The Characteristics of Foreign Exchange markets

The Characteristics of Foreign Exchange markets Foreign exchange refers to money denominated in the currency of another nation or group of nations. Foreign exchange can be cash, bank deposits or other short-term claims. But in the foreign exchange market as the network of major foreign exchange dealers engaged in high-volume trading, foreign exchange almost always take the form of an exchange of bank deposits of different national currency denominations. Market Characteristics The foreign exchange market place is a twenty-four hour market with exchange rates and market conditions changing constantly. However, foreign exchange activity does not flow evenly. Over the course of a day, there is a cycle characterized by periods of very heavy activity and other periods or relatively light activity. Business is most heavy when two or more market places are active at the same time such as Asia and Europe or Europe and America. Give this uneven flow of business around the clock, market participants often will respond less aggressively to an exchange rate development that occurs at a relative inactive time of day, and will wait to see whether the development is confirmed when the major markets open. Nonetheless, the twenty-four hour market does provide a continuous real-time market assessment of the currencies values. The market consists of a limited number of major dealer institutions that are particularly active in foreign exchange, trading with customers and (more often) with each other. Most, but not all, are commercial banks and investment banks. The institutions are linked each other through telephones, computers and other electronic means. There are estimated 2,000 dealer institutions in the world, making up the global exchange market. Each nations market has its own infrastructure. For foreign exchange market operations as well as for other matters, each country enforces its own laws, banking regulations, accounting rules, and tax codes. They also have different national financial systems and infrastructures through which transactions are executed and within the currencies are held. With access to all of the foreign exchange markets generally open to participants from all countries, and with its vast amounts of market information transmitted simultaneously and almost instantly to dealers throughout the world, there is an enormous amount of cross-border foreign exchange trading amongst dealers as well as between dealers and their customers. At any moment, the exchange rates of major currencies tend to be virtually identical in all of the financial centers. Rarely are there such substantial price differences among these centers as to provide major opportunities for arbitrage. Over-the-Counter vs. Exchange-Traded Segment There are generally two different market segments within the foreign exchange market: over-the-counter (OTC) and exchange-trade. In the OTC market, banks indifferent locations make deals via telephone or computer systems. The market is largely unregulated. Thus, a bank in a country such the USA does not need any special authority to trade or deal in foreign exchange. Transactions can be carried out on whatever terms and with whatever provisions are permitted by law and acceptable to the two counter-parties, subject to the standard commercial law governing business transactions in the respective countries. However, there are best practice recommendations such from the Federal Reserve Bank of New York with respects to trading activities, relationships, and other matters. Trading practices on the organized exchanges and the regulatory arrangements covering the exchanges, are markedly different from those in the OTC market. In the exchange, trading takes place publicly in a centralized location and products are standardized. There are margin payments, daily marking to market, and a cash settlement through a central clearinghouse. With respects to regulations in the USA, exchanges at which currency futures are traded are under the jurisdiction of the Commodity Futures Trading Corporation (CFTC). Steps are being taken internationally to harmonize trade regulations and to improve the risk management practices of dealers in the foreign exchange market and to encourage greater transparency and disclosure. The various parties involved Today, commercial banks and investment banks serve as the major dealers by executing transactions and providing foreign exchange services. Some, but not all, are market makers, that regularly quote both bids and offers for one ore more particular currencies thus standing ready to make a two-sided market for its customers. Dealers also trade foreign exchange as part of the banks proprietary trading activities, where the firms own capital is put at risk on various strategies. A proprietary trader is looking for a larger profit margin based on a directional view about a currency, volatility, an interest rate that is about to change, a trend or a major policy move. . Payment and Settlement Systems Executing a foreign exchange transaction requires two transfers of money value, in opposite directions, since it involves the exchange of one national currency for another. Execution of the transaction engages the payment and settlement systems of both nations. Payment is the transmission of an instruction to transfer value that results from a transaction in the economy, and settlement is the final and unconditional transfer of the value specified in a payment instruction. The foreign exchange instruments Spot: A spot transaction is a straight forward (or outright) exchange of one currency for another. The sport rate is the current market price, the benchmark price. Outright Forwards: An outright forward transaction is a straight forward single purchase/sale of one currency for another, that is settled on a day pre-arranged date three or more business days after the deal date. FX Swaps: In the FX swap market, one currency is swapped for another for a period of time, and then swapped back, creating an exchange and re-exchange. Currency swaps: In a typical currency swap, counter-parties will (i) exchange equal initial principle amounts of two currencies at the spot exchange rate, (ii) exchange a stream of fixed or floating interest rate payments in their swapped currencies for the agreed period of the swap and then (iii) re-exchange the principle amount at maturity at the initial spot exchange rate. Direct and Indirect Quotation for Exchange Rates Purpose: This component enables you to manage exchange rates for each currency pair using direct or indirect quotation. The type of quotation used is dependent on the market standard. You can define the type of quotation per client and currency pair (business transaction). Indirect quotation has not been required until now, because direct quotation was usually used for exchange rates. With the start of the dual currency phase of the European Monetary Union (EMU), indirect quotation is now used within Europe for exchange rates with the euro. Indirect quotation is also becoming more widely accepted internationally. Until now, there were many limitations involved in processing indirect exchange rates. Direct quotation is where the cost of one unit of foreign currency is given in units of local currency, whereas indirect quotation is where the cost of one unit of local currency is given in units of foreign currency. Your local currency is GBP: Direct exchange rate: 1USD = 0.6464 GBP Indirect exchange rate: 1GBP = 1.5470 USD Direct or indirect quotation can be maintained as the standard form of quotation for a certain currency pair. You use: 1 for direct quotation 2 for indirect quotation If a standard form of quotation has not been specified for a currency pair, the system automatically uses direct quotation. Foreign currency options: A foreign exchange or currency option contract gives the buyer the right, but not the obligation, to buy/sell a specified amount of one currency for another at a specified price on a specified date. That differs from a forward contract, in which the parties are obligated to execute the transaction on the maturity date. An OTC foreign exchange option is a bilateral contract between two parties. In contrast to the exchange-traded options market, in the OTC market, no clearing-house stands between the two parties, and there is no regulatory body establishing trading rules. Trade mechanics Dealer institutions trade with each other in two basic ways: direct dealing and through a brokers market. The mechanics of the two approaches are quite different, and both have been changed by technological advances in recent years. Direct Dealing: Each of the major market makers shows a running list of its main bid and offer rates that is, the prices at which it will buy and sell the major currencies, spot and forward and those rates are displayed to all market participants on their computer screens. The dealer shows his prices for the base currency expressed in amounts of the terms currency. Although the screens are updated regularly throughout the day, the rates are only indicative-to get a firm price, a trader or customer must contact the bank directly. A trader can contact a market maker to ask for a two-way quote for a particular currency. Theories of Fund Flow Fund flow is usually measured on a monthly or quarterly basis.  