Different conceptions of entrepreneurial strategies Essay

Various originations of pioneering methodologies - Essay Example The standards of business enterprise are perceived as basic segments for the movement and the progression of monetary or financial activities. It is a nonstop system of money related turn of events. As per Schumpeter, a business person is an individual who goes about as a trailblazer by executing certain changes inside the monetary market through using different assets. Schumpeter likewise characterizes business enterprise as a creative capacity and essentially a money related movement. The monetary movement alongside the reason for accomplishing greatest income must be satisfied by empowering the viewpoint towards the standard of business enterprise. As indicated by Kirzner, a business visionary is perceived by the exercises that an individual performs inside the market economy. The business visionary composes the plans and makes new items alongside modernizing the creation framework. Kirzner likewise characterized business as an arranging component of the market, working for specia lized procedure headway and advancement alongside influencing different money related market hypotheses. It has been distinguished that the originations of various business enterprise techniques that are skimmed by Schumpeter and Kirzner were primarily founded on specific perspectives that incorporate pushing the money related system away from prudent parity and driving the monetary methodology towards efficient equalization among others.

A paper about change management and organizational leadership- Case Study

A paper about change the board and hierarchical administration circumstance and how to manage it utilizing a style of initiative collegue test included - Case Study Example Great pioneers are the individuals who can capably deal with the oddities related with the association, and steer the association to statures inconceivable. Be that as it may, numerous supervisors consistently bear witness to the way that taking care of changes can some of the time be testing. Research show that it is the strategies utilized in dealing with execution that occasionally are not reasonable for the overall conditions in a specific association, and along these lines the inescapable disappointment saw in such circumstances. Think about a case in an association, state ABC, in which the administration needs to give an upgrade to the current humanistic qualities. Just like the case with people, change is never something that they are prepared to welcome. This requires the requirement for a superior methodology that won't mix resistance from the worker. Nickols (2010) for example, presents an examination of four methodologies that are crucial to overseeing change in any association. He fixates his contention on various angles with respect to the idea of progress. These angles incorporate the degree of the change for example increasingly radical and transformative changes require a methodology that is ecologically versatile, and which may bomb when managing a less extreme change. The other perspective is the stakes that the change has, for example, a change with high stakes requires the use of practically all the four procedures, while moderate stakes are absolutely against a methodology, for example, the fo rce coercive technique. The level of opposition the change will undoubtedly experience is another perspective, solid obstruction favors the utilization of intensity coercive and additionally natural versatile system while a frail obstruction is increasingly open to either or a mix of balanced observational methodology and regulating re-educative procedure. Another part vital is the period inside which execution of the change is to happen. Here, he takes note of that Short time changes require power-coercive technique to execute, while long haul changes flourish well

The Essence of Essay Topics

<h1>The Essence of Essay Topics</h1><p>Writing a viable exposition is an overwhelming undertaking for some understudies, particularly the individuals who battle with their English composing aptitudes. The explanation is that there are such a significant number of paper subjects and articles to browse. In spite of the fact that there are numerous that you can choose from, in all actuality most understudies normally bomb when they attempt to compose a paper dependent on their own ideas.</p><p></p><p>Most understudies consistently get their work done by investigating articles points that they might want to compose. In any case, it ought to be recalled that composing a paper isn't just about looking into exposition points to use in an essay.</p><p></p><p>Students must realize how to use the fundamental parts of scholastic composition to utilize their composition. For instance, on the off chance that they just are keen on c omposing an exposition on peer gatherings, they can look over a wide range of subjects. For instance, peer bunches for kids, athletic groups, or gangs.</p><p></p><p>On the other hand, on the off chance that they need to concentrate on close to home expositions about connections, they can browse individual paper subjects, for example, relationship papers, family papers, or in any event, wedding papers. There are numerous other article points that they can look over. Be that as it may, these subjects have their regular center components that involve an essay.</p><p></p><p>The substance of all these exposition points are an article theme, a thought, a contention, and an end. A thought is simply the subject, an end is the contention, and a contention is the end. Since understudies realize what these three viewpoints are, we should discuss how they can be used to utilize exposition topics.</p><p></p><p>One part of pa per themes that you will need to consider is your crowd. On the off chance that you are expounding on yourself, you ought to consider expounding on yourself as a person.</p><p></p><p>If you are expounding on yourself as an individual, consider how you came to understand that your way point isn't right. Have you invested enough energy considering the issue? Consider the best comment, the right wording, the tone, and the best possible sentence structure. This is an incredible method to ensure that you just bring the best thoughts that you need to hand to the table.</p>

