Utilitarianism By John Stuart Mill - 930 Words

Analysis Paper 2 In the essay â€Å"Utilitarianism† by John Stuart Mill, he explains his support for utilitarianism and argues any misconceptions of it. In his essay he talks about the difference between higher and lower pleasures and what significance they have in his utilitarian moral theory. His theory is based on the rule that â€Å"actions are right in proportion as they tend to promote happiness, wrong as they tend to produce the reverse of happiness.† Many people experience different kinds of pleasure and he talks about how they can differ in quality and quantity. Mills talks about higher and lower pleasures and what they mean. Higher and lower pleasures are two things that bring someone pleasure but pleasure one brings greater pleasure than pleasure 2. Although pleasure 2 brings the person happiness, pleasure 1 has a greater affect on their happiness and the person will always choose pleasure 1. Even is the quantity is greater in pleasure two they will still cho ose pleasure one because of the quality. Typically when someone experiences the higher pleasure they will not choose the lower pleasure when given the option. Once people have experienced a higher pleasure they will never want to go back to choosing the lower pleasure except in extreme circumstances. For example someone might get pleasure from eating McDonalds, but one day they decide to go to chipotle instead and find out that they like it much better than McDonalds. The next time that person is hungry and having toShow MoreRelatedUtilitarianism, By John Stuart Mill And Utilitarianism880 Words   |  4 Pagessometimes hard to define, but with John Stuart Mill and Utilitarianism it is a little bit easier. Utilitarianism is an easy one, for the reason that it is defined by the greatest happiness for everyone involved. Sometimes it does not always make everyone content, but if you look at it as a whole it makes sense. Mill says that we have to look at the bigger picture. One personà ¢â‚¬â„¢s happiness affects another’s and so on. Utilitarianism is a moral theory that John Stuart Mill, the philosopher, formulated toRead MoreUtilitarianism, By John Stuart Mill1365 Words   |  6 Pages In John Stuart Mill’s book Utilitarianism, he argues for the defense of utilitarianism, an age old theory originally developed by Jeremy Bentham that states the proper course of action is the one that maximizes happiness. The course of action that maximizes general happiness is also the only true standard for moral assessment. Mill also introduces the idea of ‘first principle’ which states that it is not acceptable for individuals to characterize actions as either ‘good’ or ‘bad’, because it isRead MoreUtilitarianism, By John Stuart Mill1372 Words   |  6 PagesAct Utilitarianism is a long standing and well supported philosophical argument that when boiled down to its most basic elements, can be described as creating â€Å"th e greatest good for the greatest number† (122). Such was the sentiment of John Stuart Mill, one of act utilitarianism’s (also known as just utilitarianism) greatest pioneers, and promoters. Mills believed that his theory of always acting in a way that achieved the greatest net happiness was both superior to other philosophical theories andRead MoreUtilitarianism By John Stuart Mill1805 Words   |  8 PagesIn his book Utilitarianism, John Stuart Mill presents his exposition and his major defenses of the philosophy of utilitarianism. Utilitarianism, a theory in ethics developed by the philosopher Jeremy Bentham, focuses on a concept of utility that focuses on deciding if actions are morally right or wrong by analyzing the pleasure and pain they cause. In other words, if an action causes primarily pleasure for all parties, then it must be good and right; however, if it causes pain for the parties involvedRead MoreUtilitarianism, By John Stuart Mill1599 Words   |  7 P agesUtilitarianism is a doctrine in normative ethics that is outlined and defended by many philosophers, including the English philosopher John Stuart Mill as a standard to determine what are right and wrong actions. At its most basic claim, the right course of action one must take should be in the interest of maximizing what is known as utility. The right course of action is determined as being right if it maximizes the total benefit and happiness gained, while at the same time reducing the greatestRead MoreThe Utilitarianism By John Stuart Mill984 Words   |  4 PagesDecriminalize Drug use Utilitarianism as an example of consequentialism is a moral theory generally considered to have started in the late eighteenth century. In the book Utilitarianism by John Stuart Mill he defined the ethical theory stating that â€Å"†¦actions are right in proportion as they tend to promote happiness; wrong as they tend to produce the reverse of happiness†(7). The idea behind the theory is that people seek happiness, and that the ultimate goal of all human beings is to be happy.Read MoreUtilitarianism, By John Stuart Mill854 Words   |  4 PagesJohn Stuart Mill, among other things, was an English philosopher and economist who lived from 1806 to 1873. Mill grew up being immersed in the principles of utilitarianism. Mill’s essay on utilitarianism, titled Utilitarianism, was written to debunk misconceptions of and to provide support for the ideology. Mill’s essay and argument span five chapters, where his discussions range from definitions, misconceptions, re wards, methods, and validity. Utilitarianism is generally held to be the view thatRead MoreJohn Stuart Mill And Utilitarianism983 Words   |  4 PagesIn Utilitarianism actions are judged right and