The Risks Involved In Internet Banking Finance Essay - Free Essay Example

Sample details Pages: 7 Words: 2105 Downloads: 1 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? Internet banking refers to systems that enable bank customers to access accounts and general information on bank products and services through a personal computer (PC) or other intelligent device. Internet banking products and services can include wholesale products for corporate customers as well as retail and fiduciary products for consumers. Ultimately, the products and services obtained through Internet banking are mirror products and services offered through other bank delivery channels. Types of Internet Banking Informational Communicative Transactional Don’t waste time! Our writers will create an original "The Risks Involved In Internet Banking Finance Essay" essay for you Create order Internet Banking Risks Credit Risk Credit risk is the risk to earnings or capital arising from an obligors failure to meet the terms of any contract with the bank or otherwise to perform as agreed. Credit risk is found in all activities where success depends on counterparty, issuer, or borrower performance. It arises any time bank funds are extended, committed, invested, or otherwise exposed through actual or implied contractual agreements, whether on or off the banks balance sheet. Internet banking provides the opportunity for banks to expand their geographic range. Customers can reach a given institution from literally anywhere in the world. In dealing with customers over the Internet, absent any personal contact, it is challenging for institutions to verify the bonafides of their customers, which is an important element in making sound credit decisions. Verifying collateral and perfecting security agreements also can be challenging with out-of-area borrowers. Unless properly managed, Internet banking could lead t o a concentration in out-of-area credits or credits within a single industry. Moreover, the question of which states or countrys laws control an Internet relationship is still developing. Effective management of a portfolio of loans obtained through the Internet requires that the board and management understand and control the banks lending risk profile and credit culture. They must assure that effective policies, processes, and practices are in place to control the risk associated with such loans. Interest Rate Risk Interest rate risk is the risk to earnings or capital arising from movements in interest rates. From an economic perspective, a bank focuses on the sensitivity of the value of its assets, liabilities and revenues to changes in interest rates. Interest rate risk arises from differences between the timing of rate changes and the timing of cash flows (repricing risk); from changing rate relationships among different yield curves affecting bank activities (basis risk); from changing rate relationships across the spectrum of maturities (yield curve risk); and from interest-related options embedded in bank products (options risk). Evaluation of interest rate risk must consider the impact of complex, illiquid hedging strategies or products, and also the potential impact that changes in interest rates will have on fee income. In those situations where trading is separately managed, this refers to structural positions and not trading portfolios. Internet banking can attract deposits, loans, and other relationships from a larger pool of possible customers than other forms of marketing. Greater access to customers who primarily seek the best rate or term reinforces the need for managers to maintain appropriate asset/liability management systems, including the ability to react quickly to changing market conditions. Liquidity Risk Liquidity risk is the risk to earnings or capital arising from a banks inability to meet its obligations when they come due, without incurring unacceptable losses. Liquidity risk includes the inability to manage unplanned changes in funding sources. Liquidity risk also arises from the failure to recognize or address changes in market conditions affecting the ability of the bank to liquidate assets quickly and with minimal loss in value. Internet banking can increase deposit volatility from customers who maintain accounts solely on the basis of rate or terms. Asset/liability and loan portfolio management systems should be appropriate for products offered through Internet banking. Increased monitoring of liquidity and changes in deposits and loans may be warranted depending on the volume and nature of Internet account activities. Price Risk Price risk is the risk to earnings or capital arising from changes in the value of traded portfolios of financial instruments. This risk arises from market making, dealing, and position taking in interest rate, foreign exchange, equity, and commodities markets. Banks may be exposed to price risk if they create or expand deposit brokering, loan sales, or securitization programs as a result of Internet banking activities. Appropriate management systems should be maintained to monitor, measure, and manage price risk if assets are actively traded. Foreign Exchange Risk Foreign exchange risk is present when a loan or portfolio of loans is denominated in a foreign currency or is funded by borrowings in another currency. In some cases, banks will enter into multi-currency credit commitments that permit borrowers to select the currency they prefer to use in each rollover period. Foreign exchange risk can be intensified by political, social, or economic developments. The consequences can be unfavorable if one of the currencies involved becomes subject to stringent exchange controls or is subject to wide exchange-rate fluctuations. Foreign exchange risk is discussed in more detail in the Foreign Exchange, booklet of the Comptrollers Handbook. Banks may be exposed to foreign exchange risk if they accept deposits from non-U.S. residents or create accounts denominated in currencies other than U.S. dollars. Appropriate systems should be developed if banks engage in these activities. Transaction Risk Transaction risk is the current and prospective risk to earnings and capital arising from fraud, error, and the inability to deliver products or services, maintain a competitive position, and manage information. Transaction risk is evident in each product and service offered and encompasses product development and delivery, transaction processing, systems development, computing systems, complexity of products and services, and the internal control environment. A high level of transaction risk may exist with Internet banking products, particularly if those lines of business are not adequately planned, implemented, and monitored. Banks that offer financial products and services through the Internet must be able to meet their customers expectations. Banks must also ensure they have the right product mix and capacity to deliver accurate, timely, and reliable services to develop a high level of confidence in their brand name. Customers who do business over the Internet are likely to hav e little tolerance for errors or omissions from financial institutions that do not have sophisticated internal controls to manage their Internet banking business. Likewise, customers