The Various Types Of Junior High Research Paper Topics

<h1>The Various Types Of Junior High Research Paper Topics</h1><p>Junior high research paper subjects are very well known on the grounds that they can be utilized by understudies to assist them with finding the ideal method to communicate. The pleasant thing about the middle school subjects is that there are a variety of decisions that you can browse with regards to making your papers. A portion of the subjects that you may browse incorporate music, wellbeing, nature, strict points, and even themes that manage emotions.</p><p></p><p>Music is one of the most famous subjects that you can make your paper around. This can be a result of the way that there are a few understudies who have extremely solid sentiments about specific groups. It could likewise be on the grounds that the topic on music is the thing that attracts them to it.</p><p></p><p>A intriguing thing to note is that there are numerous different understudies w ho don't have the foggiest idea about that there are groups that they by and by appreciate tuning in to. This is the reason it is significant for understudies to find out about this and how they can start to discuss them in their papers. Since it is typically best to let the understudies communicate in an alternate manner, you should consider utilizing a point that centers around a specific band or gathering of groups. For instance, if you somehow happened to discuss certain groups that emphasis on melodies that have been recorded as unique tunes and not ones that are secured, at that point this could be an incredible theme for you to use.</p><p></p><p>If you are attempting to pick subjects that are identified with a specific wellbeing subject, at that point the alternatives that you have will be substantially more various. Wellbeing themes incorporate points, for example, diet, the historical backdrop of the idea of eating healthy, how nourishments influence our bodies, and even creation solid food decisions. It can even be a plan to give a blueprint of what a good dieting arrangement would comprise of.</p><p></p><p>Another region where you can discover themes that can fit pleasantly is in the region of religion. Strict points can incorporate anything from conversations about religion, to things that individuals see as hurtful to them, to whole books expounded on the subject. For this situation, it may be a smart thought to utilize an expansive theme and permit understudies to think of a fascinating contention for it dependent on their own beliefs.</p><p></p><p>Other regions that you can browse are diverse passionate subjects. One of the most widely recognized passionate points is what is identified with misfortune and sadness. These themes can incorporate things like mourning, managing misfortune, and managing pain subsequent to losing an adored one.</p><p></p><p> The last point that you can utilize depends on the possibility of science. Numerous understudies may be interested about themes that manage development as a rule. This can be a fascinating point to expound on the grounds that there are a great deal of understudies who might truly want to find out about it.</p><p></p><p>As you can see, there are different subjects that you can look over with regards to your youngsters' exploration paper. With such a large number of subjects to browse, you will have the option to make an incredible theme and furthermore get a ton of extraordinary input from the understudies that you work with.</p>

Writing a Five Paragraph Essay

<h1>Writing a Five Paragraph Essay</h1><p>To have a fruitful article, you have to realize how to compose five-passage expositions in the correct way. This will expect you to concoct subjects for your article that are deserving of being utilized in the body of the work.</p><p></p><p>There are a few reasons why an understudy would be required to compose a five section exposition. Now and again it is important to have the option to give the paper a solid contention that would have the option to be sponsored up by various realities. It could likewise be the situation that the understudy will be given a ton of schoolwork and should think of a response to an assortment of inquiries identified with the examination so as to show signs of improvement grade on the assignment.</p><p></p><p>The most significant activity when you are composing a five passage exposition is to begin by depicting every subject in its own section. It i s imperative. By depicting every subject in any event three sentences long, the odds of the peruser having no clue about the point or having no idea about what is happening will be definitely reduced.</p><p></p><p>Once you have portrayed every theme in its own passage, at that point you would then be able to start to give great data about every subject. Notwithstanding giving data about every point, you can likewise make the most of the chance to embed whatever number thoughts regarding the subject as could reasonably be expected. You ought to be mindful so as to just present thoughts inside the body of the passages. Presenting thoughts outside of the passages will look amateurish and it will likewise simply appear as though you are simply utilizing the sections to fill in the blanks.