The performance of an asset or fund is not taken into account, only share redemptions (outflows) and share purchases (inflows).   Net inflows create excess cash for managers to invest, which theoretically creates demand for securities such as stocks and bonds.  Ã‚   Law of one price The law of one price is another way of stating the concept of purchasing power parity. The law of one price exists due to arbitrage opportunities. If the price of a security, commodity or asset is different in two different markets, then an arbitrageur will purchase  the asset in the cheaper market and sell it where prices are higher. When the purchasing power parity doesnt hold, arbitrage profits will persist until the price converges across markets. Foreign exchange risk exposure : We can define exposure as the sensitivity real home currency value of an asset, liability or an operating income to an unknown change in the exchange rate, moreover foreign exchange risk means variabilty of the domestic currency values of assets, liabilities operating income due to unknown changes in exchange rate. The foreign exchange business is by nature risky because it deals primarily in risk measuring it, pricing it, accepting it when appropriate managing it. Market Risk: Market risk, in simple terms, is price risk, or exposure to adverse price change. For a dealer in foreign exchange, two major elements of market risk are exchange risk and interest rate risk. Exchange rate risk is inherent in foreign exchange trading. Interest rate risk arises when there is any mismatching or gap in the maturity structure. Thus, an uncovered outright forward position can change in value, not only because of a change in spot rate but also because of a change in interest rates, since a forward rate reflects interest rate differential between the two currencies. Credit Risk: Credit risk arises from the possibility that the counter-party to a contract cannot or will not make the agreed payment at maturity. In foreign exchange trading, banks have long been accustomed to dealing with the broad and pervasive problem of credit risk. Know your customer is a cardinal rule and credit limits or dealing limits are set for each counter-party and adjusted in response to changes in financial circumstances. Over the past decade or so, banks have become willing to consider margin trading when a client requires a dealing limit larger than the banks is prepared to provide. Under this arrangement, the client places a certain amount of collateral with the bank and can then trade much larger amounts. Other Risks: Numerous other forms of risks can be involved in the foreign exchange trading, such as liquidity risk, legal risk and operational risk. The latter is the risk of losses from inadequate systems, human error, or lack of proper oversight policies and procedures and management control. Interest rate swap and currency swap: Interest rate swaps: This type of swaps are derivatives as the the underlying asset is not exchanged in the trancation. It is an agreement in which two parties exchange interest payments of differing nature on an imaginary amount of principal for a defined time span. Actually, it is an exchange of different cash flows; one generated by a fixed interest rate on a sum, the other by a floating interest rate on the same sum. For instance, a party (such as a depository institute) that earns a steady stream of income may prefer one which matches (fluctuates with) the market interest rates. It may agree to exchange its interest income on a certain sum (say ten million dollars of principal) for a certain period (say one year) with another party (such as a mutual fund) which earns a fluctuating interest income but prefers a steady one. Currency swap: An agreement between two parties to exchange  interest  payments and principal on loans denominated in two different currencies. In a cross currency swap, a loans interest payments and principal in one currency would be exchanged for an equal valued loan and interest payments in a different currency. Different Types of Foreign currency option: Arrangement in which a party acquires (upon payment of a fee) the right but not the obligation to buy or sell a specified amount of a currency on a fixed date and at a fixed rate. Such options are used usually by importers as a hedge against exchange rate fluctuations. See also foreign exchange contract. Call Option: The call options give the buyer the right, but not the obligation, to buy the underlying shares at a predetermined price, on or before a determined date. Put Option: A Put Option gives the holder the right to sell a specified number of shares of an underlying security at a fixed price for a period of time. Knock-Out Options: These are like standard options except that they extinguish or cease to exist if the underlying market reaches a pre-determined level during the life of the option. The knockout component generally makes them cheaper than a standard Call or Put. Knock-in Options These options are the reverse of knockout options because they dont come into existence until the underlying market reaches a certain pre-determined level, at this time a Call or Put option comes into life and takes on all the usual characteristics. Average Rate Options The options have their strikes determined by an averaging process, for example at the end of every month. The profit or loss is determined by the difference between the calculated strike and the underlying market at expiry. Basket Options A basket option has all the characteristics of a standard option, except that the strike price is based on the weighted value of the component currencies, calculated in the buyers base currency. The buyer stipulates the maturity of the option, the foreign currency amounts which make up the basket, and the strike price, which is expressed in units of the base currency. Difference between a call and a put option : The main diffenence in writing a put option and buying a call option is that they both are opposite to each other an elaboration of a put and call option will diffenciate clearly. An inverstor who writes a call option sees the future price of the underlying asser will go up and they will be able to get profit from this investment. An investor who buy put options believe the price of the underlying asset will go down and they will be able to purchase another option on the same asset for reselling at a price lower than the current exercise price. Put Option : Because put options vest the buyer with the right to sell stock at a pre-determined price, these option contracts are frequently used to protected stock holdings from losses in the event of a market decline.   Much like insurance, a stock investor can pay a premium and purchase a put option to protect his holdings.   