will expect continuous availability of the product and Web pages that are easy to navigate. Software to support various Internet banking functions is provided to the customer from a variety of sources. Banks may support customers using customer-acquired or bank-supplied browsers or personal financial manager (PFM) software. Good communications between banks and their customers will help manage expectations on the compatibility of various PFM software products. Attacks or intrusion attempts on banks computer and network systems are a major concern. Studies show that systems are more vulnerable to internal attacks than external, because internal system users have knowledge of the system and access. Banks should have sound preventive and detective controls to protect their Internet banking systems from exploitation both internally and externally. See OCC Bulletin 99-9, Infrastructure Threats from Cyber- Terrorists for additional information. Contingency and business resumption planning is necessary for banks to be sure that they can deliver products and services in the event of adverse circumstances. Internet banking products connected to a robust network may actually make this easier because back up capabilities can be spread over a wide geographic area. For example, if the main server is inoperable, the network could automatically reroute traffic to a back up server in a different geographical location. Security issues should be considered when the institution develops its contingency and business resumption plans. In such situations, security and internal controls at the back-up location should be as sophisticated as those at the primary processing site. High levels of system availability will be a key expectation of customers and will likely differentiate success levels amo ng financial institutions on the Internet. National banks that offer bill presentment and payment will need a process to settle transactions between the bank, its customers, and external parties. In addition to transaction risk, settlement failures could adversely affect reputation, liquidity, and credit risk. Risk Management Financial institutions should have a technology risk management process to enable them to identify, measure, monitor, and control their technology risk exposure. Examiners should refer to OCC Bulletin 98-3, Technology Risk Management for additional guidance on this topic. Risk management of new technologies has three essential elements: The planning process for the use of the technology. Implementation of the technology. The means to measure and monitor risk. The OCCs objective is to determine whether a bank is operating its Internet banking business in a safe and sound manner. The OCC expects banks to use a rigorous analytic process to identify, measure, monitor, and control risk. Examiners will determine whether the level of risk is consistent with the banks overall risk tolerance and is within the banks ability to manage and control. The risk planning process is the responsibility of the board and senior management. They need to possess the knowledge and skills to manage the banks use of Internet banking technology and technology-related risks. The board should review, approve, and monitor Internet banking technology-related projects that may have a significant impact on the banks risk profile. They should determine whether the technology and products are in line with the banks strategic goals and meet a need in their market. Senior management should have the skills to evaluate the technology employed and risks assumed. Periodic independent evaluations of the Internet banking technology and products by auditors or consultants can help the board and senior management fulfill their responsibilities. Implementing the technology is the responsibility of management. Management should have the skills to effectively evaluate Internet banking technologies and products, select the right mix for the bank, and see that they are installed appropriately. If the bank does not have the expertise to fulfill this responsibility internally, it should consi der contracting with a vendor who specializes in this type of business or engaging in an alliance with another provider with complementary technologies or expertise. Measuring and monitoring risk is the responsibility of management. Management should have the skills to effectively identify, measure, monitor, and control risks associated with Internet banking. The board should receive regular reports on the technologies employed, the risks assumed, and how those risks are managed. Monitoring system performance is a key success factor. As part of the design process, a national bank should include effective quality assurance and audit processes in its Internet banking system. The bank should periodically review the systems to determine whether they are meeting the performance standards. Internal Controls Internal controls over Internet banking systems should be commensurate with an institutions level of risk. As in any other banking area, management has the ultimate responsibility for developing and implementing a sound system of internal controls over the banks Internet banking technology and products. Regular audits of the control systems will help ensure that the controls are appropriate and functioning properly. For example, the control objectives for an individual banks Internet banking technology and products might focus on: Consistency of technology planning and strategic goals, including efficiency and economy of operations and compliance with corporate policies and legal requirements. Data availability, including business recovery planning. Data integrity, including providing for the safeguarding of assets, proper authorization of transactions, and reliability of the process and output. Data confidentiality and privacy safeguards. Reliability of MIS. Once control objectives are established, management has the responsibility to install the necessary internal controls to see that the objectives are met. Management also has the responsibility to evaluate the appropriateness of the controls on a cost-benefit basis. That analysis may take into account the effectiveness of each control in a process, the dollar volume flowing through the process, and the cost of the controls. Examiners will need to understand the banks operational environment to evaluate the proper mix of internal controls and their adequacy. According to the Information Systems Audit and Control Association (ISACA) the basic internal control components include: Internal accounting controls used to safeguard the assets and reliability of financial records. These would include transaction records and trial balances Operational controls used to ensure that business objectives are being met. These would include operating plans and budgets to compare actual against pla nned performance. Administrative controls used to ensure operational efficiency and adherence to policies and procedures. These would include periodic internal and external audits. Conclusion This paper has thus covered the various aspects of internet banking risks. Also, the suggestions given in the form of control measures may be followed to achieve the desired results and overcome the demerits.