</p><p></p><p>A last significant thing to recall is to end each section on a solid note. Continuously end the section with a sentence that you accept will make the peruser need to keep perusing. There are a few understudies who feel that a sentence like 'Should you keep perusing, the remainder of this article is loaded with significant data' is the most ideal approach to end a paragraph.</p><p></p><p>A five-section paper is likewise simple to peruse on the off chance that you realize how to appropriately utilize pictures. In some cases it is ideal to put pictures inside the body of the passages. For instance, rather than composing 'A few people like to tune in to music while driving', you could put an image of a CD player and a stereo and portray how these two things go together to give a comprehension of why tuning in to music while driving is a decent idea.</p><p></p><p>There are a few different things that can be utilized to assist you with composing a five passage exposition. By realizing how to start each passage, which is in every case best done by portraying every point, and by n ot accepting that a peruser knows all that is going on, you will have the option to compose an article that will be far simpler to peruse than it would somehow or another be. On the off chance that you are uncertain about whether you think enough about any subject to give a precise portrayal of it, at that point it is alright to just skirt it or, more than likely incorporate a passage expressing why it isn't something that they ought to be concerned about.</p><p></p><p>Remember that on the off chance that you are composing a five section article, you ought not expect that the peruser has a deep understanding of the theme. In the event that you neglect to give great and strong data about a subject, at that point you ought to just proceed onward to something different that is pertinent to the essay.</p>

Research Paper Topics For Evolutionary Biology

<h1>Research Paper Topics For Evolutionary Biology</h1><p>Research papers are expositions that portray the verifiable or natural setting of a particular issue or theme. To make it additionally fascinating, you should seriously think about utilizing research paper themes for transformative science. While some examination papers are given in absolutely insightful, scholastic writing, others are utilized to support understudies and scientists to find out about explicit instances of developmental theory.</p><p></p><p>One approach to utilize inquire about paper subjects for transformative science is to remember papers for species, phylogeny, and how the parentage of life functions. By doing this, you might have the option to clarify developmental hypotheses with application in your subject area.</p><p></p><p>As a model, zoology utilizes attributes to order creatures as per physical qualities like sizes, hues, and shapes. A peruser may have a superior comprehension of these attributes on the off chance that they find out about how phylogeny is utilized by biologists.</p><p></p><p>In short, creatures advance after some time by parting into discrete species and subspecies. As these species keep on advancing, the subspecies in the long run become new species and gotten totally isolated from their folks. It's like the manner in which numerous individuals have as a primary concern when they consider advancement, and the exploration paper points for developmental science can help clarify what's going on by being more explanatory.</p><p></p><p>You may find that a similar research paper subjects will function admirably for two distinct themes. For instance, one class will require a theme on animal groups while another will need to think about the ancestry of life. A decent technique to remember is to get ready for two distinct subjects, so you can adjust the expl oration paper themes for developmental science between the classes.</p><p></p><p>To help you with your examination paper points for transformative science, here are a few things to consider. This rundown isn't comprehensive, yet it should give you a spot to start.</p><p></p><p>First, consider the primary thought of your paper. Is it about a creature that developed into another species? Or on the other hand is it about how the ancestry of life functions? For each of these, you should consider what the crowd of your paper is, and how your paper can help them.</p><p></p><p>By contemplating these two research paper points for developmental science, you'll be more ready to make your own exploration paper themes for this subject. Remember that on the off chance that you have something to train that others can profit by, you can generally simply incorporate a connect to a site that helps clarify the theme for you. Now and again you can discover things all alone, while different occasions you'll have to ask.</p>

Asset And Liability Management Essay Online For Free - Free Essay Example

