeson. There is nothing he can do to cover all the losses. He took an action by left his job and went to Malaysia two days before his 28th birthday. He left a note said, Im sorry. The total loss he made was $1.3 billion twice from the amount of capital the Barings had. Approximately 2,000 of Nick Leesons staff have lost their job. On the 26th February 1995, the Barings have been declared as bankrupt. THE AFTERMATH. After the collapse of Barings Bank, their liabilities had increase up to 827 million. The Barings Bank enables to pay all the liabilities which make them collapse on 26th February 1995. In 1995, the ING, one of the Dutch Bank have purchased the Barings Bank for the nominal sum of 1 along with assumption of all Barings liabilities. In 2001, the ING has sold the United States based operations to ABN Amro for $275 million and folded the rest of ING Barings into it European Banking division. Then, Barings Bank was split and sold by ING to MassMutual which give the right to use the name Barings Asset Management (BAM) and acquiring BAM investment management activities. Therefore, Barings Bank has no longer a separate corporate existence, although the Barings name still lived on as the MassMutual subsidiary Barings Asset Management. The ING also sold Barings Bank to Northern Trust will acquire BAMs financial services group. In 1995, Nick Leeson has realized that his operation have incurred losses, so he try to escape with his wife by flying to London from Malaysia. He was arrested in March while on a stop-over in Germany. The reason that he gave where he said had been holiday. Singapore court have sentenced him to six and a half years in prison but nick was released from a Changi prison in Singapore after serving three and a half years of a sentence for fraud. At Changi prison, he was diagnosed a cancer and recover, at the same time was divorced by his wife. After he has release from Changi prison in 1999, he wrote an autobiography which called Rogue Trader. In this autobiography, it covering the events that have been leading up to the collapse. After that, Film maker James Dearden has dramatized the book in the film Rogue Trader. Last but not least, Nick Leeson has released a new book in Jun 2005 entitled back from the brink: coping with stress. It is about continued the story of rogue trader and including in the depth conversation with psychologist Ivan Tyrrell asserting that the prolonged periods of severe stress that affected Leeson mental and physical health that occur in many other people lives. THE LESSON LEARNT. Barings bank collapse can be a worth lesson to everyone that seek the message behind the tragedy. There is much lesson that can be learned in this incident especially by superiors of an organization. In Barings bank, we can see that there is a poor supervision of employees especially on Nick Leeson when his activities of trading not have been monitored directly which they (Barings bank headquarter in London) only hears the end report made by Leeson. Thus it causes the bank to lose all its assets to cover the losses made by Leeson. Therefore, we know that in an organization there should be more strict rule to do trading and the superior should monitor directly all trading that been done by their subordinate. Besides that, the top management of Barings bank has lack of understanding about trading business; this made them to give full trust on Leeson. Thus, the upper line of every organization must have the knowledge and understanding about trading and business they involve with. So they may realize their subordinate (in this case Leeson) is trying to gamble using banks assets as his bet, instead of helping the bank to hedge banks assets value. Other than that, in Barings bank there is also a poor segregation of work. This can be seen where Leeson has been assigned to be incharge in both dealing desks and back office. In the first place, the bank should be more detail with their employees job specification and should diversify the job to avoid fraud in the work place. One person should be incharge in one job or maybe more, but the jobs must have no correlation that may lead to fraud. Last but not least, the lesson is the employee himself must be honest in doing their job. The employee shouldnt be selfish and greedy to get easy wealth, they should be more innovative in their field to receive promotion or start their own business to be rich and successful.