In the event of a market downturn, he may sell the put option at an increased value to offset any losses or the option may be exercised, and the stock sold, at what would be above market prices. Call option : A call option, often it is simply labeled a call, is a financial contract between two parties, the buyer and the seller of this type of option. The buyer of the call option has the right, but not the obligation to buy an agreed quantity of a particular commodity or financial instrument (the underlying) from the seller of the option at a certain time (the expiration date) for a certain price (the strike price). The seller (or writer) is obligated to sell the commodity or financial instrument should the buyer so decide. The buyer pays a fee (called a premium) for this right. Why are the premiums different with the same contact specifications but different trading dates: The premium is the amount that is offered to the contactor for taking the risk while making a forwad, future or options contract as the investor is making his/her investment safe the contractor is exposed to risk so he/she might charged an amount called premium. The reason that the contract might have different premium amount with the same specifications is that the risk of currency appriciation or depriciation or the maturity of the contract, foir instance if the contract is one month long the premium might be low as the contract time is less and more accurate predictoins can be made by the contractor but if the maturity date is too long it will be difficult for the contractor to predict the future or will be difficult for him to manage his/her own risk do he/she might charge more premium for the transaction. Deep in the money : An option with an exercise price, or strike price, significantly below (for a call option) or above (for a put option) the market price of the underlying asset. Significantly, below/above is considered one strike price below/above the market price of the underlying asset.  For example, if the current price of the underlying stock was $10, a call option with a strike price of $5 would be considered deep in the money. Many option traders (both professionals and individual investors) will exercise, as they have the right, an expiring option that is in-the-money by any amount, even though this amount may be less than OCCs thresholds for automatic exercise. Therefore, you might anticipate assignment on any in-the-money option at expiration. An option is  in-the-money if it has positive intrinsic value that is, if the holder would profit from exercising it. In terms of strike price, a call is in-the-money if the exercise price is below the underlying stocks spot price. A put is in-the -money if the exercise price is above the stocks spot price. If GBP would depreciate against the dollar a call or put option would have been better for a British exporter If the GBP would depreciate against the dollar a call option will be beneficial for a British exporter as he is carrying transactions in dollar and he can buy GBP on low price at the future date and when it appreciates he can again write a put put option to get the benefit

Don’t Live to Eat but Eat to Live Essay

The title sounds easy right? Eat to live, don’t live to eat. Simple enough. So why do I go to the park and half of the people I see are overweight or severely obese? Why are their kids fat? Why do my coworkers have fat rolls that hang off the back of their chairs? It’s a question I have asked myself over and over again. There have been many theories as to why people are fatter today than they were 100 years ago. Now you can choose to believe the BS about good calories and bad calories or that we are fatter because we don’t eat like our ancestors. You can also choose to believe that calories don’t matter and we are fat because of the processed junk food we consume so much of. By taking a look at fat people, we can make the most probable assumption that they consume more calories than they expend. So, if you are in tune with what happens when energy intake is greater than expenditure, you know the excess energy is stored as body fat or contributes to LBM gain under certain situations. Why is this important? A long time ago when we had to chase down our food and stab it with a sharp object, storing fat was essential for survival as it could be days or weeks before we might feast again. So after I expended all of that energy hunting down the kangaroo, you can bet your sweet loin cloth I am going to sit and stuff myself for the next few days. Now some of that ingested energy went to preserving lean body mass but a lot of the excess was shuttled right into my fat cells. Thankfully we have the ability to store fat, otherwise I wouldn’t be here today writing this article. So here is what I have noticed. While it’s not revolutionary, it’s not something we think about much. We are Emotional Eaters Many of us are emotional eaters. We sometimes eat to relieve stress and find comfort in eating certain foods. While I have not looked at statistics, I am willing to bet those of us at high stress jobs are more likely to be overweight than those in less stressful positions. I witnessed this at a previous job where over half of the workers there were over weight and some were dangerously obese. The day job was very stressful and the cafeteria served some really calorie dense food. People would go to lunch and take the edge off by eating a foot long chili cheese dog or go down the road and polish off a few big macs. Then when it was time to head home, I am sure many hit the pint of ice cream for their post dinner indulgence. I have also noticed people working in lower stress environments to be slimmer and more fit. I supposed they had more energy and vigor outside of work to be more active than their stressed out counterparts. Now this could all be coincidence and anecdotal but I have a hunch there is more to it than that. Lots and Lots of Food If you live in America, you know how easy food is to come by. We are constantly being told to eat thanks to TV, radio and the internet(I am thinking about ordering a pizza right now because of the Domino’s ad I see on the web page). This seems to screw with our natural cravings. It’s like we only become hungry because food is always in front of our face. So we only think we are hungry. We eat and then a few hours later are bombarded again with more advertisements of food. Time to go to Wendy’s! No wonder we are a bunch of fatties. Lack of Balance This is probably the biggest factor in the obesity epidemic we are facing. The fact is most people are very sedentary. We wake up, go to work, sit for 8 hours and return home to sit some more until we hit the sack. Now this may sound a bit exaggerated but it’s not far from the truth for many. Most of the people living like this are very chunky too. People like to argue and say they have a metabolic disorder. They say â€Å"I eat the same amount that my grandparents used to eat and they were always thin. † I wonder if working on a farm and doing manual labor had anything to do with them staying so slim? If you are sedentary and desire to maintain your weight it’s most definitely a great idea to begin working out a few times per week, burn some calories and move around a bit more than usual. Perhaps you can begin walking on your lunch break. If you don’t have time to do any extra activity, then the only way to manage your weight is by watching what you eat and keep it at your maintenance intake. Now ideally, you will be doing both of these(exercise and watching your diet) for optimal results. Eat To Live Eating purely out of necessity is often hard to do because some food tastes so good. Sometimes we eat a little too much or indulge a bit too often. I am not telling you to completely limit your intake of what you really enjoy eating because that will only make you crazy. This is coming from the guy ho eats cereal every day because he absolutely loves it. I really love a big bowl of Cap’n Crunch with cold whole milk. The main point I am trying to make here is we should view food as energy and nothing else. You simply need energy to live. Do not get hung up on food being bad or good, clean or unclean. This will only lead to a terrible relationship with food. I have experienced some slight issues with binge eating, thus I had to take the time to reestablish a healthy