wrong solely on their consequence, and in order to assess this consequences, the only thing that matters is the amount of happiness and unhappiness caused and by calculating happiness and unhappiness caused, nobody’s happiness counts any more than anybody else’s. Utilitarian ethics is the most common form of ethics used today, it has thrived because two needs have been met by it. Firstly, end-based thinking is common and people have sought to improveRead MoreJohn Stuart Mill And Utilitarianism1202 Words   |  5 Pages I contend that the philosophy of John Stuart Mill and Utilitarianism can be used to show that society should will that genetic enhancement be morally acceptable if the adverse cognitive or emotional effects are outweighed by the benefits. Glannon argues tha t gene enhancement is morally objectionable because â€Å"there would be the unacceptable social cost of some people suffering from adverse cognitive or emotional effects of the enhancement.† Under Utilitarianism, society would likely deem that geneticRead MoreUtilitarianism, By John Stuart Mill2436 Words   |  10 PagesUtilitarianism is an ethical speculation that communicates that the best movement is the one that expands utility. Utility is portrayed in various courses, frequently to the extent the success of mindful substances, for instance, people and diverse animals. Jeremy Bentham, the coordinator of utilitarianism, delineated utility as the entire of all bliss that results from a movement, short the burden of anyone required in the action. Utilitarianism is a variation of consequentialism, which communicates

Integration of Life and Death in Mrs. Dalloway and The...

Integration of Life and Death in Mrs. Dalloway and The Hours Mrs. Dalloway and The Hours show that life and death are dependent on each other. It is a persons life experiences that define their thoughts and feelings on death and death can define their life experiences. Cunningham, the author of The Hours, explains it best: We live our lives, do whatever we do and then we sleep - its as simple and ordinary as that. A few jump out of windows or drown themselves or take pills; more die by accident; and most of us, the vast majority, are slowly devoured by some disease or, if were very fortunate, by time itself. Theres just this for consolation: and hour here or there when our lives seem against†¦show more content†¦It is not until Richards death that Laura begins to regret her decision of abandonment. Clarissa Dalloway is a women living in the time when a womens primary role was that of a housewife. Clarissa spent her days reading memoirs and trying to get her servants to like her. Her life was restricted to a very set routine. Even her marriage was routine and void of passion. She had the oddest sense of being herself invisible, unseen; unknown; there being no more marrying, no more having of children now, but only this astonishing and rather solemn progress with the rest of them, up Bond Street, this being Mrs. Dalloway; not even Clarissa and more; this being Mrs. Richard Dalloway (Woolf 11). Although her life was a set routine, Clarissa embraced her role of mother and housewife because she feared life and the thought of dying. Her fear for life is illustrated when she repeats the line of Shakespears Cymbeline while she walks to buy flowers. Clarissas fear of dying stems from her living through the death of her mother, father and sister. She has the notion that everyday is dangerous and she was going through it alone. She had a perpetual sense, as she watched the taxi cabs, of being out, out, far to sea and alone; she always had the feeling that it was very, very dangerous to live even one day (Woolf 8). Clarissa realizes that life is not worth living unless you are passionate

Enterprise Risk Management Free Essays

Enterprise / Operational Risk Management IT Audit Manager City National Bank California State Polytechnic University, Pomona Enterprise risk management (ERM) is a relatively new discipline that focuses on identifying, analyzing, monitoring, and controlling all major risk classes (e. g. , credit, market, liquidity, operational risk classes). We will write a custom essay sample on Enterprise Risk Management or any similar topic only for you Order Now Operational risk management (ORM) is a subset of ERM that focuses on identifying, analyzing, monitoring, and controlling operational risk. The purpose of this paper is to explain what enterprise risk management is and how operational risk management fits into the ERM framework. In our conclusion, we discuss what is likely to happen in the ERM / ORM environment over the next 5 years. Introduction As the Internet has come of age, companies have been rethinking their business models, core strategies, and target customer bases. â€Å"Getting wired,† provides businesses with new opportunities, but brings new risks and uncertainty into the equation. Mismanagement of risk can carry an enormous cost. In recent years, business has experienced numerous, related risk reversals that have resulted in considerable financial loss, decrease in shareholder value, damage to company reputations, dismissals of senior management, and, in some cases, the very dissolution of the business. This increasingly risky environment, in which risk mismanagement can have dire consequences, mandates that management adopt a new more proactive perspective on risk management. What is Enterprise / Operational Risk Management? Clearly, there is a correlation between effective risk management and a well-managed business. Over time, a business that cannot manage risk effectively will not prosper and, perhaps fail. A disastrous product recall could be the company’s last. Rogue traders lacking oversight and adequate controls have destroyed old well-established institutions in a very short time. But, historically, risk management in even the most successful businesses has tended to be in â€Å"silos†Ã¢â‚¬â€the insurance risk, the technology risk, the financial risk, the environmental risk, all managed independently in separate compartments. Coordination of risk management has usually been non-existent, and identification of emerging risks has been sluggish. This paper espouses a recent concept—enterprise-wide risk management—in which the management of risks is integrated and coordinated across the entire organization. A culture of risk awareness is created. Companies across a wide crosssection of industries are beginning to implement this effective new methodology. 