The Rise Of The Middle Class - 1012 Words

For decades now, our political and economic policy have been constructed around one idea: that if taxes on the rich go up, job creation will go down. This idea has been the backbone of Republican trickle-down Reagan-economics and has been scarcely challenged by Democrats. America’s economy as well as the global economy as a whole are facing extreme income inequality and this idea has only widened the gap. Our political system has been flooded with the money of the rich through lobbyists or super PACs, who then are the ones receiving the tax cuts and are garnering political favors by doing so, effectively moving us farther from a free and fair democracy, but rather towards oligarchy. The middle class has been fading away due to stagnating†¦show more content†¦Hanauer begins his argument by comparing the fallacy on hand to another fallacy we once believed, which turned out to be dead wrong: â€Å"For thousands of years people were sure that earth was at the center of t he universe. It’s not and an astronomer who still believed it was, would do some lousy astronomy.† In doing this, Hanauer seeks to bring out the â€Å"duh!† response out of people and relate it back to the argument at hand. The argument being that if a policy maker who believed that the rich and businesses are â€Å"job creators† and therefore should not be taxed, would make policy equally as lousy. Although he incites the emotional response in the reader he also backs it up with facts and his experience as one of the plutocrats. He cites his experience as well as,going into some basic economic theory: â€Å"I have started or helped start, dozens of business and initially hired lots of people. But if no one could have afforded to buy what we had to sell, my businesses would have all failed and all those jobs would have evaporated.† He uses this to pivot to his next point, which is the main point of the argument: â€Å"That’s why I can say wi th confidence that rich people don’t create jobs, nor do businesses, large or small.† He backs it up with his theory, which is a basic economic principle of demand when broken down: â€Å"What does lead to more employment is a ‘circle of life’ like feedback loop between customers and business.† Not only is it not the rich who create

Jealous Husband Returns in Form of Parrot Claim Paper free essay sample

I recently read â€Å"Jealous Husband Returns in Form of Parrot† by Robert Butler which is written in first person narrator form. Writing this story in first person narrator form makes this particular story very interesting and much better of a story, and keeps the reader very interested in the story. When Butler writes this story he sets the story up from the beginning when he recognizes his wife, this places the reader in a zone to try and figure out how exactly the story is going to play out. In the story Butler uses the parrot as the first person narrator in the story which turns out that the parrot was once the husband of the lady that buys, and takes home the parrot from the pet store. At the beginning of the story the parrot is sitting on his perch in the pet store cage and sees a lady come close to him, at that point he realizes that this lady was once his wife. The parrot says to himself in the story â€Å"Holy Shit, It’s you† (Butler) this is referring to looking at a lady that was once the parrots wife, before when the parrot was human. Butler goes on to describe in the story by first person narrator the parrot on how the wife is touching or petting him, the parrot is once again thinking to himself â€Å"For a moment I think she knows it’s me† (Butler) without Butler writing this story in the first person narrator form, he would not be able to take the reader into the parrots, or the once husbands thoughts, and be able to make the reader feel like they are inside the story and not a person from the outside looking into the story. The parrot starts thinking about his last day on earth as a man while he is playing with the toys in his cage; he looks back at that day relating to the toys in his cage now. In this flashback that he Has he gives the reader a picture of how the wife was, and how jealous he may have been when he was married as a man. He describes how when checking up on his wife, he fell from a tree, and if he was a parrot he could have just flown to safety, and not actually died. He explains how he was a very jealous husband, and that his wife gave him every reason for that jealousy, describing how his wife would talk about other guys at her work, their cars, etc. Now that he was brought home from the pet store the wife puts him in a large cage just down the hallway, but unable to see into her bedroom. He know gets even more jealous seeing strange men come and go, and noises coming from the bedroom of his once wife by the following excerpt from the tory. â€Å"My cage sits in the den. My pool table is gone and the cage is sitting in that space and if I come all the way down to one end of my perch I can see through the door and down the back hallway to the master bedroom. When she keeps the bedroom door open I can see the space at the front of the bed, but not the bed itself. That I can sense to the left, just out of sight. I watch the men go in and I hear the sounds but I can’t quite see. † (Butler) By Butler writing in the first person narrator form he makes the story much better because he is able to bring the reader into the story without having to continue to describe and explain the situation, instead he writes directly into the storyline making the reader understand where he is coming from. During the story he tells that he looks out the window when these strange men come into the house where he once lived as a human, before he was a parrot, he gazes outside at the beautiful Back yard and the weather that is just right there. There is a point where he actually tries to fly to this beautiful place, but once in flight he only remembers being in pain, and dizzy only to find out that he has flown into the glass of the sliding glass door that separates him, from the beautiful outside. He depicts that he knows that this can be very dangerous for a bird by saying â€Å"I remembered eventually about the glass, and I knew that I had been lucky, I knew that for the little fragile-boned skull I was doing all this thinking in- it meant death† (Butler) with this statement he knew that striking the glass could be death for him. During the remainder of the story while in his cage he gets irritated about the scores of different men that come to the house and disappear in the bedroom, with his wife to the point where he bashes around in the cage and screams during all this. At the end of the story he sees his wife naked and she comes to him in the cage and picks him up and starts talking to him, during this time he is just remembering how much he loved his wife and how jealous she made him on occasions with talking about all the other guys that she worked with, he also starts to realize if she is like this now that she was probably like this while he was a human, so once she puts him down on the cage she leaves the door open. He gazes at the beautiful day it is outside he says â€Å"And I spread my wings. I will fly now. Even though I know there is something between me and that place where I can be free of all these feelings, I will fly. I will throw myself there again and again† (Butler) Butler is describing in the first person narrator that the parrot has had enough and know that there is glass there, and knows that it could mean death but that what he wants to be free of all this jealousy. If Butler would have written this story in any other form than the first person narrator form, the story would not have kept the reader in the story, and would not have been able to help the reader actually visualize the story. Being written in this form did make this story a much better story.

