Role of Derivatives on Financial Products

Role of Derivatives on Financial Products Title: Derivatives are now a well established part of every financial institutions financially engineered products. Discuss, in depth, the role that derivatives are playing in financial products/portfolios and the risks that they remove (and create) Introduction Past three decades have witnessed an expansion in global trade and continuing technological developments. This has resulted in an increase in market volatility and enlargement of business and financial risks and has led to an increase in demand for risk management products. The types of risks faced by corporations today have not changed; rather, they have become more complex and interrelated. The increase in demand for risk management products and the complexity of risks is reflected in the growth of spectrum of financial contracts called derivatives. Derivatives are now a well established part of every financial institution’s financially engineered products. Derivatives have become an integral part of the financial markets because they can serve several economic functions. Though there has been an incredible growth in the derivative market, there has also been an increase in reports of major losses associated with derivative products. For example, derivatives led to a collapse of Barings Bank (the Queen of England’s primary bank), bankruptcy of Orange County California and also had a role in the fall of Enron. All this has resulted in a great deal of confusion about effectiveness of derivatives in risk management. What are Derivatives? Derivatives are complex instruments that have become increasingly important to the overall risk profile and profitability of organisations throughout the world. Broadly defined, derivatives are contracts that primarily derive their value from the performance of underlying assets. Derivatives contracts are entered into throughout the world on organised exchanges and through over-the-counter (OTC) arrangements. Types of Derivatives Derivatives come in various shapes and forms such as futures1, forwards2, swaps3, options4, structured debt obligations and deposits, and various combinations thereof. __________________________________________________________________________________________________________ 1Futures are contracts to buy or sell specific quantities of a commodity or financial instrument at a specified price at a specified time in the future. 2A forward contract obligates one party to buy the underlying at a fixed price at a certain future date from a counterparty, who is obligated to sell the underlying at that fixed price. (Source: Demystifying Financial derivatives, Rene A Stulz) 3A swap is a contract to exchange cash flows over a specific period. 4An option can be a call option or a put option. A call option on a stock gives its holder the right to buy a fixed number of shares at a given price by some future date, while a put option gives its holder the right to sell a fixed number of shares on the same terms. Benefits of Derivatives Derivatives are put to three key uses: Hedging by entering into derivatives transactions for offsetting existing risks. The existing risks could be an investment portfolio, price changes of a commodity or perhaps investments in a foreign country. Derivatives make it possible to hedge risks that otherwise would be not be possible to hedge. Speculating through hedge funds to generate profits with only a insignificant investment, essentially by putting money on the movement of an asset. Exploiting Arbitrage opportunities throughout the world markets. Thus, risk management is one of the primary purposes of derivatives. Role of Derivatives in Risk Management As indicated above, derivatives are important tools that can help organisations meet their specific risk-management objectives. Derivatives allow organisations to break up their risks and distribute them around the financial system through secondary markets. Thus, derivatives help organisations in risk management. Risk management is not about the removal of risk but is about its management. An organisation can manage its risks by selectively choosing those risks it is comfortable with and minimising those that it does not want. Through derivatives, risks from traditional instruments can be effectively unpackaged and managed independently. If managed properly derivatives can help businesses save costs and increase returns. In addition, derivatives make underlying markets more efficient. Derivative markets produce information which at time is the only reliable information available to base critical business decisions on. For example, reliable information about long-term interest rates can be obtained from swaps, because the swap market may be more liquid and more active than the bond market. Using Derivatives Many organisations use derivatives conservatively to counterbalance risks from fluctuating currency and interest rates. Individuals and firms use derivatives to achieve payoffs that they would not be able to achieve without derivatives, or could only achieve at greater cost. Derivatives are used by both financial and non-financial institutions and organisations. Financial organisations use derivatives both as risk management tools and also as a