1 Enterprise / Operational Risk Management At first glimpse, there is much similarity between operational risk management and other classes of risk (e. . , credit, market, liquidity risk, etc. ) and the tools and techniques applied to them. In fact, the principles applied are nearly identical. Both ORM and ERM must identify, measure, mitigate and monitor risk. However, at a more detailed level, there are numerous differences, ranging from the risk classes themselves to the skills needed to work with operational risk. Operational risk management is just beginning to define the next phase of evolution of corporate risk management. Should firms be able to develop successful ORM programs, the next step will be for these firms to integrate ORM with all other classes of risks into truly enterprise-wide risk management frameworks. See Exhibit 1 for an example of an ERM / ORM organizational structure representative of the banking industry: ERM Organization Chart CEO Group Risk Director (ERM) Economic Capital (Planning) Risk Transfer Group Risk Executive Committee Change Program Credit Risk * Market Risk* Operational Risk (ORM)* Corporate Compliance IT Security and Business Continuity Corporate Risk Evaluation (Audit) †¢ Note – the major categories of risk to which financial services firms expose themselves are credit risk, market risk and operational risk. Not surprisingly, financial services firms’ largest risk concentrations—credit risk and market risk are most effectively managed. Exhibit 1 2 Why Enterprise / Operational Risk Management? There are many reasons ERM / ORM functions are being established within corporations. following are a few of the reasons these functions are being established. Organizational Oversight Two groups have recently emphasized the importance of risk management at the organization’s highest levels. In October 1999, the National Association of Corporate Directors released its Report of the Blue Ribbon Commission on Audit Committees, which recommends that audit committees â€Å"define and use timely, focused information that is responsive to important performance measures and to the key risks they oversee. † The report states that the chair of the audit committee should develop an agenda that includes â€Å"a periodic review of risk by each significant business unit. In January 2000, the Financial Executives Institute released the results of a survey on audit committee effectiveness. Respondents, primarily chief financial officers and corporate controllers, ranked â€Å"key areas of business and financial risk† as most important for audit committee oversight. In light of events surrounding recent corporate scandals (e. g. , Enr on, etc. ), and the increasing executive and regulatory focus on risk management, the percentage of companies with formal ERM methods is increasing and audit committees are becoming more involved in corporate oversight. The UK and Canada have set forth specific legal requirements for audit committee oversight of risk evaluation, mitigation, and management which are widely accepted as best practices in the U. S. Magnitude of Problem The magnitude of loss and impact of operational risk and losses to date is difficult to ignore. Based on years of industry loss record-keeping from public sources, large operational risk-related financial services losses have averaged well in excess of $15 billion annually for the past 20 years, but this only reflects the large public and visible losses. Research has yielded nearly 100 individual relevant losses greater than $500 million each, and over 300 individual losses greater than $100 million each. 1 Exhibit 2 is a listing of major operational losses. Interestingly enough, the majority of these losses have occurred in financial services, which explains the industry’s leading focus on operational risk management especially in the area of asset-liability modeling and treasury management models to manage risks in the highly volatile capital markets activity of derivative trading and speculation. The 1 Hoffman, Douglas G. , Managing Operational Risk (New York: John Wiley Sons, 2002), p. xvi. 3 Top Operational Risk Losses Company Numerous Financial Institutions and Others BCCI Sumitomo Corporation Tokyo Shinkin Bank Banca Nazionale del Lavoro Daiwa Bank Barings Non-Financial Institutions: LTCM Texaco, Inc. Cendant Corporation Dow Corning St. Francis Assisi Foundation Mettlgesellschaft Owens Corning Fiber Glass Orange County Atlantic Richfield Kashima Oil Showa Shell Prudential Securities Drexel Burnham Lambert General Motors Phar Mor Loss Amount $20 million. Initial Estimates $17 billion $2. 9 billion $2. 3 billion $1. 8 billion $1. 1 billion $1 billion $4 billion $3 billion $2. 9 billion $2 billion $2 billion $1. billion $1. 7 billion $1. 6 billion $1. 5 billion $1. 5 billion $1. 5 billion $1. 