relationship with food. Nowadays I am not concerned with what I eat, as long as I eat enough for my current goals. I make sure to get my protein, fish oil and fill in the rest with the other macros. I may eat pizza, tacos, oats or have a few beers. Once you can view food as nothing but a fuel source, a piece of chocolate cake or a bowl of rice is essentially the same difference. They both provide energy. We need energy to live. Don’t live to eat, eat to live. Many people struggle to attain the health goals that they want to achieve. Whether those goals are losing weight, lowering cholesterol levels or just getting into better overall health, the foundation for those goals is a healthy diet. Diet is a four letter word. I’m not sure if you’re aware of that. When people hear the word diet, they cringe. They immediately think it means you have to eat very little, and the food that you’re allowed to eat must taste terrible. I am here to tell you that does not have to be the case. When I talk about diet I mean diet in its most basic meaning. The first definition of diet listed in the dictionary is as follows: Diet (n) – food and drink considered in terms of its qualities, composition, and its effects on health. It’s not about breaking down what you’re eating a cutting a bunch of it out to lose weight. It’s about the quality of the food that you are putting into you mouth and how it will affect your overall health. It truly is about your habits with regard to food. When patients come into my office diet is always something that we modify. Patients come to see us for a wide range of conditions, but dietary change is almost always necessary. There is the occasional patient that already has a perfect diet, but they are few and far between. Patients are very motivated at first to change their eating habits because they are very motivated to feel better. As they get into their programs motivation dwindles and people begin to miss their comfort foods. It really is amazing how much people depend on food to make them happy. It should not be that way. Food can certainly be a source of joy. There is nothing better than a good piece of steak or a tasty chicken breast sometimes. However, if foods become your only enjoyment there is a problem. Food should be nourishment, not your sole source of pleasure. Patients, even when they are achieving the results they desire, complain about the dietary changes they’ve been forced to make. Of course the alternative is to continue down the path they were on, eat as they wish and continue to feel bad. Either way they feel trapped. This is where the mind set needs to switch. They need to finally realize that they need to eat to live, not live to eat. If a person can understand that concept, accept it and then apply it, dietary changes are easy. You are eating to be healthy and therefore happy. Not the other way around. Patients that have the hardest time changing often do not accept this concept. They don’t want to give up ice cream, candy, cakes, etc. ecause they get enjoyment out of consuming them. There are physiological reasons for this of course, but even when those are addressed the mindset does not change. If one can decide to use food as a tool to get healthy rather than a tool to be happy changes occur much faster. Remember this concept: food is fuel for our bodies. We need it to function. We need it to live. We can certainly enjoy it, but it should not be a tool to make us happy. We should view food simply as something that can nourish our bodies and make us healthy. Viewing it this way makes it much easier to make good choices. Inevitably people who choose â€Å"comfort foods† make bad choices. When was the last time you heard that someone over ate chicken breast? It doesn’t happen. People over eat the bad stuff like donuts, chips or ice cream because they are eating for joy, not for nourishment. Abiding by the eat to live, don’t live to eat mantra will serve you well because it will help you make the right diet choices for the right reasons. Chances are, you’ve tried to lose weight. The first goal of dieting is to stop further weight gain. The next goal is to establish a realistic weight loss goals. Any intentional weight reduction results in health benefits. And, the amount of weight loss can improve your health. Changing your behavior to adopt a healthier lifestyle can be tough; however it’s easier to make healthy lifestyle changes one step at a time. Sticking to a diet rich in fresh fruits and vegetables and exercising regularly are also proven ways to prevent diseases such as cancer and heart complications. Losing weight is not simple because many factors affect how much or how little food a person eats and how that food is metabolized by the body. Your weight depends on the number of calories you consume, how many of those calories you store, and how many you burn. If you decrease your food intake and consume fewer calories than you burn, or if you exercise more and burn up more calories, your body will reduce some of your fat stores. In order to turn your body into a weight loss machine, you must start by determining how many calories you should consume each day. Weight loss can be accomplished by eating fewer calories and by exercising to help you burn fat and calories and keep the weight off. Exercise can boost your metabolism increase muscle mass as a result you burn more calories. The most effective method for weight loss is reducing the number of calories you consume while increasing the number of calories you burn through physical activity. In order to reach this goal, you must multiply your current weight by 15 that’s about the number of calories per pound of body weight needed to maintain your current weight if you do at least 30 minutes of physical activity a day. To lose one to two pounds a week your food consumption should provide less than your total weight-maintenance calories. You will also need to build more activity into your day. In order to lose at least a pound a week, try to do at least 30 minutes of physical activity at least three days a week, and reduce your daily calorie intake. Physical activity is an important part of weight management. However, calorie intake should not fall below 1,200. Becoming physically active can help you burn extra calories and naturally increase your glucose uptake by increasing your metabolism and muscle mass. Whether you want to drop 10 pounds or 100, the truth is that no weight loss plan will work if you don’t stay with it. Our bodies require a complex array of nutritional components, and especially the micro-nutrients that are missing from the normal diet. The question is how to do this while eating less. The answer is to eat super foods, or booster foods. Booster foods provide us with a full spectrum concentrated nutrition with minimal caloric content. A well-functioning metabolism has three jobs: it converts energy from the food we eat into work and heat; it eliminates toxins and any unnecessary nutrients in the form of waste; and it stores glucose in the form of lycogen and extra energy as fat for future use. All of these functions are interrelated and interdependent; they rely on each other. One cannot function properly without the support of the other two. Healthy leanness results from burning fat and building muscle. Many people try to lose weight, but fewer people lose weight and keep it off. The first step in losing weight safely is to determine a realistic weight goal. If you want to lose weig ht, cutting calories or controlling your portions is a good place to start. After determining a reasonable goal weight, devise an eating plan. Our eating habit and lifestyle have a great impact on our body. This does not mean you have to stop eating your favorite foods. It means you must reduce your caloric intake. Set a realistic weight loss goal. One of your goals should be to lose a few pounds and be able to keep it off for a long time. Eating foods high in fiber, such as fruits, vegetables, legumes and whole grains can be an important aid in weight maintenance because eating enough of fiber can help make a person feel full or curb your appetite longer. Weight loss is a continuous process.