source of revenue. From a risk management perspective, derivatives allow financial institutions to identify, segregate and manage separately the market risks in financial instruments and commodities. Cautious use of derivatives provides managers with effective risk reducing opportunities through hedging. Derivatives may also be used to reduce financing costs and to increase the yield of certain assets. In addition, derivatives are a direct source of revenue through market-making functions, position taking and risk arbitrage to most of the financial organizations (source: http://www.bis.org/publ/bcbsc211.pdf). Derivatives are used by non-financial organisations for hedging and for minimising earnings volatility. For example, derivatives are used to hedgeinterest-rate risks. If the company strongly believes that interest rates will drop between now and a future date, it could purchase a futures contract. By doing so, the company is effectively locking in the future interest rate. Similarly, companies that depend heavily on raw-material inputs or commodities are sensitive, sometimes significantly, to the price change of the inputs. For example, most airlines use derivatives for hedging against crude-oil price. Some firms use derivatives to reduce tax liability and at times to speculate. Risks Associated with Derivatives Although derivatives are legitimate and valuable tools for hedging risks, like all financial instruments they create risks that must be managed. Warren Buffett, one of the worlds most wise investors, states that â€Å"derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.† (Source: Gabriel Kolko, Weapons of Mass Financial Destruction) On one hand derivatives neutralise risks while on the other hand they create risks. In fact there are certain risks inherent in derivatives. Derivatives can be dangerous if not managed properly. Numerous financial disasters such as Enron can be related to the mismanagement of derivatives. In the 1990s, Procter Gamble lost $157 million in a currency speculation involving dollars and German Marks, Gibson Greetings lost $20 million and Long-Term Capital Management, a hedge fund, lost $4 billion with currency and interest-rate derivatives (Source: Ludger Hentschel and Clifford W. Smith, Jr., Risks in Derivative Markets) . It is key to consider that it has not been the use of derivatives as a tool which has led to the downfall of these companies but the misuse of such instruments. The kinds of risks associated with derivatives are no different from those associated with traditional financial instruments, although they can be far more complex. Different derivatives have different risk profiles. For some derivatives though the risk may be limited, the profit potential may be unlimited. For example, the risk of loss with a derivative contract which grants a right to buy a particular asset at a particular price is limited to the amount paid to hold that right. However, profit potential is unlimited. On the other hand there are certain other derivatives that exhibit risk characteristics in which while potential gain is limited, the losses associated with the derivative is unlimited. For example, a derivative contract which grants the right to buy a particular asset at a particular price may have the associated potential profit limited to the amount received for giving that right, but because the asset has to be delivered to the counterparty at expiry of the contrac t, the potential loss may be unlimited. Most of the risk of derivatives is due to the complexity of the structure of the derivative instruments. Apart from the structure of the instrument itself, the source of a lot of the risk associated with derivative contracts arises from the fact that they are leveraged contracts. Derivative products are ‘leveraged’ because only a proportion of their total market exposure needs to be paid to open and maintain a position. Thus, the market exposure with derivative contracts can be several times the cash placed on deposit as margin for the trade, or paid in the form of a premium. Derivative contracts also have the ability to create artificial wealth and this creates additional risk. The artificial wealth skews the values of underlying assets considerably. Fundamentally, risks from derivatives originate with the customer and are a function of the timing and variability of cash flows. Types of Risks Associated with Derivatives In general, the risks associated with derivatives can be classified as credit risk, market risk, price risk, liquidity risk, operations risk, legal or compliance risk, foreign exchange rate risk, interest rate risk, and transaction risk. These categories are not mutually exclusive. Credit risk Derivatives are subject to credit risk or the risk to earnings or capital due to obligor’s failure to meet the terms of a contract. Credit risk arises from all activities that can only be accomplished on counterparty, issuer, or borrower’s performance. Credit risk in derivative products comes in the form of pre-settlement risk and settlement risk. Derivatives are exposed to pre-settlement credit risk or loss due to failure to pay on a contract during the life of a transaction by the counterparty. This credit risk exposure consists of both the replacement cost of the