Economic Risk - Literature review Example

Review No Source of article: Italian borrowing costs hits new record in debt crisis The Guardian Alex Hawks of Publication: November 7, 2011. Themes: Economic risk assessment. Commentary: 498 words Brief Summary of Article: Italy has been pulled into Europe’s debt crisis given that its borrowing costs have reached the highest level since the creation of the euro. The interest rate on 10 year Italian bond has increased to 6.6 % and the analysts have warned that its yields were now approaching the danger zone where a bail out can prove to be a risk. The crisis has been exacerbated by a sharp fall in the stock markets in Europe and it is suggested that an attempt to bail Italy will be challenging given that it is relatively big in size. Fears are that the Italian debt costs can spread to the other inner peripheries in the Euro zone and there is general feeling that this threat can be addressed through change of top political leadership. France and Greece have somehow been impacted by these economic challenges related to bonds and these have some political connotations. Personal commentary Risk is inevitable in every business operation given that some situations cannot be avoidable due to uncertainties that may be encountered (Morris, 2008). However, risk is not only limited to business organizations given that it can also threaten to destabilize the whole economy of a country if certain measures are not put in place. Economic risk such as the one given in this particular case is mainly a result of speculative actions which can result in an unprecedented decline or increase of stock markets (Jones, 2007). Due to an increase in interest rates, Italy is faced with the risk of failing to meet the obligations for its bond. Bonds are often considered as low risk investment as a result of the fact that their repayment period is relatively longer. An increase in the interest rates can also impact on the original value of the bond (Correia, 2005). A bond with lower rating risks to attract more interest rates which is another threat faced by France in this particular case which risks to lose its AAA grade. If the rate of the bond is lowered like what Alex Hawks is suggesting, then the welfare of the people is likely to be impacted negatively which also risks the stability of the country. There are likely chances that the level of welfare of the people will be lowered if this problem related to bonds is not carefully addressed. However, Ross et al (1988) posit to the effect that a stable rating of the bond is the best in as far as the aspect of debt through is concerned. The stability of this rate can be negatively affected if there is discontent in the political situation of the country. As aptly stated by Gary Jenkins, speculation that change in leadership can bring about a turnaround in the fortunes of Italy’s debt situation may be futile given that the problem is not purely political. Whilst there can be short term benefits for change in political leadership, it can be noted that such a decision does not provide a long term solution though. As such, it can be observed that the economic risk faced by Italy is a result of a combination of factors and a holistic approach has to be taken in order to address it rather than just dealing with political leadership. Addressing such a risk issue should not be one sided since this can pose serious threats to the already bad situation. An objective approach has to be taken rather than relying on subjective judgements which may not address the problem. Reuvid (2010) suggests that some actions may threaten the existence of an organisation if a holistic approach is not taken to address them. In as far as the management of risk is concerned, there is need for the responsible authorities to identify the causes of the problem obtaining on the ground as this can enable them to come up with a long lasting solution in dealing with this particular problem. References Alex Hawks, 7 November, 2011, ‘The Guardian,’ Italian borrowing costs hits new record in debt crisis, Viewed 07 November, 2011 Burke, R 2007, Introduction to Project Management, Burke Publishing, London. Chapman, R 2006 Simple tools and techniques of enterprise risk management. John Wiley and Sons Ltd: Chichester. Correira C et al 2005, Financial Management, 5th Edition, JUTA, Cape Town. Jones, R 2007, Project Management Survival, Kogan Page, London. Kaplan, S, Mikes, A, Simons, R, Tufano, P, & Hofman, M 2009, Managing Risk in the New World. Harvard Business Review, October, 14 2009, p.72. Morris, RA 2007, Project Management Book, Adams Media, Avon: Massachusetts. Reuvid, J 2010, Managing Business Risk: A Practical Guide to Protecting Your Business, Kogan: Philadelphia. Ross, SA 1988, Corporate Finance, 2nd Edition, Irwin, Boston. Waring, A & Glendon, A 1998, Managing Risk. Cengage Learning, London. Student’s Name: Review No.: 2 Source of article: Public health journal publishes cannabis use guidelines The Independent Author’s Name: Anonymous Date of Publication: November 7, 2011. Themes: Risk and policy change Commentary: 475 Brief summary of the article Researchers have come up with guidelines towards the promotion of safer use of cannabis for the sake of public health given that the use of this substance has been prevalent among different age groups in Canada. Despite the health risks associated with the use of marijuana, research has shown that Canada has not publicly taken a health approach towards it like what was done with alcohol as well as tobacco. The main problem associated with the use of cannabis is that of misinformation where it can be seen that different users of this substance lack full knowledge about its effects given that they tend to believe that it is harmless. Personal commentary The risk management standard in this particular