4 billion $1. 3 billion $1. 2 billion $1. 1 billion Date 2001 1991 1996 19901991 1992 19831995 1995 1998 1984 19851998 1994 1999 19911993 1980s1990s 1994 19861990 1994 19891993 1994 19981993 1996 1992 Description Terrorists hijacked four commercial airliners and crashed them into the World Trade Center. Over 2000 lives lost. Countless businesses impacted. Regulators seized about 75 percent of The Bank of Credit and Commerce International’s $17 billion in assets in a major fraud. Sumitomo Corporation incurred huge losses through excessive trading of copper. The manager of the Imasato branch forged 19 deposit certificates, which were used to raise money for stock deals. Former employees plead guilty to conspiring to arrange $5 billion in unauthorized loans to Iraq. Loss due to unauthorized trading by an employee. This catastrophic loss has become a benchmark for operational risk. Losses due to lack of dual control and checks and balances. Huge market losses due to inadequate model management and inadequate controls at Long Term Capital Management. Pennzoil sued Texaco alleging that Texaco â€Å"wrongfully interfered† in its merger deal with Getty. Largest and longest-running accounting fraud in history. Former executives conspired to inflate earnings. The company agreed to pay settlements to 18 women who indicated breast implants made them ill. Insurance fraud case in which Martin Frankel allegedly stole as much as $2 billion from this foundation. Loss due to liquidation of oil supply contracts. Settlement of asbestos-related claims. Largest people risk class case in financial history. Largest investment loss ever registered by a municipality. Settlement of North Slope oil royalties dispute with Alaska. Disguised losses on FX forward contracts. Major oil refiner in Japan faced losses from forward currency contracts. Settled charges of securities fraud with state and federal regulators. Former employees filed a class action suit charging the company with fraud, breach of duty and negligence. Heavy losses suffered due to 3 strikes. A former president of the firm defrauded in an embezzlement scheme. Exhibit 2 Source: Hoffman; Managing Operational Risk 4 Increasing Business Risks With the increasing speed of change for all companies in this new era, senior management must deal with many complex risks that have substantial consequences for the organization. A few forces currently creating uncertainty are: †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ Technology and the Internet Increased worldwide competition Free trade and investment worldwide Complex financial instruments Deregulation of key industries Changes in organizational structures from downsizing, reengineering, and mergers Increasing customer expectations for products and services More and larger mergers Collectively, these forces are stimulating considerable change and creating an increasing risk in the business environment. Regulatory The international regulators clearly intend to encourage banks to develop their own proprietary risk measurement models to assess regulatory, as well as economic, capital. The advantage for banks should be a substantial reduction in regulatory capital, and a more accurate allocation of capital vis-a-vis the actual risk confronted. In December 2001, the Basel Committee on Banking Supervision submitted a paper â€Å"Sound Practices for the Management and Supervision of Operational Risk† for comment by the banking industry. In developing these sound practices the Committee recommended that banks have risk management systems in place to identify, measure, monitor and control operational risks. While the guidance in this paper is intended to apply to internationally active banks, plans are to eventually apply this guidance to those banks deemed significant on the basis of size, complexity, or systemic importance and to smaller, less complex banks. Regulators will eventually conduct regular independent evaluations of a bank’s strategies, policies, procedures and practices addressing operational risks. The paper indicates an independent evaluation of operational risk will incorporate a review of the following six bank areas:2 †¢ †¢ Process for assessing overall capital adequacy for operational risk in relation to its risk profile and its internal capital targets; Risk management process and overall control environment effectiveness with respect to operational risk exposures; 2 Basel Committee on Banking Supervision, Sound Practices for the Management and Supervision of Operational Risk, (Basel, Switzerland: Basel Committee on Banking Supervision, 2001), p. 1. 5 †¢ †¢ †¢ †¢ Systems for monitoring and reporting operational risk exposures and other data quality considerations; Procedures for timely and effective resolution of operational risk exposures and events; Process of internal controls, reviews and audit to ensure integrity of the overall risk management process; and Effectiveness of operational risk mitigation efforts. Market Factors Market factor s also play an important role in motivating organizations to consider ERM / ORM. Comprehensive shareholder value management and ERM / ORM are very much linked. Today’s financial markets place substantial premiums for consistently meeting earnings expectations. Not meeting expectations can result in severe and rapid decline in shareholder value. Research conducted by Tillinghast-Towers Perrin found that with all else being equal, organizations that achieved more consistent earnings than their peers were rewarded with materially higher market valuations. 