Why did North Vietnam embrace Communism Essay Example

Why did North Vietnam embrace Communism? Essay The evolution of Vietnamese culture over the last 4 millennia had facilitated adoption of the concept of nation-state. The notion of a sovereign nation with its own identity had taken shape through these years. Hence, Vietnamese history is â€Å"the history of the constitution of the nation, with its clearly delineated territory, its own language, its specific culture, which needed to be protected against all external aggressions† (Nguyen 123). Although such traits do not lead to Communism as the form of government, it nevertheless leaves the field open for scientific political ideas to be applied. And Communism is one such ideology. Although invaded and occupied through the major part of its recent history, the Vietnamese managed to retain an identity that is uniquely theirs. The common threads that made this possible were the internal and foreign wars, coping with hostile natural elements, etc. During the onset of the 20th century, the country was much exploited and war ravaged. However, it was united and resolute. This proved the perfect climate for the Communist revolution that was to follow. And the conception by many historians that Vietnamese people did not possess a uniform social structure in order to form a national consciousness does not hold up. We will write a custom essay sample on Why did North Vietnam embrace Communism? specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Why did North Vietnam embrace Communism? specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Why did North Vietnam embrace Communism? specifically for you FOR ONLY $16.38 $13.9/page Hire Writer After being subject to foreign invaders from time immemorial, the peasant assumed the role of the defender of his land. This elevated him to a warrior. If we look at precedents for Communist revolutions – Russia and China, we can see the undeniable part the populous peasantry played. They, in short, act as the backbone of such revolutions. â€Å"The revolutionary tradition, finding its expression through the continual resurgence of agrarian revolts, has taken root deeply in the very structure of Vietnamese society, as the hardships of the peasants became increasingly acute while they were increasingly deprived of their rice fields. During their fights, the peasants have acquired the knowledge of revolutionary methods, of what should be done in a revolutionary situation, and they have handed down this knowledge from generation to generation. The same process of peasant revolts has repeated itself throughout the centuries, under different forms and different historical circumstances.†(Nguyen 127) Adding to such a political climate was China’s never ending hostility towards Vietnam. It is in the policy of every traditional ruler to resist the invaders indefatigably. This antagonism helped form a sense of community among the struggling peasants, who were later to turn revolutionary. That such a concept could persist even after 10 centuries of Chinese occupation is quite remarkable indeed. A comprehensive research project carried out by the Institute of Archaeology describes Vietnamese history as â€Å"a brilliant civilization in the basin of the Red River, which developed unceasingly during the whole Bronze Age and climaxed in the Dong-son culture in the last millennium BC† (Kelley 69). This evidence of an endogenous culture helps explain the originality of the Vietnamese culture and their resistance to foreign invasions. The early decades of the twentieth century were the most tumultuous in the political history of Vietnam. This was a period of introspection and transition. The exploitative nature of the imperial economic systems â€Å"gave birth to new social forces, while aggravating the situation of the rural masses.† (Kelley 70) This combination of extreme poverty and the tradition of resistant peasantry set forth the endeavors that addressed these imbalances. The decisive moment of the national movement came with the founding of the communist party in February 1930. The party was based on sound scientific theory that had the potential to guide the popular masses in their struggle for liberation in a systematic and organized manner. The communist party would eventually seize power fifteen years after its inception. The party’s central committee brought forward â€Å"Theses on Vietnamese Culture† in the year 1943. This policy statement called for â€Å"a new culture possessing exclusively nationalistic, scientific, and mass traits† (Nguyen 128). All subsequent activities were measured by the magnitude to which such qualities were