case is related to change in public health policy with regards to the use of cannabis. Change can be loosely defined as making things different (Robbins, 1993). In the case of health and safety field, the consequences are seen from a negative perspective hence the efforts to manage safety risk are directed towards prevention and mitigation of harm (Waring & Glendon, 1998, pp. 5-6). By failing to prevent such hazards, it can be noted that such a situation can pose a threat to the health care of the people. An integrated approach is required in as far as policy change towards mitigation of this health risk is concerned, it can be noted that an integrated approach is vital in order to share the same ideas with the targeted people. There is need to consult the people so as to gain their own views towards the proposed changes to the public health policy. Failure to do so may result in those championing this cause failing to achieve their intended goals. Fischer argues that misinformation among the Canadians is the major driving force towards the proposal of policy change with regards to the use of cannabis which is anticipated to go a long way in promoting the health needs of the users of this substance. In as far as policy formulation is concerned, Robins (1993) posits to the effect that there is need for involvement of all the targeted people so that they will share the same understanding of the policies being proposed. The risk of not telling people the truth when it comes to health concerns is that some situations can be blown out of proportion where people lack knowledge about the whole issue. In some instances, serious issues can be undermined where their long term impacts can be overlooked. For instance, it is widely perceived that cannabis has no effect when one is driving but research according to this article has shown that it is responsible for causing fatal accidents on the road. Some people however dispute this which amounts to risk taking. When it comes to issues that are related to risks of this magnitude, an open and accommodative approach will be more ideal. This is so because mutual understanding among all the people involved will be promoted and can be supported. As such, concerted efforts have to be taken with regards to change in policy especially with regards to issues related to health as there is a risk of meeting stiff resistance by the targeted people. According to Werner (2003), resistance to change can be a result of fear for the unknown or general lack of information about the new initiative. Resistance to change in such issues that are meant to initiate policy changes can be overcome through the involvement of all stakeholders who are involved. References Anonymous, 7 November, 2011, ‘The Independent,’ Public health journal publishes cannabis use guideline, Viewed 07 November, 2011 . Chapman, R 2007, Simple Tools and Techniques for Enterprise Risk Management, Chapter 1. Canadian Standards Association, 1997, CAN/CSA-Q850-97 Risk Management: Guideline for Decision Makers Jones, R 2007, Project Management Survival, Kogan Page, London. Morris, RA 2007, Project Management Book, Adams Media, Avon: Massachusetts. Reuvid, J 2010, Managing Business Risk: A Practical Guide to Protecting Your Business, Kogan page, Philadelphia. Robbins, SP 1993, Organisational behaviour: Concepts, controversies and applications.6th Edition, Prentice Hall, NJ. Rollinson, D et al 2008, Organisational behaviour and analysis: An integrated approach. 4th Edition. Pearson, London. Ross, SA 1988, Corporate Finance, 2nd Edition, Irwin, Boston. Rossouw D et al 2003, Strategic management, NAE, Cape Town. Waring, A & Glendon, A 1998, Managing Risk, Cengage Learning, London. Student’s Name: Review No.: 3 Source of article: Time for a culture change at the Bank of England The Telegraph Author’s Name: Damian Reeece Date of Publication: November 8, 2011. Themes: Culture and risk management Commentary: 498 Brief summary of the article The article is about culture change at the Court of the Bank of England. This is a major change given that it proposes to start with the change of the name as well as the operations of the Bank which have been veiled in secrecy. It is suggested that the bank should have representation from real economy of the external members such as the monitory policy. The culture change proposal states that the Chancellor should be allowed to direct the bank in difficult times when the public money is at risk. Personal commentary The article is concerned with risk management culture where a proposal to change the culture of the Bank of England has been put in place. Basically, “organisational culture refers to a system of shared assumptions held by members of a given organisation which distinguishes it from the other,” (Werner, 2003, p. 25). In simple terms, organisational culture is a system of values that tries to distinguish one organisation from the other and it has a bearing on the behaviour and performance of the employees. Reuvid (2010) concurs with this assertion when he suggests that a set of cultural norms come into play when it comes to the operations of the organisation. Organisations may encourage certain types of risk taking behaviour, for example in financial trading or investment companies (Waring &Glendon, 2007). However, if there are no effective controls, losses can be recorded as well as damage of reputation in case of banks. Therefore, if risk management is to be effective within an organisation, it has to be practiced by all members within that particular organization. Implementing change in an organisation is not an easy feat given that it can be met with resistance by other members of the organisation. Thus, change of culture can affect various internal processes of the organisation. In broad terms, it can be noted that the culture of an