3 Therefore, for corporate executives, managing key risks to earnings is an important element of shareholder value management. The traditional view of risk management has often focused on property and iability related issues or internal controls. However, â€Å"traditional† risk events such as lawsuits and natural disasters may have little or no impact on destroying shareholder value compared to other strategic and operational exposures—such as customer demand shortfall, competitive pressures, and cost overruns. One explanation for this is that traditional risk hazards ar e relatively well understood and managed today—not that they don’t matter. Managers now have the opportunity to apply tools and techniques for traditional risks to all risks that affect the strategic and financial objectives of the organization. For non-publicly traded organizations, ERM / ORM is valuable for many of the same reasons. Rather than from the perspective of shareholder value, ERM / ORM would provide managers with a comprehensive overview of other important items such as cash flow risks or stakeholder risks. Regardless of the organizational form, ERM / ORM can be an important management tool. Corporate Governance Defense against operational risk and losses flows from the highest level of the organization—the board of directors and executive management. The board, the management team that they hire, and the policies that they develop, all set the tone for a company. As guardians of shareholder value, boards of directors must be acutely attuned to market reaction to negative news. In fact, they can find themselves castigated by the public if the reaction is severe enough. As representatives of the shareholders, boards of directors are responsible for policy 3 Tillinghast-Towers Perrin, Enterprise Risk Management: Trends and Emerging Practices. (The Institute of Internal Auditors Research Foundation, 2001), p. xxvi. 6 matters relative to corporate governance, including but not limited to setting the stage for the framework and foundation for enterprise risk management. Right now, operational risk management is a â€Å"hot topic† of discussion for regulators and in boardrooms across the US. In the wake of the 2001 releases from the Basel Risk Management Committee, banks now have further insight as to the regulatory position on the need for regulatory capital for operational risk. Meanwhile, shareholders are aware that there are means to identify, measure, manage, and mitigate operational risk that add up to billions of dollars every year and include frequent, low-level losses and also infrequent but catastrophic losses that have actually wiped out firms, such as Barings, and others. Regulators and shareholders have already signaled that they will hold directors and executives accountable for managing operational risk. Best-Practice Senior managers need to encourage the development of integrated systems that aggregate various market, credit, liquidity, operational and other risks generated by business units in a consistent framework across the institution. Consistency may become a necessary condition to regulatory approval of internal risk management models. An environment where each business unit calculates their risk separately with different rules will not provide a meaningful oversight of firm-wide risk. The increasing complexity of products, linkages between markets, and potential benefits offered by overall portfolio effects are pushing organizations toward standardizing and integrating risk management. Conclusion It seems clear that ERM / ORM is more than another management fad or academic theory. We believe that ERM / ORM will become part of the management process for organizations in the future. Had ERM / ORM processes been in place during the past two decades, a number of the operational risk debacles that took place may not have occurred or would have been of lesser magnitude. Companies are beginning to see the benefit of protecting themselves from all types of potential risk exposures. By identifying and mapping risk exposures throughout the organization, a company can concentrate on mitigating those exposures that can do the most damage. With an understanding of risks, their severity, and their frequency, a company can turn to solutions; be it retaining, transferring, sharing, or avoiding a particular risk. Our thoughts on what will happen in the ERM / ORM environment in the next 5 years are: In the next 5 years, it is likely that companies will no longer view risk management as a specialized and isolated activity: the management of insurance or foreign exchange risks, for instance. The new approach will 7 keep managers and employees at all levels sensitized to and concerned about risk management. Risk management will be coordinated with senior management oversight and everyone in the organization will view risk management as part of his or her job. The risk management process will be continuous and broadly focused. All business risks and opportunities will be covered. In the next 5 years, the use of bottom-up risk assessments will be a standard process used to identify risks throughout the organization. The self-assessment process will involve everyone in the company and require individual units to focus and report on the threats to their individual business objectives. Through the selfassessment process, the organization will be able to understand loss potential and risk control by business, by profit center and by product. The individual line manager will begin to understand the loss potential in his or her own processing system. In the next 5 years, the use of top-down scenario analysis will be another standard method used to identify risks throughout the organization. Top down scenario analysis will