Current Issues in the Philippines Essay

According to the Greek philosopher, Plato, â€Å"Nothing is more important in human life as education. It is an indispensable necessity for mankind.† Education is the key that levels the playing field of opportunity between the rich and poor, amongst social classes and races. In the Philippines, the lack of education is the primary reason why it cannot move forward towards progress, and has led to social problems such as: scarcity of job opportunities, impoverished family life, and lack of environmental concerns among the marginalized members of our society. The lack of education of Filipinos living in the slum areas in major cities of the country is the void that keeps the gap between the rich and the poor. It is one of the major contributory factors that has caused the Philippines to remain as a third world country, aside from corruption in government. Our president, Benigno C. Aquino III, strongly believes that education is the first step that will lead the Filipinos to the â€Å"tuwid na daan.† The lack of education can be equated to poor job opportunities. Job hiring, nowadays, is highly competitive among fresh graduates. In fact, the degree or course of an individual is not only the basis for getting a good paying job, but from what university or college he/she graduated from. Hence, since good job opportunities are scarce for those who have not gone to school, low paying â€Å"blue-collar jobs† is the only means to survive. Most often, these people are the victims of contractualization from which they do not receive benefits as compared to regular employees, and the protection from the abuses of companies that give below daily minimum wage that is set by law. In the survey conducted by the National Statistics Office (NSO) in 2011 on Child Labor, it showed that out of the 29.019 million Filipino children aged 5-17 years old, about 18.9 percent or 5.59 million were already working, usually in hazardous conditions. For parents who lack education, they actually pressu re their children to work. Instead of sending them to school, they force them to do so in order to help in the family’s financial needs. It works to the advantage of companies, those cost-cutting with their labor over-head, to employ children at a low cost. In reality, even these children themselves are unaware of their rights. They choose to work because they witness the poverty in their own family for which they feel the responsibility to help. In the remote provinces, young women who lack  education are victims of white slavery or women trafficking, either domestically or abroad. They are forced by their parents who are bribed by recruitment agencies, without knowing that their daughters will be turned into sex slaves by foreigners or even local sex dens in key cities in the country. Out-of-school-youth is increasing every year as the population increases. There have been crime syndicates preempting these children to commit crime since they are protected by the â€Å"juvenile law.† Minors at the age of 15 who commit crime will not be charged of the crime committed in a regular court, but will simply have to undergo rehabilitation in the Department of Social Welfare and Development (DSWD). Because of this, crime rates committed by minors have increased in the past years since the conceptualization of this law. Another social impact of the lack of education is poverty. Since job opportunities are deficient, the financial status of the family suffers. Such condition leads to poor family planning, malnutrition, and juvenile delinquency. The lack of the basic knowledge on family planning has led to population explosion among the poor families. Statistically, large family size comes from the underprivileged families of the society. This is the result of the myth that the more children they have, the more chances they will have to be free from poverty if one of their children is fortunate enough to find a job that pays well. According to Plato, â€Å"No man should bring children into the world, which is unwilling to persevere to the end in their nature and education.† Parents must be mindful of their responsibility of sending their children to school in order for them to have a brighter future, and not by means of luck. The lack of environmental awareness is another detrimental effect caused by the lack of education. These poor families are also known as informal settlers that reside in slum areas. They have created environmental problems such as air pollution, water pollution, flooding and congestion. Since they are formed in an environment where exposure to all kinds of pollution is highest, they usually operate outside society’s norms where environmental laws are not strictly enforced. They are situated along river lines or seashores which are frequently affected by typhoons, rains, erosion and sea  surges. Not only does is this harmfully affect their environment, but also their health. The risk of over-crowding along rivers and the narrowing of our floodway system, the garbage pollution they contribute everyday lead to disease outbreak like dengue, flooding, and casualties during typhoons and heavy rains. For a family of a deprived household with more mouths to feed, children also become victims of malnutrition. Improper nutrition affects all body systems, from physical growth and vision, brain vigor, and immunity. According to the survey conducted by the Food and Nutrition Research Institute (FNRI), Filipino children suffer from micronutrient deficiency: Vitamin A, iodine and iron. The lack of Vitamin A affects eye health, while iodine affects cognitive functions and iron for fighting anemia. These defects have been mostly rampant among children of distressed families. Lack of education is one of the major reasons why there is poverty in the country. To level the playing field of opportunities to every Filipino, I suggest that the government provide free and quality education to every child. The K-12 program in our educational system is one of the best initiatives this administration has done. The underprivileged children can now compete with children in exclusive schools, since they now have the same foundation of nursery and kinder education in preparation for a free grade one to seventh grade education given to them by the government. The passing of the RH bill is also a positive move the present government has done to address overpopulation. Relocating informal settlers to a safer community environment is a long term remedy for the issue of over-crowding, flooding and health risks. As mentioned, education is the only way to level the playing field of opportunities between the rich and the poor. As Plato said, â€Å"Every boy and girl must be educated to his/her limit. Education, therefore, should be provided by the state not by parents.† The government’s K-12 program shows its determination to provide every child the right to education. What matters here is the full implementation of the programs that would benefit every child, especially those in the farthest corners of the country. Plato perceived education â€Å"as the total development of a man: mind, body, and soul by using every possible means.