stimulated. Thus, the foundations were laid for the impending socialist revolution. The document contained the intellectual and cultural policy of the party. â€Å"Vietnamese communism was therefore a product both of the development of the social movement of the workers and the peasants, and of the extension of the national movement. In contrast with the bourgeois parties confined in their powerlessness and their contradictions, the communist movement was the only one to understand that the independence of the country was inseparable from a social and political solution to the misery of the peasant and laboring masses, and to know how to mobilize the vital forces of the nation into the service of the movement of national liberation by linking clearly the land problem to the national question.† (Nguyen 129) Another critical event in the Vietnamese communist movement was the Geneva Conference of 1954, which led to the Peace Accords. Accordingly, Vietnam was divided into two, north and south of the 17th parallel. China and Russia accepted this compromise, because they were jolted by the Korean War and did not want another confrontation with the United States so soon. Ho Chi Minh, though suspicious of American intentions, signed the accord. Meanwhile, Minh’s popularity was growing across the divide. It was becoming clear to the United States that if an election was conducted, Ho Chi Minh would easily win and thereby establish Communism. For this reason the US refused to reunify the country and created the Republic of South Vietnam, with Ngo Dinh Diem as its head. In fact, Ngo Dinh Diem2 was selected for no other reason than that he was anti-communist. The United States’ intervention further deepened when it started providing aid to South Vietnam. Diem made unsuported claims that his government was attacked by the Communists and compelled the United States to intervene3. This further escalated the combat operations from both sides. The atrocities of the Diem regime coincided with the ascendancy of the communist movement headed by Ho Chi Minh (Ruane 17). The Vietnamese Communist movement and the enigmatic leader Ho Chi Minh were intricately linked. Born in a small village Kim Lien in Nghe An Province in May 1890, Ho was the son of a poor Scholar from a peasant background. Minh’s early education was about the classical Confucian tradition. When he was in his late teens, he worked as a teacher and then went to Saigon to take a course in navigation. On successful completion, he joined a French ship crew as a kitchen assistant. The ship traveled across continents and this gave Minh a broad perspective of the world. In 1919, he tried unsuccessfully to meet President Woodrow Wilson at the Versailles Peace Conference, so that he could present a proposal. During this period, Minh was particularly impressed by Marxist-Leninist literature and this led to his becoming a member of the French Communist Party. He also read, wrote, and spoke widely on the difficulties ailing Indochina. In 1925, he formed the Revolutionary Youth League in Gua ngzhou. Here, he was involved in training Vietnamese cadres in revolutionary techniques. He incorporated the ideas of such leaders as Marx, Lenin, Sun Yat-Sen and Gandhi in his instructions. He published Duong Cach Menh (The Revolutionary Path) in 1926, which is regarded by many as a masterpiece on revolutionary methods. Later on, he also formed the Communist Youth League (Thanh Nien Cong San Doan). The league’s main activity was the printing and distribution of the journal Thanh Nien. The publication brought â€Å"communist theory into the Vietnamese independence movement† (Brigham). Ho Chi Minh had to flee to Moscow after the 1927 coup by Chiang Kai-shek as it led to the suppression of Communists in south China. Subsequently in December of the same year the Vietnamese Nationalist Party4 was formed in Hanoi. This is another landmark event in the communist movement. Its activists were largely students, factory workers and soldiers. The party received financial aid from the Chinese Nationalist Party. The party adopted putschist-style activities to unsettle and topple the French. Various uprisings by these independent groups were promptly crushed by the imperialist forces. These groups also suffered due to poor preparation and communication. Most notably, the Yen Bai uprising was a complete disaster. This resulted in the execution of most of the top leaders. The villages harboring party workers were also shelled and destroyed. At the beginning of 1930, there were actually three communist parties in French Indochina, all competing for the same members. The formation of Indochinese Communist