organisation has to determine the extent to which the members from other cultures can identify with the organization (Robbins, 1993). There may be for instance attitudes which exist among staff which may prevent the implementation of effective risk management strategies hence the need for involvement of all stakeholders in this initiative. This emanates from the strong belief that risk management manifests itself in the behaviour of the employees (Chapman, 2007). There are various cultural factors that shape the attitudes, beliefs as well as the values of the employees hence these should not be overlooked as they can pose some risks to the operations of the organisation as a whole. As noted in the above scenario, a complete overhaul of the organisational culture of the Bank of England is likely to pose some risks given that all its operations were not under public scrutiny. Whilst there is need to take such risk, there are fears that it may erode the reputations of the organisation if the bank is staffed with external members in the policy units. Such changes in culture can also be necessitated by external factors such as need for accountability by the members of the public with regards to the operations of a financial institution such as this. However, the notable risk in this case is that there are likely to be conflicts of interests if the bank is staffed with external members who are also members of the bank’s various policy making units. As such, a holistic approach which is also integrative is supposed to be taken when carrying out this initiative in order to effectively manage the risk likely to be encountered. References Damian Reeece, November 8, 2011, ‘The Telegraph,’ Time for a culture change at the Bank of England, viewed November 8, 2011, Chapman, R 2007, Simple Tools and Techniques for Enterprise Risk Management, John Wiley & Sons Ltd. Chichester. Lupton, D 1999, Risk, London, Routledge. Reuvid, J 2010, Managing Business Risk: A Practical Guide to Protecting Your Business, Philadelphia, Chapter 4, pp.191-207. Robbins, SP 1993, Organisational behaviour: Concepts, controversies and applications.6th Edition, Prentice Hall, NJ. Toft, B. and Reynolds, S., (1997), Learning from disasters: a management approach, Leicester, Perpetuity Press. Torrington, T & Taylor, H 2008, Human Resource Management, 7th ed, Financial Times / Prentice Hall: London. Waring, A & Glendon, A 2007, Managing Risk, Chapter 4, pp.69-87; Werner, A et al 2007, Organisational behaviour: A contemporary SA perspective.2nd Edition. CT: Van Schaik Publishers. Student’s Name: Review No.: 4 Source of article: The Economist The return of the iron fist: A former guerrilla promises a crackdown on violence Author’s Name: Anonymous Date of Publication: November 8, 2011. Themes: Culture and risk management Commentary: 493 Brief summary of the article In this article, the former army general who is a presidential candidate for Guatemala elections has promised a crackdown on any form of violence. He promises people to crush crime using an iron fist and some voter are of the view that this is long overdue given the prevalence of crime rate in Guatemala is one of the highest in the world. However, the return of the general raises more questions because of the genocide as a result of the 1960 to 1990 civil war which left more than 200 000 people dead at the behest of the army. Memories of the deaths of innocent lives are still fresh in the minds of the people hence this is seen as a risk factor that can threaten this person’s aspirations to become the next president of Guatemala. Personal commentary The risk factor discussed in this given article is concerned with power and risk management. Power often takes different forms depending on the situation in which it is practiced. Basically, “power refers to a capacity that one person has to influence the behaviour of the other person so that he does something that he or she would not otherwise do,” (Robbins, 1993, p. 407). From this definition, it can be noted that power is used as an authoritative force to coerce or make another person to behave in a way he may not do when free. It can be seen that there is no mutual understanding especially with regards to the decisions that may be passed by the people at the top. Although power relationships form part of the culture of an organisation or a particular group of people, these often represent differences between groups and individuals since they do not reflect a shared set of cultural values (Reuvid, 2010). According to Waring & Gledon (2007), carrying out one person’s will using power may be opposed by the other people. Normally, the concept of power has undertones of authoritarianism given that it infers the right to make unilateral decisions that can affect the whole population or the members belonging to a particular group. Given such a scenario, it can be noted that power flows from the top to bottom levels where ordinary people at the grassroots level are not given the opportunity to contribute towards the decision making process of any decision that may be imposed upon them by the responsible authorities. Crashing dissent among citizens using force is meant to assert power by individuals or a group of people representing the values and interests that are suitable to their own political agendas. Waring & Glendon (2007) posit to the effect that the use of power to assert one’s power is not readily acceptable by the other people who may be involved. The result is more resistance which is likely to aggravate the situation. This is one of the risk parts of using force as a source of showing power and authority. The use of the iron fist may not be readily accepted by every person which is one major risk likely to be faced by the presidential spirant. Use of violence does not end crime as aptly illustrated in the