† Knowing the capabilities and ingenuity of every Filipino, through education, we can help the Philippines become one of the leading countries in Asia in the coming years. REFERENCES: Ballesteros, M. M. (2010). _Linking poverty and the environment: Evidence from slums in philippine cities._ Retrieved on December 19, 2013 from http://dirp3.pids.gov.ph/ris/dps/pidsdps1033.pdf. Castillo, T. (2013). _Pinoy kids micronutrient deficient._ Retrieved on December 19, 2013 from http://tempo.com.ph/2013/06/pinoy-kids-micronutrient-de%EF%AC%81cient/#.UtSTrzfnimR. Cousins, B., Fry, S. (2002). _Health of children living in urban slums in asia and the near east: Review of existing literature and data._ Retrieved on December 19, 2013 from http://pdf.usaid.gov/pdf_docs/PNACQ101.pdf. Salaverria, L. B. (2013). _Revised penal code revised: Criminal age lowered to 13 in house bill._ Retrieved on December 19, 2013 from http://newsinfo.inquirer.net/465181/revised-penal-code-revised-criminal-age-lowered-to-13-in-house-bill. Tesha, J. (n.d). _Plato’s concept of education._ Retrieved on December 19, 2013 from http://sdsmorogoro.com/common/My%20pages/Research%20Papers/Plato%27s%20Concept%20of%20Education.html. Tubeza, P. C. (2012). _5.50 million child laborers in philippines, says ILO survey._ Retrieved on December 19, 2013 from http://newsinfo.inquirer.net/218947/philippines-has-3-m-child-laborers-nso-ilo.

Analysing and Applying Business Process Reengineering - Free Essay Example

Sample details Pages: 10 Words: 2911 Downloads: 2 Date added: 2017/06/26 Category Business Essay Type Analytical essay Did you like this example? In the first part of this assignment the meaning of business process reengineering (BPR) is analysed. In more details, it is outlined how business processes might be reengineered to improve company or organizational performance. The themes covered are: The importance of BPR in organizations The objectives of implementing BPR The specific techniques that can be used (like process mapping) The required training The possible problems in implementation (like resistance) As about the second part, a critical evaluation is made concerning the statement of McCabe (2004: 851): BPR does not challenge hierarchical authority, but instead attempts to reconfigure authority and power relations so as to obscure them through the language of consensus. Don’t waste time! Our writers will create an original "Analysing and Applying Business Process Reengineering" essay for you Create order In this section of the assignment it is critically evaluated the proposition that BPR in fact does very little to question the fundamental tenets of hierarchical control and in several important respects simply reinforces them. ANALYSIS OF PART 1. The term of BPR Today the business world is characterized by unpredictable changes, under the global competition and the customers demands. To be successful in such an environment, a firm must operate with speed, flexibility, low overheads and a clearly defined customer focus. The term business process reengineering (BPR) refers to an approach that is used by organizations seeking improvements in their business performance (Anonymous, 2007). The importance of BPR There is a series of driving forces, which trigger companies to undertake reengineering projects. These are customers, competition, change, cost, technology and shareholders and they lead to a requirement of new organizational structures and an alteration of the traditional way of doing business. Organizations consider BPR as an important tool of organizational improvement, as it helps them achieve the radical change necessary for todays volatile business environment. Additionally, BPR stresses the importance of linkages within an organisation. Though its structure integrated processes are generated concerning the nature of peoples jobs and how people are grouped and organized in the working environment. What is more, through BPR peoples jobs become multidimensional instead of narrow and traditional task orientation. When the concept of process is promoted in the BPR, cross boundary teamwork is incorporated and process shifts the goal focus on performance measurement and managerial responsibility from a function or responsibility center to an activity derivative process concept. So, BPR defines process teams as an important element in the business environment where work becomes multidimensional, substantive and more rewarding (Anonymous, 2007). It can be concluded that the importance of BPR is found at the fact that it is a dynamic tool for improving operations. BPR provides a process view of the organisation and a way of improving processes. Using this approach a company will be organized based on processes. As a result, processes are simplified, flows are improved and non value added work is eliminated (Schroeder, 2000). BPR is a complete life cycle approach. This provides the scope for problem identification and also solutions to implement the successful business operations. BPR can significantly improve cost, quality, service and speed simultaneously, so important results are provided to customers (Thyagarajan and Khatibi, 2004). It can be supporte d that organisations should focus on BPR for three key reasons: Firstly, there is much to be gained by improving business process. Secondly, business processes can be controlled and finally business processes are comparatively more important than production processes (Anonymous, 2007). The objectives of BPR BPR is a fundamental element in improving business performance and profitability. The BPR objectives refer to: improved operational performance, by closing performance gaps improved competencies, by closing skill and competency gaps reduced costs and manpower savings, by application of management analysis tools and techniques improved customer services or employee quality of life increased customer satisfaction increased productivity in the workplace continuous improvement of services quality delivered quality goods at competitive prices in a timely fashion (Anonymous, 2010a). The technical tools used in BPR There are different improvement techniques that can be adopted to analyse the BPR. These techniques enable the organization to understand, simplify and improve processes that already exist, not only to meet, but also to exceed the expectations of customers and provide a coordinating discipline for overall performance improvement (Anonymous, 2007). The selection of technical tools for BPR depends upon: (i) the nature of decision areas, (ii) the nature of data to be analysed, and (iii) the background of users. Table 1. The specific techniques that can be used in BPR Areas to be reengineered Techniques used in BPR BPR strategies Decision support system and Knowledge-based models Business process system design Analytical models such as queuing and simulations models Project management PERT/CPM and Flow Charts Reengineering business process Activity-based analysis and workflow model including flow chart Design of information system for reengineering business process Object-oriented models and programming Understanding of the business process system IDEF Models, EFQM Models, Petri-Net Models (Gunasekaran and Kobu, 2002). Process Mapping is a