ASSET AND LIABILITY MANAGEMENT In banking, asset and liability management (ALM) is used to manage the risks that arise due to mismatches between the assets and liabilities (debts and assets) of the bank. Banks face several risks like the liquidity risk, market risk, interest rate risk, credit risk and operational risk. Asset Liability management (ALM) is a strategic management tool to manage interest rate risk and liquidity risk faced by banks, other financial services companies and corporations. Banks manage the risks of Asset liability mismatch by matching the assets and liabilities according to the maturity pattern or the matching the duration, by hedging and by securitization. Asset and liability management remain high-priority areas for bank regulators, with an emphasis on management of market risk, liquidity risk, and credit risk. Asset/liability managers face the challenge of keeping pace with industry changes as new areas of risk are identified and new tools and models are developed to help measure and manage risk. In other words Asset-Liability Management (ALM) can be known as a risk management technique designed to earn an adequate return while maintaining a comfortable surplus of assets beyond liabilities. It takes into consideration interest rates, earning power, and degree of willingness to take on debt and hence is also known as Surplus Management. But in the last decade the meaning of asset liability management has evolved. It is now used in many di fferent ways under different contexts. ALM, which was actually pioneered by financial institutions and banks, are now widely being used in industries too. The Society of Actuaries Task Force on ALM Principles, Canada, offers the following definition for ALM: Asset Liability Management is the on-going process of formulating, implementing, monitoring, and revising strategies related to assets and liabilities in an attempt to achieve financial objectives for a given set of risk tolerances and constraints. Basis of Asset-Liability Management Traditionally, banks and insurance companies used accrual system of accounting for all their assets and liabilities. They would take on liabilities such as deposits, life insurance policies or annuities. They would then invest the proceeds from these liabilities in assets such as loans, bonds or real estate. All these assets and liabilities were held at book value. Doing so disguised possible risks arising from how the assets and liabilities were structured. Consider a bank that borrows 1 Crore (100 Lakhs) at 6 % for a year and lends the same money at 7 % to a highly rated borrower for 5 years. The net transaction appears profitable the bank is earning a 100 basis point spread but it entails considerable risk. At the end of a year, the bank will have to find new financing for the loan, which will have 4 more years before it matures. If interest rates have risen, the bank may have to pay a higher rate of interest on the new financing than the fixed 7 % it is earning on its loan. Suppose, at the end of a year, an applicable 4-year interest rate is 8 %. The bank is in serious trouble. It is going to earn 7 % on its loan but would have to pay 8 % on its financing. Accrual accounting does not recognize this problem. Based upon accrual accounting, the bank would earn Rs 100,000 in the first year although in the preceding years it is going to incur a loss. The problem in this example was caused by a mismatch between assets and liabilities. Prior to the 1970s, such mismatches tended not to be a significant problem. Interest rates in developed countries experienced only modest fluctuations, so losses due to asset-liability mismatches were small or trivial. Many firms intentionally mismatched their balance sheets and as yield curves were generally upward sloping, banks could earn a spread by borrowing short and lending long. Things started to change in the 1970s, which ushered in a period of volatile interest rates that continued till the early 1980s. US r egulations which had capped the interest rates so that banks could pay depositors, was abandoned which led to a migration of dollar deposit overseas. Managers of many firms, who were accustomed to thinking in terms of accrual accounting, were slow to recognize this emerging risk. Some firms suffered staggering losses. Because the firms used accrual accounting, it resulted in more of crippled balance sheets than bankruptcies. Firms had no options but to accrue the losses over a subsequent period of 5 to 10 years. One example, which drew attention, was that of US mutual life insurance company The Equitable. During the early 1980s, as the USD yield curve was inverted with short-term interest rates sky rocketing, the company sold a number of long-term Guaranteed Interest Contracts (GICs) guaranteeing rates of around 16% for periods up to 10 years.Equitable then invested the assets short-term to earn the high interest rates guaranteed on the contracts. But short-term interest rates so on came down. When the Equitable had to reinvest, it couldnt get even close to the interest rates it was paying on the GICs. The firm was crippled. Eventually, it had to demutualize and was acquired by the Axa Group. Increasingly banks and asset management companies started to focus on Asset-Liability Risk.The problem was not that the value of assets might fall or that the value of liabilities might rise. It was that capital might be depleted by narrowing of the difference between assets and liabilities and that the values of assets and liabilities might fail to move in tandem. Asset-liability risk is predominantly a leveraged form of risk. The capital of most financial institutions is small relative to the firms assets or liabilities, and so small percentage changes in assets or liabilities can translate into large percentage changes in capital. Accrual accounting could disguise the problem by deferring losses into the future, but it could not solve the problem.Firms responde d by forming asset-liability management (ALM) departments to assess these asset-liability risk. Techniques for assessing Asset-Liability Risk Techniques for assessing asset-liability risk came to include Gap Analysis and Duration Analysis. These facilitated techniques of managing gaps and matching duration of assets and liabilities. Both approaches worked well if assets and liabilities comprised fixed cash flows. But