Party urged the rest of the Thanh Nien members to transform the Communist Youth League into a full-fledged party – the Annam Communist Party. The Tan Viet Party members made a similar change by renaming their group the Indochinese Communist League (Dong Duong Cong San Lien Doan). These developments concerned the Comintern, which â€Å"issued a highly critical indictment of the factionalism in the Vietnamese revolutionary movement and urged the Vietnamese to form a united communist party† (Suter 352). Later, the Comintern leadership sent a message to Ho Chi Minh, asking him to make endeavors in unifying all the groups. Minh’s first action was a speech he delivered to the delegates from various factions. This meeting culminated in the formation of the unified Vietnamese Communist Party (VCP) or the Vie t Nam Cong San Dang. It was subsequently renamed Indochinese Communist Party, thus reclaiming the name of the first party of that name founded in 1929. Various community based organizations like unions, peasants’ associations, women’s associations, etc were to be organized under the banner of the new party. â€Å"Minh drew up a program of party objectives, which were approved by the conference. The main points included overthrow of the French; establishment of Vietnamese independence; establishment of a workers’, peasants’, and soldiers’ government; organization of a workers’ militia; cancellation of public debts; confiscation of means of production and their transfer to the proletarian government; distribution of French-owned lands to the peasants; suppression of taxes; establishment of an eight-hour work day; development of crafts and agriculture; institution of freedom of organization; and establishment of education for all.† (Suter 354) The founding of the Indochinese Communist Party came at a crucial phase in the country’s history. It coincided with the declining economic conditions and general civil unrest. Factory workers were going on strikes and wages were falling sharply. Due to the economic depression around the world rice exports came to a grinding halt. Of all those who suffered these conditions, the peasants were the most unfortunate. Adding to their woes were famines, floods and riots. In such an atmosphere the Communist ideology was perceived as a blessing. It brought hope amid all pervading gloom. The protracted U.S. led Vietnam War only consolidated the resolve of the Communist groups and further alienated the masses from the Diem regime. And when the United States finally withdrew its forces, it had already suffered heavy losses, human and economic. After the war, Vietnam became a Socialist Republic embracing Communism. Works Cited: Ambrose, Stephen E. â€Å"Trapped by Success: The Eisenhower Administration and Vietnam, 1953-61.† Foreign Affairs 72.n4 (Sept-Oct 1993): 160(2). Brigham, Robert K. â€Å"BattleField Vietnam: A Brief History.† Public Broadcasting Service. Retrieved: 9th March 2006. â€Å"Ho Chi Minh and the Communist Movement.† U.S. Library of Congress. Retrieved: 7th March 2006 Kelley, Liam. â€Å"Vietnam as a ‘domain of manifest civility’ (Van Hien chi Bang).† Journal of Southeast Asian Studies 34.1 (Feb 2003): 63(14). Nguyen The Anh. â€Å"Historical research in Vietnam: a tentative survey.† Journal of Southeast Asian Studies 26.n1 (March 1995): 121(12). Ruane, Kevin. â€Å"The USA in Asia Vietnam: America’s allies kept out and President Johnson wanted to concentrate on reform at home. So why did America let itself get sucked into an agonising war it could not win?.† Modern History Review 14.4 (April 2003): 13(4). Suter, Keith. â€Å"Vietnam: yesterday, today and tomorrow.† Contemporary Review 286.1673 (June 2005): 351(6). The evolution of Vietnamese culture over the last 4 millennia had facilitated adoption of the concept of nation-state. The notion of a sovereign nation with its own identity had taken shape through these years. Hence, Vietnamese history is â€Å"the history of the constitution of the nation, with its clearly delineated territory, its own language, its specific culture, which needed to be protected against all external aggressions† (Nguyen 123). Although such traits do not lead to Communism as the form of government, it nevertheless leaves the field open for scientific political ideas to be applied. And Communism is one such ideology. Although invaded and occupied through the major part of its recent history, the Vietnamese managed to retain an identity that is uniquely theirs. The common threads that made this possible were the internal and foreign wars, coping with hostile natural elements, etc. During the onset of the 20th century, the country was much exploited and war .