story given above. Countries like Mexico which use the same strategy have not achieved a lot in terms of combating crime. In contrast, countries which use preventive policing like Costa Rica have the lowest crime rates in Central America. The other risk is that his efforts to role in the army to crush violence can be hampered by the lack of resources. Given such a scenario, it can be noted that his wishes and dreams may not come true given that this initiative may not be supported by the majority of people who will be the main targets for this authoritative use of power. References The Economist, 10 September, 2011, The return of the iron fist: A former guerrilla promises a crackdown on violence, Viewed 08 November, 2011, . Lupton, D 1999, Risk, London, Routledge. Reuvid, J 2010, Managing Business Risk: A Practical Guide to Protecting Your Business, Philadelphia, Chapter 4, pp.191-207. Rollinson, D et al 2008, Organisational behaviour and analysis: An integrated approach. 4th Edition, Pearson, London. Schultz, H et al 2003, Organisational behaviour, CT, Van Schaik Publishers. Toft, B and Reynolds, S 1997, Learning from disasters: a management approach, Leicester, Perpetuity Press. Torrington, T & Taylor, H 2008, Human Resource Management, 7th ed, Financial Times / Prentice Hall: London. Waring, A and Glendon, AI, 2007, Managing Risk, Chapter 4, pp.69-87; Student’s Name: Review No.: 5 Source of article: Scotsman Higher learning needs new direction Author’s Name: Anthony Cohen Date of Publication: 19 October, 2010. Themes: Change Commentary: 458 Brief summary of the article The author argues that the public spending crisis for funding of the English Universities poses a serious challenge to the Scottish university system. A reduction in the public funding of the universities in Scotland has been a cause for concern since it has negatively impacted on areas such as research. The responsible authorities have put legislation in place which compels the universities to put mechanisms that are meant to utilise other sources of generating income such as funding as well as income related graduate contribution. However, to convince the responsible authorities to change this system may be a challenge for the universities in Scotland. Personal commentary In this particular scenario, it can be noted that the primary concern for the author of the article is to convince the responsible authorities to change the funding system for universities in Scotland. However, implementing change of such magnitude is quite an uphill task which is pretty challenging to achieve. According to Amos et al (2008), change can be loosely defined as the process of doing the same thing in a different way. There are various factors that influence people to behave or to act in different ways. With regards to organisations, it can be noted that there are both internal as well as external factors that can force them to change their usual ways of operating in their daily business. As aptly put by Chapman (2006), in order for most businesses to survive and prosper, they cannot stand still but have to change to reflect the evolving changes in the market place. This notion has also been supported by Stewart (1982) who suggests that the degree of change that businesses have to endure can be at opposite ends of the spectrum. For instance, factors that can compel other organisations to change cannot affect the other organisations. However, while it can be noted that change is inevitable, it can be observed that there are various risks that ought to be taken into consideration since these can impact on the operations of the organization as a whole. In this case, the risk likely to be faced by the proponents of this new system is that the responsible authorities will resist the move arguing that it is meant to improve the competitiveness of the universities. They may also argue that the system is meant to promote innovation as well as creativity given that the universities are given the autonomy to run their operations through implementing different means of raising funds in their operations. Waring & Glendon (2007) argue that it is challenging to completely change the status quo of the organisation given that there are some people who will be in support of it. In this particular case, it can be seen that the government and other responsible authorities are behind this status quo while the staff at these universities view it from the other angle. As such, it can be seen that there is need for collective contributions from all the stakeholders in order to come up with a solid decision that is mutually understood. In the event that the stakeholders involved in this debate lack common understanding, it may be difficult for them to reach consensus given that some of them will oppose the proposed change. Resistance to change is always a risk which threatens organisations when they seek to implement various changes in their operations. References Anthony Cohen, 19 October, 2010, Scotsman, Higher learning needs new direction, Viewed 08 November, 2011, . Amos, TL et al 2008, Human Resources Management. 3rd Edition, JUTA, CT. Grobler, P et al 2006, Human Resource Management. 3rd Edition. London. Thompson Learning. Lupton, D 1999, Risk, London, Routledge. Reuvid, J. (2010) Managing Business Risk: A Practical Guide to Protecting Your Business, Philadelphia, Chapter 4, pp.191-207. Robbins, SP 1993, Organisational behaviour: Concepts, controversies and applications.6th Edition, Prentice Hall, NJ. Schultz, H. et al (2003). Organisational behaviour. CT. Van Schaik Publishers. Toft, B. and Reynolds, S., (1997), Learning from disasters: a management approach, Leicester, Perpetuity Press. Waring, A & Glendon, A 2007, Managing Risk, Chapter 4, pp.69-87; Werner, H et al 2003, Organisational behaviour. Pretoria. Van Shaik Publishers. Read More