determine the risk potential for the entire firm, the entire business, organization, or portfolio of business. By its very nature, it is a high-level representation and cannot get into the bottom-up transaction-by-transaction risk analysis. For example, because Microsoft has a campus of more than 50 buildings in the Seattle area, earthquakes are a risk. 4 In the past, Microsoft looked at silos of risk. For example, they would have looked at property insurance when they considered the risks of an earthquake and thought about protecting equipment and buildings. However, using scenario analysis they are now taking a more holistic perspective in considering the risk of an earthquake. The Microsoft risk management group has analyzed this disaster scenario with its advisors and has attempted to quantify its real cost, taking into account how risks are correlated. In the process, the group identified risks in addition to property damage, such as the following: †¢ †¢ †¢ †¢ †¢ †¢ 4 Director and officer liability if some people think management was not properly prepared. Key personnel risk Capital market risk because of the firm’s inability to trade. Worker compensation or employee benefit risk. Supplier risk for those in the area of the earthquake. Risk related to loss of market share because the business is interrupted. Michel Crouhy, Dan Galai, and Robert Mark, Making Enterprise Risk Management Payoff (New York: McGraw-Hill, 2001), pp 132-133. 8 †¢ †¢ Research and development risks because those activities are interrupted and product delays occur. Product support risks because the company cannot respond to customer inquiries. By using scenario analysis, management has identified a number of risks that it might not have otherwise and Microsoft is now in a better position to manage these risks. The future ERM / ORM tools such as risk assessment and scenario analysis will assist companies in identifying and mitigating the majority of these risks. In the next 5 years, companies will be using internal and external loss databases to capture occurrences that may cause losses to the company and the actual losses themselves. This data will be used in quantitative models that will project the potential losses from the various risk exposures. This data will be used to manage the amount of risk a company may be willing to take. In the next 5 years, companies will allocate capital to individual business units based on operational risk. By linking operational risk capital charges to the sources of that risk, individuals with risk optimizing behavior will be rewarded and those without proper risk practices will be penalized. In the next 5 years, internal audit will become even more focused on how risks are managed and controlled throughout the company on a continuous basis. Internal audit will be responsible for reporting on integrity, accuracy, and reasonableness of the company’s entire risk management process. In addition, Internal Audit will be involved in ensuring the appropriateness of the company’s capital assessment and allocation processes. Furthermore, audit will influence continual improvement of risk management and controls through the sharing of best practices. In the next 5 years, management will be looking for individuals who are skilled in risk management. Professional designations such as the Bank Administration Institute’s Certified Risk Professional (CRP) and the Information and Audit and Control Association’s Certified Information Security Manager (CISM) will demonstrate proficiency in the risk management area and will be in demand. In the next 5 years, external auditors will be required to report on the efficiency and effectiveness of a company’s risk management program. These companies will be required to disclose the scope and nature of risk reporting and/or measurement systems in their annual reports. Overall, companies will be better positioned in the next 5 years to deal with the broad scope of enterprise-wide risks. By implementing the ERM / ORM process now, companies will begin to maximize their overall risk profile for competitive advantage. 9 Bibliography Barton, Thomas L. ; Shenkir, William G. ; Walker, Paul L. Making Enterprise Risk Management Pay Off. New Jersey: Financial Times / Prentice Hall, 2002. Basel II Mandates a Nest http://web2. infotrac. galegroup. co Egg for Banks† US Banker. (July 1, 2002) 48. July 2002. BITS. BITS Technology Risk Transfer Gap Analysis Tool. Washington, D. C. : BITS, 2002. Bock, Jerome T. , The Strategic Role of â€Å"Economic Capital† in Bank Management, Wimbledon, London: MidasKapiti International, 2000. Business Banking Board. RAROC and Operating Risk. Washington, D. C. : Corporate Executive B oard, 2001. Business Banking Board. Risk Management Structure. Washington, D. C. : Corporate Executive Board, 2001. Consultative Document Operational Risk. 2001. Bank for International Settlements and Basel Committee on Banking Supervision. July 2002. http://www. bis. org/publ/bcbsa07. pdf Crouhy, Michel; Galai, Dan; Mark, Robert, Risk Management. New York: McGraw-Hill, 2001. â€Å"Elements of a Successful IT Risk Management Program†. Gartner. (May 2002. ) 9. July 2002. http://www. gartner. com/gc/webletter/bindview/issue1/ggarticle1. html Ernst Young, Integrated Risk Management Practices. Unpublished PowerPoint slides, Ernst Young: 2000. Hively, Kevin; Merkley, Brian W. ; Miccolis, Jerry A. Enterprise Risk Management: Trends and Emerging Practices. Florida: The Institute of Internal Auditors Foundation, 2001. Hoffman, Douglas G. Managing Operational Risk. New York: John Wiley Sons, Inc. , 2002. â€Å"In Brief: Ferguson Urges Investing in Risk Control†. American Banker. (March 5, 2002) 1. July 2002. http://0proquest. umi. com. opac. library. csupomona. edu James, Christopher, RAROC Based Capital Budgeting and Performance Evaluation: A Case Study of Bank Capital Allocation. Pennsylvania: The Wharton School, 1996. Jameson, Rob; Walsh, John, â€Å"The Leading Contenders,† Risk Magazine, (November 2000). 