Essay on Benefits and Effects of Different Types of Training

People often think that bodybuilding is the best way to show off muscle strength. Instead, there are smarter ways to gain strength and show off strength and it can be done in more effective ways than straight weight lifting. In this report, I will show the benefits and effects of different types of training. Strong muscles, being essential to good health, can be built and toned through many different forms of exercise. Three primary methods of strength training are traditional exercise, alternative exercise and other miscellaneous methods of training. Traditional exercise is mainly things that you will find at your normal gym like weights, treadmills and other common equipment. Alternative exercise includes group classes and sports.†¦show more content†¦Trainers can also give you exercises to do without any equipment at all, so you can do them at home. Another thing that trainers do is mix pieces of equipment, like making you use weights while on an exercise machine. Also , if personal trainers are too expensive or hard to get, group classes are a great option. You will get most of the same exercises, just in a group environment. Group classes are also great because you can be inspired t(o work harder, faster, more frequently, etc.) by other people in the class. Alternative exercise is another option for muscle strengthening. Good forms of alternative exercise are group classes. The classes do not necessarily need to be group exercise classes, there are many other classes available that will strengthen you. Yoga is one of those classes. Yoga not only stretches your muscles out so they have more room to grow, you also usually work in a warm or hot environment, which makes your muscles work harder. Yoga involves balance, concentration, and relaxation. These things are all necessary and relevant to muscle strengthening because if you do too much strengthening in a short amount of time, like a week, you could possibly get injured. 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Critical incident Reflective Teaching Journal

Question: Discuss the critical incident on reflective teaching journal? Answer: It is not possible that all individuals will have the same learning capacity or skill among a group of students. Many students might find group work interesting while others may find it disturbing to work in the group. However, it is the role of the teacher to understand how to manage the critical incidents and help students learn a particular subject. While teaching computer systems to a group of student in level four, I faced problems with a student who was not comfortable with working in a group. This write-up will throw light on such incidents and will elucidate effective methods of control while teaching. Critical incidents To make the teaching session exciting, I introduced group work among the students and lesson handouts were given. They were given 45 minutes to complete the handouts. I thought rather than following the monotonous way of completing individual worksheet it will be interesting if the students get to discuss the questions with their peers. I was there to help them with their queries and help them either on one-to-one basis or in a group. Once the students completed the handouts and were happy with the results, I gave them the answer sheets so that they are able to compare their results and understand where they need to improve in future (English, Barbour and Papa, 2015). It seemed that students liked the session, as it was different from their regular class work. In addition to this, the students were able to share the ideas with each other, which enriched their knowledge (Haksever, Render and Haksever, 2013). However, one student did not like the session, as there was much noise. She liked a quieter environment without any discussions in the class where she could carry out her work easily. It was true that there was much noise in the class as the students were discussing the assignment with each other. I felt sorry about her condition and apologized as well as promised that the method will be corrected in the next session. In addition to this, she said, that she needed to prepare for the next lesson beforehand. Hence, it would be better if she gets the lesson plan for the next week so that she will prepare herself for the next session and eventually works well in the class. She further added that if the next session is carried out with the same noise and discussion then she would have no other option but to leave the class (Wankel and Blessinger, 2013). I was ready to help the student, asked for her email address, and mailed all the details of the lesson that will be done in the coming weeks so that she could prepare herself well in advance. In addition to this, I asked the class to be quieter while doing their work and the student who was having problem with the noise continued with the class (Ozaki, Hornak and Lunceford, 2014). In my previous assignments where I dealt with classroom management and getting to know the students, I realized that the importance of student knowledge. It is important to know the individual student and manage the classroom accordingly. The assignment that dealt with getting to know the student helped me to understand that each student is unique and every student should be dealt accordingly. It is the duty of the teacher to make every student comfortable in