cases of callable debts, home loans and mortgages which included optio.ns of prepayment and floating rates, posed problems that gap analysis could not address. Duration analysis could address these in theory, but implementing sufficiently sophisticated duration measures was problematic Accordingly, banks and insurance companies started using Scenario Analysis. Under this technique assumptions were made on various conditions, for example: * Several interest rate scenarios were specified for the next 5 or 10 years. These specified conditions like declining rates, rising rates, a gradual decrease in rates followed by a sudden rise, etc. Ten or twenty scenarios could be specified in all. * Assumptions were made about the performance of assets and liabilities under each scenario. They included prepayment rates on mortgages or surrender rates on insurance products. * Assumptions were also made about the firms performance-the rates at which new business would be acquired for various products, demand for the product. * Market conditions and economic factors like inflation rates and industrial cycles were also included. * Based upon these assumptions, the performance of the firms balance sheet could be projected under each scenario. If projected performance was poor under specific scenarios, the ALM committee would adjust assets or liabilities to address the indicated exposure. Let us consider the procedure for sanctioning a commercial loan. The borrower, who approaches the bank, has to appraise the banks credit department on various parameters like industry prospects, operational efficiency, financial efficiency, management qualities and other things, which would influence t he working of the company. On the basis of this appraisal, the banks would then prepare a credit-grading sheet after covering all the aspects of the company and the business in which the company is in. Then the borrower would then be charged a certain rate of interest, which would cover the risk of lending. * But the main shortcoming of scenario analysis was that, it was highly dependent on the choice of scenarios. It also required that many assumptions were to be made about how specific assets or liabilities will perform under specific scenario. Gradually the firms recognized a potential for different type of risks, which was overlooked in ALM analyses. Also the deregulation of the interest rates in US in mid 70 s compelled the banks to undertake active planning for the structure of the balance sheet. The uncertainty of interest rate movements gave rise to Interest Rate Risk thereby causing banks to look for processes to manage this risk. In the wake of interest rate risk came L iquidity Risk and Credit Risk, which became inherent components of risk for banks. The recognition of these risks brought Asset Liability Management to the centre-stage of financial intermediation. Today even Equity Risk, which until a few years ago was given only honorary mention in all but a few company ALM reports, is now an indispensable part of ALM for most companies.. Some companies have gone even further to include Counterparty Credit Risk, Sovereign Risk, as well as Product Design and Pricing Risk as part of their overall ALM. * Now a days a company has different reasons for doing ALM. While some companies view ALM as a compliance and risk mitigation exercise, others have started using ALM as strategic framework to achieve the companys financial objectives. Some of the business reasons companies now state for implementing an effective ALM framework include gaining competitive advantage and increasing the value of the organization. Asset-Liability Management Approach ALM in its most apparent sense is based on funds management. Funds management represents the core of sound bank planning and financial management. Although funding practices, techniques, and norms have been revised substantially in recent years, it is not a new concept. Funds management is the process of managing the spread between interest earned and interest paid while ensuring adequate liquidity. Therefore, funds management has following three components, which have been discussed briefly. A. Liquidity Management Liquidity represents the ability to accommodate decreases in liabilities and to fund increases in assets. An organization has adequate liquidity when it can obtain sufficient funds, either by increasing liabilities or by converting assets, promptly and at a reasonable cost. Liquidity is essential in all organizations to compensate for expected and unexpected balance sheet fluctuations and to provide funds for growth. The price of liquidity is a function of market conditions and market perception of the risks, both interest rate and credit risks, reflected in the balance sheet and off-balance sheet activities in the case of a bank. If liquidity needs are not met through liquid asset holdings, a bank may be forced to restructure or acquire additional liabilities under adverse market conditions. Liquidity exposure can stem from both internally (institution-specific) and externally generated factors. Sound liquidity risk management should address both types of exposure. External liquid ity risks can be geographic, systemic or instrument-specific. Internal liquidity risk relates largely to the perception of an institution in its various markets: local, regional, national or international. Determination of the adequacy of a banks liquidity position depends upon an analysis of its: * Historical funding requirements * Current liquidity position * Anticipated future funding needs * Sources of funds * Present and anticipated asset quality * Present and future earnings capacity * Present and planned capital position As all banks are affected by