6. July 2002. http://www. financewise. om/public/edit/riskm/oprisk/opr-soft00. htm Insurance Industry – Participating companies: Allianz, AXA, Chubb, Mitsui Sumitomo, Munich Re, Swiss Re, Tokio Marine and Fire, Xl, Yasuda Fire and Marine and Zurich. Insurance of Operational Risk Under the New Basel Accord. Insurance Industry, 2001. Lam, James, â€Å"Top Ten Requirements for Operational Risk Management† R isk Management (November 2001) July 2002. http://0-proquest. umi. com. opac. library. csupomona. edu Marks, Norman, â€Å"The New Age of Internal Auditing† The Internal Auditor (December 2001) 5. July 2002. http://0-proquest. mi. com. opac. library. csupomona. ed McNamee, David; Selim, George M. Risk Management: Changing the Internal Auditor’s Paradigm. Florida: The Institute of Internal Auditors Research Foundation, 1998. National Association of Financial Services Auditors. â€Å"Enterprise Risk Management,† National Association of Financial Services Auditors. Spring 2002. 12-13. netForensics is a Web site that discusses those regulations that govern information security in financial services, healthcare and government. http://www. netforensics. com/verticals. html 10 Ong, Michael; â€Å"Why bother? Risk Magazine, (November 2000). 6. July 2002. http://www. financewise. com/public/edit/riskm/oprisk/oprcommentary00. htm Practice Advisory 2100-3: Internal Auditâ €™s Role in the Risk Management Process. March 2001. The Institute of Internal Auditors. July 2002. http://www. theiia. org/ecm/guide-frame. cfm? doc_id=73 Santomero, Anthony M. , Commercial Bank Risk Management: an Analysis of the Process. Wharton School, 1997. Pennsylvania: The Sound Practices for the Management and Supervision of Operational Risk. 2002. Bank for International Settlements and Basel Committee on Banking Supervision. July 2002. http://www. bis. org/publ/bcbs86. htm The Financial Services Roundtable, Guiding Principles in Risk Management for U. S. Commercial Banks. Washington D. C. : The Financial Services Roundtable, 1999. Verschoor, Curtis C. Audit Committee Briefing – 2001: Facilitating New Audit Committee Responsibilities. Florida: The Institute of Internal Auditors, 2001. Working Paper on the Regulatory Treatment of Operational Risk. 2001. Bank for International Settlements and Basel Committee on Banking Supervision. July 2002. http://www. bis. org/publ/bcbs_wp8. pdf 11 How to cite Enterprise Risk Management, Essays

Economics and Quantitative Analysis Demand and Employment

Questions: 1.Explain why real GDP might be an unreliable indicator of the standard of living. 2.Why does unemployment arise and what makes some unemployment unavoidable? 3.Consider the following statement: When the average level of prices of goods and services rises, inflation rises? Do you agree or disagree? Explain. 4. What is the aggregate demand (AD) curve and why does it slope downwards? Explain. 5.What is the long run aggregate supply (LRAS) curve and why is it vertical? Why does the short run aggregate supply curve slope upwards? Answers: 1. In order to measure the standard of living, real GDP is mostly used however; due to several causes, it can be misleading. This is mostly because real GDP does not comprise household production, useful activities performed in and around the house by the house owner. This in turn creates key measurement problem as these tasks are considered as an important element of the work of the individual. The underground economy as well as the economic activity that is legal is omitted by Real GDP (Fleurbaey and Blanchet 2015). It also does not include the measurement of health and life expectancy of an individual. Environmental harm is also barred from real GDP. Leisure time of an individual is also not a part of real GDP. Leisure time are valued by everyone and as a result, an increase in the leisure time enhances economic welfare of an individual that in turn lowers the well-being of the nation. Thus, it can be concluded that an economy that grows at the expense of its environment, misleadingly appears to offer greater economic wellbeing as compared to a similar economy that expands somewhat more slowly but at less environmental cost (Brynjolfsson and McAfee 2015). 2. Unemployment is mostly considered as an e economic reality and even a healthy economy has a certain level of unemployment. Unemployment arises mostly due to government regulation. According to labor laws, employers require to pay certain amount of wages and provide health insurance as well as other benefits when they hire a certain number of workers. This in turn adds to the cost of every worker and forces companies to hire fewer workers and terminate existing employees in order to make the remaining workforce more reasonably priced. Unemployment also arise due to increased competition between trades that leads to unemployment as trades looks for ways to reduce their costs in order to enlarge expansion or draw investors. Increased automation is also considered as a major historical reason of unemployment that leads to job loss in some industries. Increased automation is also referred to as increased technology that displaces employees. On the other hand, assistance programs by gov ernments that offers financial help to the unemployed workers are mostly considered as the root reason for unemployment. In other words, a noteworthy portion of unemployment statistics refers to individuals who register as part of the labor force in order to receive benefits. The most common cause for structural unemployment is technological change. In the long-run demand for workers is larger as compared to the temporary demand. As a result, the rate of unemployment is larger as compared to its natural rate (Levine 2013). Unemployment is unavoidable because there are always people who enter the workforce looking for a job at any point in time. On the other had there are some individuals who stops looking for a job if they are not able to find any. Unemployment is also unavoidable due to the existence of depressed employees (Holzmann, Gcs and Winckler 2012). 