the classroom (Haydn, 2012). Simultaneously, the teachers should not forget there are other students in the class. Hence, the teacher has to create an atmosphere where the student with a critical situation is able to learn properly as well as the other students are also enjoying the class (Martin and McLellan, 2013). Hence, I asked the class to carry out the session as quietly as possible. In this way, the student with the critical condition is able to concentrate in the class and the class is also managed properly. Conclusion When on one hand, many students enjoy working in groups there was one student who did not like the noise in the class. Moreover, the student needed to prepare the lessons before the lesson was taught in class. I learnt that the teacher needs to understand the individual needs of students and help the students accordingly. Hence, I asked the class to be quieter while doing the job as well as mailed the student the assignment that will be done in the coming week. My way of helping the student and managing the class was successful as the student continued with the sessions. References English, F., Barbour, J. and Papa, R. (2015).SAGE Guide to Educational Leadership and Management. Thousand Oaks, United States: SAGE Reference. Haksever, C., Render, B. and Haksever, C. (2013).Service management, student workbook. Upper Saddle River, N.J.: FT Press. Haydn, T. (2012).Managing pupil behaviour. Abingdon, Oxon: Routledge. Martin, J. and McLellan, A. (2013).The education of selves. New York: Oxford University Press. Ozaki, C., Hornak, A. and Lunceford, C. (2014).Supporting student affairs professionals. San Francisco: Jossey-Bass. Wankel, C. and Blessinger, P. (2013).Increasing student engagement and retention using classroom technologies. Bingley, U.K.: Emerald.

Strategic Initiative Paper free essay sample

In the current business environment, companies must take strategic initiatives to prevent the losses and overcome the rough economy we are currently facing. Starbucks Corporation (furthermore, Starbucks) is known as one of the leaders for the retail sales of roasted and specialty coffee. Starbucks is focused on creating a detailed strategic and financial planning that can take the company to the next level. The aim of this paper is to investigate Starbuckss actions upon creation of strategic and financial plans, and its impact on cost and sales and risks associated. Starbucks has a long-standing effort in thical conduct and global responsibility. One of the major efforts is sourcing ethically grown coffee. For example, Starbucks Annual Report for the 2009 states that the Companys focus is on ethically sourcing high-quality coffee, reducing its environmental impacts, and contributing positively to communities. Starbucks Global Responsibility strategy and commitments are integral to the Companys business strategy. We will write a custom essay sample on Strategic Initiative Paper or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page (Starbucks Corporation, 2009, Annual Report). The strategic plan includes the Shared Planet initiative. Starbucks has commenced plans to make environmental ransformations to the companys business practices through the Shared Planet. These changes include buying ethically traded coffee, which encompasses environmentally responsible grown coffee and the ethical treatment of coffee farmers. Starbucks collaborates with Conservation International to ensure that the company is meeting purchasing guidelines for socially, environmentally, and economically responsible coffee. Starbucks Shared Planet also embraces conservation of the growers surrounding communities. For example, Starbucks is committed to creating environmentally clean water filter systems in the communities hat the coffee is grown. The company has also committed to recycling and reducing waste. Starbucks Initiative Plan states that by the year 201 5, the company will serve 25% of its beverages in reusable cups and introduce in-store recycling stations for the non-reusable cups. The company is devoted to reducing energy use by 25% in all new stores and obtaining 50% of the used energy from renewable energy sources for all company-owned stores by the end of 2010. By the year 2012, Starbucks plans on reducing water use by 15% company-wide. Obtaining LEED certification for all new stores globally will begin in late 2010. Such efforts are commendable and provide a solid platform for successful business. However, to be financially sound, Starbucks must consider financial aspects of the aforementioned initiative and costs associated (Starbucks Corporation, 2010, Responsibility). Based on the aforementioned information regarding Shared planet one can easily determine that this initiative is closely aligned with Starbucks mission: to inspire and nurture the human spirit one person, one cup, and one neighborhood at a time (Starbucks Corporation, 2010, Our Starbucks Mission Statement). However, important to note are relationship etween this initiative and financial planning of Starbucks. Sourcing ethically grown and socially responsible coffee has cost Starbucks $1. 28 per pound in fiscal 2005 as Starbucks paid $1. 9 per pound of coffee on average in fiscal 2008 (Starbucks Corporation, 2008, Global Responsibility Report). Ultimately, costs associated have increased cost of sales. For example, cost of sales including occupancy costs increased to 41. 