changes in the economic climate, the monitoring of economic and money market trends is key to liquidity planning. Sound financial management can minimize the negative effects of these trends while accentuating the positive ones. Management must also have an effective contingency plan that identifies minimum and maximum liquidity needs and weighs alternative courses of action designed to meet those needs. T he cost of maintaining liquidity is another important prerogative. An institution that maintains a strong liquidity position may do so at the opportunity cost of generating higher earnings. The amount of liquid assets a bank should hold depends on the stability of its deposit structure and the potential for rapid expansion of its loan portfolio. If deposit accounts are composed primarily of small stable accounts, a relatively low allowance for liquidity is necessary. Additionally, management must consider the current ratings by regulatory and rating agencies when planning liquidity needs. Once liquidity needs have been determined, management must decide how to meet them through asset management, liability management, or a combination of both. B. Asset Management Many banks (primarily the smaller ones) tend to have little influence over the size of their total assets. Liquid assets enable a bank to provide funds to satisfy increased demand for loans. But banks, which rely solely on asset management, concentrate on adjusting the price and availability of credit and the level of liquid assets. However, assets that are often assumed to be liquid are sometimes difficult to liquidate. For example, investment securities may be pledged against public deposits or repurchase agreements, or may be heavily depreciated because of interest rate changes. Furthermore, the holding of liquid assets for liquidity purposes is less attractive because of thin profit spreads. Asset liquidity, or how salable the banks assets are in terms of both time and cost, is of primary importance in asset management. To maximize profitability, management must carefully weigh the full return on liquid assets (yield plus liquidity value) against the higher return associated with less liquid assets. Income derived from higher yielding assets may be offset if a forced sale, at less than book value, is necessary because of adverse balance sheet fluctuations. Seasonal, cyclical, or other factors may cause aggregate outstanding loans and deposits to move in opposite directions and result in loan demand, which exceeds available deposit funds. A bank relying strictly on asset management would restrict loan growth to that which could be supported by available deposits. The decision whether or not to use liability sources should be based on a complete analysis of seasonal, cyclical, and other factors, and the costs involved. In addition to supplementing asset liquidity, liability sources of liquidity may serve as an alternative even when asset sources are available. C. Liability Management Liquidity needs can be met through the discretionary acquisition of funds on the basis of interest rate competition. This does not preclude the option of selling assets to meet funding needs, and conceptually, the availability of asset and liability options should result in a lower liquidity maintenance cost. The alternative costs of available discretionary liabilities can be compared to the opportunity cost of selling various assets. The major difference between liquidity in larger banks and in smaller banks is that larger banks are better able to control the level and composition of their liabilities and assets. When funds are required, larger banks have a wider variety of options from which to select the least costly method of generating funds. The ability to obtain additional liabilities represents liquidity potential. The marginal cost of liquidity and the cost of incremental funds acquired are of paramount importance in evaluating liability sources of liquidity. Consideration must be given to such factors as the frequency with which the banks must regularly refinance maturing purchased liabilities, as well as an evaluation of the banks ongoing ability to obtain funds under normal market conditions. The obvious difficulty in estimating the latter is that, until the bank goes to the market to borrow, it cannot determine with complete certainty that funds will be available and/or at a price, which will maintain a positive yield spread. Changes in money market conditions may cause a rapid deterioration in a banks capacity to borrow at a favorable rate. In this context, liquidity represents the ability to attract funds in the market when needed, at a reasonable cost vis-Ã  -vis asset yield. The access to discretionary funding sources for a bank is always a function of its position and reputation in the money markets. Although the acquisition of funds at a competitive cost has enabled many banks to meet expanding customer loan demand, misuse or imprope r implementation of liability management can have severe consequences. Further, liability management is not riskless. This is because concentrations in funding sources increase liquidity risk. For example, a bank relying heavily on foreign interbank deposits will experience funding problems if overseas markets perceive instability in U.S. banks or the economy. Replacing foreign source funds might be difficult and costly because the domestic market may view the banks sudden need for funds negatively. Again over-reliance on liability management may cause a tendency to minimize holdings of short-term securities, relax asset liquidity standards, and result in a large concentration of short-term liabilities supporting assets of longer maturity. During times of tight