technique known as Process Charting or Flow Charting and is one of the oldest, simplest and most valuable techniques for streamlining work. It is one of the fastest ways to lower errors, increase productivity and affect customer service. It generally follows these steps: Choose a process. Assemble a team. Map out the way work is currently done. Identify problem areas. Brainstorm solutions. Evaluate ac tion steps. Assign responsibilities. Create a master plan. Follow through. (Anonymous, 2010b). Process Mapping is an important tool in examining work flow and customer supplier relationships, which is the foundation for appropriate improvements. Additionally, it is a cost effective training tool for everyone interesting in increasing the efficiency of their organization and improving communication. (Damelio, 1996). Many organizations use this technique as a part of their reengineering projects, as it provides a variety of benefits (figure 1). Figure 1. The main benefits of implementing process mapping technique (Image available at the website https://www.google.gr, accessed 8-10-2010) The BPR training Implementing successfully BPR in an organisations environment is not an easy task, as the appeared changes require changes in attitudes and deep involvement of workforce both in individual and team level. As a result, the fact that a major aspect of BPR is human factor, it makes obvious that appropriate training is required in order to implement successfully BPR in the business environment. Companies should ensure that their employees are suitably motivated and the technology required for training is available in implementing BPR. Training is one of the most frequently used approaches to changing the organisations mindset. A company might offer the suitable training programs so as to effectively implement BPR processes (Daft, 2006) According to White (2010) business process reengineering education and training can come in a variety of ways, including: Learning more about process design at a graduate level. Using online continuing education options for further education. Attending seminars that cover various aspects of business process reengineering. The possible problems in BPR implementation Various radical changes occur when BPR takes place. Hammer and Champy (1993, cited in Anonymous, 2007) have listed the various kinds of changes that occur when a company re-engineers its business process. A shift from functional departments to process teams Job change A reversal of the power relationship: from superordinate to subordinate empowerment . Today markets are characterized by a high flow of information and companies face competitive business environments. Under this reality, organizations must follow effective strategies concerning change management (Robbins, 2001). BPR has to do with improving company or organizational performance, so its implementation requires the changes mentioned above often in a rapid way of implementation in attitudes and deep involvement of workforce both in individual and team level. These changes often refer to redefinition of charts structure and/ or redesign of the workforces roles and responsibilities. The new situation can bri ng resistance to change, so managers should examine carefully the way BPR implementation will take place. Managers should support understanding and trust concerning the new situation and minimize uncertainty within the workplace. The suggestions for dealing with the possible resistance to change are the following: Determining the goals of BPR implementation. Establishing a clear view about the changes that will occur in the workplace. Applying a direct communication method between managers and employees Checking the procedures of re-engineering, so as to deal with possible problems and find solutions. Focusing on performance measures and compensation shifts Enhancing customer focus as about value change Showing an appropriate management behaviour, through control and supervision Under these suggestions the changes in the business process, lob and structures, management and measurement systems, values and beliefs will result in a flatter organizational stru cture. As a consequence all the aspects (people, jobs, managers and values) are linked together and the organization will become more responsive in BPR implementation (Anonymous, 2007). ANALYSIS OF PART 2. In this section it will be critically evaluated the statement of McCabe (2004: 851): BPR does not challenge hierarchical authority, but instead attempts to reconfigure authority and power relations so as to obscure them through the language of consensus. In order to make this evaluation, it is essential to introduce the issue of hierarchical authority in an organizations environment. Hierarchical structures are present in most organizations today. Smaller organizations may have only two levels, while larger ones may have a vast number of levels. These structures are used as a method of communications and as the lines of authority. In an organizational environment, the hierarchy mainly apart of a singular/group of power at the top with subsequent levels of power beneath them. Members of such structures chiefly communicate with their immediate superior and with their immediate subordinates. Hierarchical authority structures are providing the opportunity for greater decision-making width for individuals and more flexible definitions of job activities. This is a challenge to existing organizational forms (Zhao, Rosson and Purao, 2007). In a hierarchical organisation employees are ranked at various levels within the organisation, each level is one above the other. At each stage in the chain, one person has a number of workers directly under them, within their span of control. A tall hierarchical organisation has many levels and a flat hierarchical organisation will only have a few (Anonymous, 2010d). At figure 2 a traditional hierarchy is given. Figure 2. A traditional hierarchy diagram (Hierarchical Organisation, available at the website https://www.learnmanagement2.com, accessed 18-10-2010) CHIEF EXECUTIVE MANAGER MANAGER MANAGER ASSISTANT MANAGER ASSISTANT MANAGER ASSISTANT MANAGER STAFF STAFF STAFF STAFF STAFF STAFF STAFF STAFF STAFF It is obvious that hierarchies within control systems are a clear need for business environments. Without some form of hierarchy, a low level of control can create numerous problems in an organization. There ate two kinds of control systems: flat and hierarchical. Hierarchical architectures have a more indirect coupling of perceptions to actions through a hierarchical control structure. Both kinds of control systems have benefits, but hierarchical structure can support faster learning and a better way to deal with resistance to change (Digney, 1998) Control is a fundamental managerial function. It is the process of regulating organizational activities so that actual performance conforms to expected organizational standards and goals and ensures that necessary corrective action is taken. In fact, control is ensuring work accomplishment according to plans. It is a process of ensuring that activities are producing desired results. We can support that control is an executive function involving three