0 percent of total net revenues for the 13 weeks ended July 2, 2006, compared to 40. 6 percent in the corresponding 13-week period of fiscal 2005 (Starbucks Corporation, 2006, Financial Release). In the same financia l release, Starbucks has stated that the increased costs of sales are result of increased cost of green coffee. Similarly in 2008, the cost of sales increased to 43. 8% from 41. 9% in fiscal 2007. However, in this particular case the occupancy costs were additional cost increase margin (Starbucks Corporation, 2008, Investor Relations). The increase in cost of sales has significant impact on the total net revenues. Looking at the Starbucks reports the total net revenues have also increased. For example the total net revenues have risen from (in millions) $7,786. 9, $9,411. 5, to $10,383. 0 in years 006, 2007, and 2008 respectively. Unfortunately, in year 2009 the total revenue has dropped to $9. 774. 6, possibly result of the global economic downturn (Starbucks Corporation, 2009, Annual Report). Based on the mitigation strategies aimed to reduce cost of sales, it appears that Starbucks is aiming for reduced cost of sales and increased revenues. According to the Starbucks Annual Report 2008, the company has 583 million of purchase commitments which, together with existing inventory, is expected to provide an adequate supply of green coffee through calendar 2009 (Starbucks Corporation, 2008, Annual Report). Additionally, nine and five percent of the purchase commitments from 2008 will be received in 2010 and 2011 respectively. Important to note about the aforementioned is that the purchase commitments are based of fixed-price contracts where the price of green coffee has been fixed by either seller or Starbucks directly (Starbucks Corporation, 2008, Annual Report). The fixed price contracts may account for published reports, which state that despite the rising prices of green coffee Starbucks will not increase selling price to the consumers (Morran, 2010). Such efforts would set Starbucks apart from its competitors. For example, J. M. Smucker raised prices an average of 9% on its Folgers, Dunkin Donuts, Millstone and Folgers Gourmet Selections coffees. Kraft followed suit with a hike on the price of Maxwell House and Yuban brand coffee (Morran, 2010, para 3). This coupled with the ethical background and initiative of Shared Planet will ensure loyal following and consumer satisfaction. Risks for any project or initiative are inevitable. However, if the company can foresee these risks they have a better chance of eliminating the problem before it occurs. Starbucks Shared Planet has few risks; as he strategic plan is to become more environmentally aware. The risk is that the company will not be able to execute the initiative as planned. Therefore, the cost of the campaign and advertising will have negative financial impact, if the initiative is not successful (Starbucks Corporation, 2009). The Shared Planet is also dedicated to Material interruptions in Starbucks supply of the coffee they prefer can financially affect these efforts (Starbucks Corporation, 2009). Furthermore, if the sales are not at a peak and Starbucks cannot make a profit on the higher cost coffee; this will affect ts cash flows and liquidity. The Shared Planet initiative is also implementing reusable cups (Starbucks Corporation, 2010, Responsibility). Although ethically sound and an excellent marketing move, this can increase both costs of the products and marketing. The risk associated with this is that customers may not accept the new product or the price increase to purchase the new product (Starbucks Corporation, 2009). The aforementioned risks could result in decreased sales and increased costs. This can severely impact Starbucks financial health, operability, and decrease onsumer confidence. Many risk factors are outside the companys control. However, if Starbucks anticipates the possible risk, develops mitigation and contingency plans, the company will have a better chance at finding solutions for potential problems identified herein. By being proactive instead of reactive, Starbucks has placed itself in a position in the market to grow, expand, and excel with the Shared Planet initiative. The Shared Planet has opened the door and allowed Starbucks to provide a high quality green product at a fair market price to their customers. The production of high quality green coffee has increased acquisition and merchandise costs. Over the past four years, the cost of sales for the green coffee has increased 2. 8%. While this increase in the cost of goods is somewhat significant, the foresight and ability of Starbucks to minimize this increase has allowed Starbucks to increase their overall market share thus increasing their revenue base by 25. 5% over the same period. This effort was part of the Starbucks mitigation plans and its ability to secure fixed purchase (price) contracts for the product through 2011. These ontracts will reduce the cost of the coffee acquisitions and merchandise and will further increase Starbucks share of the coffee market. Such actions have allowed Starbucks to be set apart from its competitors and increase its part in market share. Furthermore, this type of commitment, to both its investors and consumers coupled with sound financial business practices and financial health have allowed Starbucks to be one of the industry leaders who has opportunity to grow over the next fiscal year and beyond.