money, this could cause an earnings squeeze and an illiquid condition. Also if rate competition develops in the money market, a bank may incur a high cost of funds and may elect to lower credit standards to book higher yie lding loans and securities. If a bank is purchasing liabilities to support assets, which are already on its books, the higher cost of purchased funds may result in a negative yield spread. Preoccupation with obtaining funds at the lowest possible cost, without considering maturity distribution, greatly intensifies a banks exposure to the risk of interest rate fluctuations. That is why banks who particularly rely on wholesale funding sources, management must constantly be aware of the composition, characteristics, and diversification of its funding sources. Procedure for Examination of Asset Liability Management In order to determine the efficacy of Asset Liability Management one has to follow a comprehensive procedure of reviewing different aspects of internal control, funds management and financial ratio analysis. Below a step-by-step approach of ALM examination in case of a bank has been outlined. Step 1 The bank/ financial statements and internal management reports should be reviewed to assess the asset/liability mix with particular emphasis on. * Total liquidity position (Ratio of highly liquid assets to total assets) * Current liquidity position (Minimum ratio of highly liquid assets to demand liabilities/deposits) * Ratio of Non Performing Assets to Total Assets * Ratio of loans to deposits * Ratio of short-term demand deposits to total deposits * Ratio of long-term loans to short term demand deposits * Ratio of contingent liabilities for loans to total loans * Ratio of pledged securities to total securities Step 2 It is to be determined that whether bank management adequately assesses and plans its liquidity needs and whether the bank has short-term sources of funds. This should include * Review of internal management reports on liquidity needs and sources of satisfying these need.. * Assessing the banks ability to meet liquidity needs Step 3 The banks future development and expansion plans, with focus on funding and liquidity management aspects has to be looked into. This entails. * Determining whether bank management has effectively addressed the issue of need for liquid assets to funding sources on a long-term basis. * Reviewing the banks budget projections for a certain period of time in the future. * Determining whether the bank really needs to expand its activities. What are the sources of funding for such expansion and whether there are projections of changes in the banks asset and liability structure. * Assessing the banks development plans and determining whether the bank will be able to attract planned funds and achieve the projected asset growth. * Determining whether the bank has included sensitivity to interest rate risk in the development of its long term funding strategy. Step 4 Examining the banks internal audit report in regards to quality and effectiveness in terms of liquidity management. Step 5 Reviewing the banks plan of satisfying unanticipated liquidity needs by. * Determining whether the banks management assessed the potential expenses that the bank will have as a result of unanticipated financial or operational problems. * Determining the alternative sources of funding liquidity and/or assets subject to necessity. * Determining the impact of the banks liquidity management on net earnings position. Step 6 Preparing an Asset/Liability Management Internal Control Questionnaire which should include the following Whether the board of directors has been consistent with its duties and responsibilities and included o A line of authority for liquidity management decisions. o A mechanism to coordinate asset and liability management decisions. o A method to identify liquidity needs and the means to meet those needs. o Guidelines for the level of liquid assets and other sources of funds in relationship to needs. Does the planning and budgeting function consider liquidity requirements. Are the internal management reports for liquidity management adequate in terms of effective decision making and monitoring of decisions. Are internal management reports concerning liquidity needs prepared regularly and reviewed as appropriate by senior management and the board of directors. Whether the banks policy of asset and liability management prohibits or defines certain restrictions fo r attracting borrowed means from bank related persons (organizations) in order to satisfy liquidity needs. Does the banks policy of asset and liability management provide for an adequate control over the position of contingent liabilities of the bank. Is the foregoing information considered an adequate basis for evaluating internal control in that there are no significant deficiencies in areas not covered in this questionnaire that impair any controls. Guidelines on Asset-Liability Management (ALM) System -Amendments Reserve Bank had issued guidelines on ALM system vide Circular dated February 10, 1999, which covered, among others, interest rate risk and liquidity risk measurement / reporting framework and prudential limits. As a measure of liquidity management, banks are required to monitor their cumulative mismatches across all time buckets in their Statement of Structural Liquidity by establishing internal prudential limits with the approval of the Board / Management Committee. As per the guidelines, the mismatches (negative gap) during the time buckets of 1-14 days and 15-28 days in the normal course, are not to exceed 20 per cent of the cash outflows in the respective time buckets. 