3. It is agreed that when the average level of prices of goods and services rises, inflation rises. Inflation is considered as the rate of increase in prices over a given time period. Inflation represents the overall expense of the appropriate set of commodities and services over a certain time period. The cost of living of an individual depends on the average level of prices of goods and services. Inflation is all about the general increase in the prices of goods and services. The major inflationary trigger is the fall in unemployment or the increase in economic movement. Inflation leads to speculative purchasing that leads to wastage. The average increase in price is mostly associated with inflation that is increases in paper money (Woodford 2012). 4. In macroeconomics, aggregate demand indicates the total demand for completed goods as well as services in an economy at a specified time. It denotes the amounts of commodities and services that will be purchased at all possible level of prices. It is also indicated as the demand for the gross domestic product of a country. It is also known as the effective demand however; at other times, this term is eminent (Gal 2013). The aggregate demand curve mostly slopes downwards due to three diverse effects, such as wealth effect of Pigou, interest rate effect of Keynes and exchange rate effect of Mundell-Fleming. Figure 1: aggregate demand curve slopes downwards (Source: Created by Author) According to the Pigou effect, a higher level of price indicates lower real wealth and as a result, lowers consumption spending. This in turn gives a lower amount of goods demanded in the aggregate. On the other hand, when prices fall an individual becomes wealthier, a circumstance that induces more customers spending. Therefore, a fall in the price level persuades customers to spend more, thus raising the aggregate demand. The Keynes effect on the other hand, states that a higher level of price implies lower real money supply and as a result, higher rates of interest results from fiscal market equilibrium. On the other hand, a low rate of interest raises the demand for investment as the cost of investment decreases with the rate of interest. The third cause that slopes the aggregate demand curve downwards is the exchange rate effect of Mundell-Fleming. Domestic investors mostly have a tendency to invest in foreign currency, if the domestic rate of interest is low as compared to inte rest rate available in foreign countries (Rao 2016). 5. The relationship between price level and output in the long-run is represented by the long-run aggregate supply. It differs from the short-run aggregate supply and is a presentation of potential output. Since LAS is considered as impending output, it is shifted by the factors that have an impact on impending output. These factors includes obtainable resources, capital, private enterprise as well as technological developments (Case, Fair and Oster 2012) Figure: LAS curve is vertical (Source: Created by Author) The LAS curve is vertical because, it indicates a potential output and when this takes place all prices, such as input prices, increases when an increase in price level takes place (Motyovszki 2013). Figure: SAS curve is upward sloping (Source: Created by Author) The graph shows that the SAS (short-run aggregate supply) curve is upward sloping as firms have a tendency to rise the level of price with the increase in demand and because in sale markets they are upward sloping curves. The two major theories that help to explain why the SAS curve is upward are the sticky-wage model and the sticky-price model (Bernanke, Antonovics and Frank 2015). References Bernanke, B., Antonovics, K. and Frank, R., 2015.Principles of macroeconomics. McGraw-Hill Higher Education. Brynjolfsson, E. and McAfee, A., 2015. 5. Computing Bounty: GDP and Beyond1.Understanding the Growth Slowdown, p.87. Case, K.E., Fair, R.C. and Oster, S.M., 2012.Principles of economics. Prentice Hall,. Fleurbaey, M. and Blanchet, D., 2015. Book Review of Beyond GDP: Measuring Welfare and Assessing Sustainability. Gal, J., 2013. Notes for a new guide to Keynes (I): wages, aggregate demand, and employment.Journal of the European Economic Association,11(5), pp.973-1003. Holzmann, R., Gcs, J. and Winckler, G. eds., 2012.Output decline in Eastern Europe: unavoidable, external influence or homemade?(Vol. 34). Springer Science Business Media. Levine, L., 2013. The increase in unemployment since 2007: Is it cyclical or structural?.Current Politics and Economics of the United States, Canada and Mexico,15(3), p.345. Motyovszki, G.E.R.G.?., 2013. The Evolution of the Phillips Curve Concepts and Their Implications for Economic Policy. Rao, B.B. ed., 2016.Aggregate demand and supply: a critique of orthodox macroeconomic modelling. Springer. Woodford, M., 2012.Inflation targeting and financial stability(No. w17967). National Bureau of Economic Research.