elements, i.e., standards, evaluative and correc tive action. BPR is the latest wave in a series of management initiatives to increase managerial control (Gupta, 2010). According to the issues covered in the analysis of part one of this assignment, business process reengineering is proved to be a revolutionary, radical change approach to improving organizational performance through transformation. BPR methodologies aim for a flatter organizational structure, promoting the development of empowered process workers who are encouraged to use information technology in radically new ways to carry out business operations. In BPR approaches, empowerment is inflicted by leadership changing worker values and through the use of information technologies enables managerial control. Empowerment through BPR does not necessarily release control but does change the way control is exercised. Authority is still enforced through hierarchical control of culture. The reengineering approach polishes the management of power relations, when attempts ar e made to change traditional power structures and everyday power relations through the flattening of the hierarchy (Sayer and Harvey, 1997). The introduction of reengineering introduces a new relationship of power in the form of a discipline which the reengineering sustains through discourse control. In this new situation any discipline comes with its structures, its hierarchies, its inspections, exercises and methods of training and conditioning (Foucault, 1980, p. 158). BPR is an approach that supports transformation with the notion of producing the flatter organization. Hierarchy and control are still promoted and within BPR, the emphasis lies on changing the formal patterns and using mechanisms of control to change the informal (Sayer and Harvey, 1997). BPR is a strong tool of managerial control. Controlling is the fourth function of management process (the other functions are planning, organizing and leading). Through BPR managers can identify whether the organization is on target towards its goals and can make better corrections if necessary. In BPR, information technology is generally considered as playing a role as enabler of new forms of organizing and collaborating. New information technology can help managers provide needed organizational control without strict top down constraints. A representative example is that of Cisco Systems: By using information technology to coordinate and monitor several aspects of operations, the company keeps tabs on employee and organizational performance without maintaining daily authoritarian control over workers. Cisco employees have amazing freedom to make decision and take actions, but they also know that top managers keep a close eye on what is going on throughout the company (Daft, 2006). Most businesses try to take advantage of BPR concerning dealing with the fundamental tenets of hierarchical control. BPR assumes radical redesign of business processes. Many processes simply can not be further improved in small steps and require a complete redesign in order to improve them in a major way. Hierarchical control is a fundamental element in this effort and managers who desire to organize around outcomes, have people processed their own information, put the decision point where the work is performed and build control into the process, should support the view that BPR can reinforce the fundamental tenets of hierarchical control. BPR is a management system of forced, speedy culture change, highly linked to hierarchical control. In fact it does very little to question the fundamental tenets of hierarchical control and in several important respects simply reinforces them. CONCLUSIONS Business Process Reengineering includes changes concerning both structures and procedures defined in a business environment. Human, organizational, technological dimensions that characterize an organization can change through BPR. Using this approach, organizations can seek improvements in their business performance. As it was analysed at the first part of this assignment, organizations consider BPR as an important tool of organizational improvement, as it helps them achieve the radical change necessary for todays volatile business environment. Additionally, BPR stresses the importance of linkages within an organization. What is more, through BPR peoples jobs become multidimensional instead of narrow and traditional task orientation. In result, the importance of BPR is found at the fact that it is a dynamic tool for improving operations. BPR is a fundamental element in improving business performance and profitability. The main BPR objectives refer to improved operational perf ormance, improved competencies, reduced costs and manpower savings, improved customer services or employee quality of life, increased customer satisfaction, increased productivity in the workplace, continuous improvement of services quality and delivered quality goods at competitive prices in a timely fashion. There are different improvement techniques that can be adopted to analyse the BPR. Among them, Process Mapping is a technique known as Process Charting or Flow Charting and is one of the oldest, simplest and most valuable techniques for streamlining work. It is a cost effective training tool for everyone interesting in increasing the efficiency of their organization and improving communication and is highly preferred by enterprises today. Implementing successfully BPR in an organisations environment is not an easy task, as a major aspect of BPR is human factor. So, companies should ensure that their employees are suitably motivated and the technology required for traini ng is available in implementing BPR. Various radical changes occur when BPR takes place, so managers should carefully examine the strategies in change management so as to achieve the best efficiency and deal appropriately with the possible resistance to change that BPR will bring. The second part included a critical evaluation of the statement of McCabe (2004: 851): BPR does not challenge hierarchical authority, but instead attempts to reconfigure authority and power relations so as to obscure them through the language of consensus. According to the relevant analysis, within control systems are a clear need for business environments. Without some form of hierarchy, a low level of control can create numerous problems in an organization. Hierarchical structure can support faster learning and a better way to deal with resistance to change, so BPR supports the management initiatives to increase managerial control. . In BPR approaches, empowerment is inflicted by leadership changin g worker values and through the use of information technologies enables managerial control. Empowerment through BPR does not necessarily release control but does change the way control is exercised. Most businesses should try to take advantage of BPR concerning dealing with the fundamental tenets of hierarchical control. This is because BPR is a management system of forced, speedy culture change, highly linked to hierarchical control. In fact it does very little to question the fundamental tenets of hierarchical control and in several important respects simply reinforces them.