2. Having regard to the international practices, the level of sophistication of banks in India and the need for a sharper assessment of the efficacy of liquidity management, Reserve Bank of India has reviewed guidelines on 24th October 2007 and decided that : (a) the banks may adopt a more granular approac h to measurement of liquidity risk by splitting the first time bucket (1-14 days at present) in the Statement of Structural Liquidity into three time buckets viz. Next day , 2-7 days and 8-14 days. (b) the Statement of Structural Liquidity may be compiled on best available data coverage, in due consideration of non-availability of a fully networked environment.Banks may, however, make concerted and requisite efforts to ensure coverage of 100 per cent data in a timely manner. (c) the net cumulative negative mismatches during the Next day, 2-7 days, 8-14 days and 15-28 days buckets should not exceed 5 % ,10%, 15 % and 20 % of the cumulative cash outflows in the respective time buckets in order to recognise the cumulative impact on liquidity. (d) banks may undertake dynamic liquidity management and should prepare the Statement of Structural Liquidity on daily basis. The Statement of Structural Liquidity, may, however, be reported to RBI, once a month, as on the third Wednesday of every month. 3. The format of Statement of Structural Liquidity has been revised suitably and is furnished. The guidance for slotting the future cash flows of banks in the revised time buckets has also been suitably modified and is furnished at Annex II. 4. To enable the banks to fine tune their existing MIS as per the modified guidelines, the revised norms as well as the supervisory reporting as per the revised format would commence with effect from the period beginning January 1, 2008 and the reporting frequency would continue to be monthly for the present. However, the frequency of supervisory reporting of the Structural Liquidity position shall be fortnightly, with effect from the fortnight beginning April 1, 2008. Asset Liability Management in Indian Context The post-reform banking scenario in India was marked by interest rate deregulation, entry of new private banks, and gamut of new products along with greater use of information technolog.To cope with these pressures banks were required to evolve strategies rather than ad hoc solutions. Recognising the need of Asset Liability management to develop a strong and sound banking.system, the RBI has come out with ALM guidelines for banks and FIs in April 1999.The Indian ALM framework rests on three pillars. Â · ALM Organisation (ALCO) The ALCO or the Asset Liability Management Committee consisting of the banks senior management including the CEO should be responsible for adhering to the limits set by the board as well as for deciding the business strategy of the bank in line with the banks budget and decided risk management objectives. ALCO is a decision-making unit responsible for balance sheet planning from a risk return perspective including strategic management of interest and liquidity risk. The banks may also authorise their Asset-Liability Management Committee (ALCO) to fix interest rates on Deposits and Advances, subject to their reporting to the Board immediately thereafter. The banks should also fix maximum spread over the PLR with the approval of the ALCO/Board for all advances other than consumer credit. Â · ALM Information System The ALM Information System is required for the collection of information accurately, adequately and expeditiously. Information is the key to the ALM process. A good information system gives the bank management a complete picture of the banks balance sheet. Â · ALM Process The basic ALM processes involving identification, measurement and management of risk parameter.The RBI in its guidelines has asked Indian banks to use traditional techniques like Gap Analysis for monitoring interest rate and liquidity risk. However RBI is expecting Indian banks to move towards sophisticated techniques like Duration, Simulation, VaR in the future. For the accrued portfolio, most Indian Private Sector banks use Gap analysis, but are gradually moving towards duration analysis. Most of the foreign banks use duration analysis and are expected to move towards advanced methods like Value at Risk for the entire balance sheet.some foreign banks are already using VaR for the entire balance sheet. Conclusion ALM has evolved since the early 1980s.Today, financial firms are increasingly using market value accounting for certain business lines. This is true of universal banks that have trading operations.Techniques of ALM have also evolved.The growth of OTC derivatives markets has facilitated a variety of hedging strategies. A significant development has been securitization, which allows firms to directly address asset-liability risk by removing assets or liabilities from their balance sheets. This not only eliminates asset-liability risk; it also frees up the balance sheet for new business. Thus, the scope of ALM activities has widened. Today, ALM departments are addressing (non-trading) foreign exchange risks as well as other risks. Also, ALM has extended to non-financial firms. Corporations have adopted techniques of ALM to address interest-rate exposures, liquidity risk and foreign exchange risk. They are using related techniques to address commodities risks. For example, airlines hedging of fuel prices or manufacturers hedging of steel prices are often presented as ALM. Thus it can be safely said that Asset Liability Management will continue to grow in future and an efficient ALM technique will go a long way in managing volume, mix, maturity, rate sensitivity, quality and liquidity of the assets and liabilities so as to earn a sufficient and acceptable return on the portfolio.