derivative transaction or its market value and an estimate of the future replacement cost of the derivative. Even out-of-the-money derivative contracts have potential pre-settlement credit risk. Derivatives are also subject to settlement risk or loss exposure arising when an organisation meets its obligation under a contract before the counterparty meets its obligation. Settlement risk generally exists for one to two days from the time an outgoing payment instruction can no longer be cancelled unilaterally until the time the final incoming payment is received and reconciled. This risk is due to the fact that it is almost impractical to arrange simultaneous payment and delivery in the ordinary course of business. In the case of international transactions settlement risk may arise because of time zone differences. This risk is usually greater than pre-settlement risk on any given transaction. Market risk Derivatives are also subject to market risk Market risk or risk due to unfavorable movements in the level or volatility of market prices. Market risk results from exposures to changes in the price of the underlying cash instrument and to changes in interest rates. Though market risk can be created or hedged by derivatives such as future or swap in a clear-cut manner, it is not so simple in the case of options. This is because the value of an option is also affected by other factors, including the volatility of the price of the underlying instrument and the passage of time. In addition, all trading activities are affected by market liquidity and by local or world political and economic events. Price Risk Price risk is an extension of the market risk. Price risk is the risk to earnings or capital arising from changes in the value of portfolios of financial instruments. The degree of price risk of derivatives depends on the price sensitivity of the derivative instrument and the time it takes to liquidate or offset the position. Price sensitivity is generally greater for instruments with leverage, longer maturities, or option features. Price Risk can result from adverse change in equity prices or commodity prices or basis risk. The exposure from an adverse change in equity prices can be either systematic or unsystematic risk. As equity markets can be more volatile than other financial markets equity derivatives can experience larger price fluctuations than other derivatives. Commodity derivatives usually expose an institution to higher levels of price risk because of the price volatility associated with uncertainties about supply and demand and the concentration of market participants in the underlying cash markets. Price risk may take the form of basis risk or the risk that the correlation between two prices may change. Liquidity risk All organisations involved in derivatives face liquidity risks. Liquidity risk is the risk to earnings or capital from an organisation’s inability to meet its obligations when they are due, without incurring unacceptable losses. This risk includes the inability to manage unplanned decreases or changes in funding sources. An organisation involved in derivatives faces two types of liquidity risk in its derivatives activities: one related to specific products or markets or market liquidity risk and the other related to the general funding of the institution’s derivatives activities or funding risk. Market Liquidity Risk Market liquidity risk is the risk that an organisation may not be able to exit or offset positions easily at a reasonable price at or near the previous market price because of inadequate market depth or because of disruptions in the marketplace. In dealer markets, market depth is indicated by the size of the bid/ask spread that the financial instrument provides. Similarly, market disruptions may be created by a sudden and extreme imbalance in the supply and demand for products. Market liquidity risk may also result from the difficulties faced by the organisation in accessing markets because of its own or counterparty’s real or perceived credit or reputation problems. In addition, this risk also involves the odds that large derivative transactions may have a significant effect on the transaction price. Funding Liquidity Risk Funding liquidity risk is the possibility that the organisation may be unable to meet funding requirements at a reasonable cost. Such funding requirements arise each day from cash flow mismatches in swap books, the exercise of options, and the implementation of dynamic hedging strategies. The rapid growth of derivatives in recent years has focused increasing attention on the cash flow impact of such instruments. Operations risk Like other financial instruments, derivatives are also subject to operations risk or risks due to deficiencies in information systems or internal controls. The risk is associated with human error, system failures and inadequate procedures and controls. In the case of certain derivatives, operations risk may get aggravated due to complexity of derivative transactions, payment structures and calculation of their values. . Legal or compliance risk Derivative transactions face risk to earnings or capital due to violations, or nonconformance with laws, rules, regulations, prescribed practices, or ethical standards. The risk also arises when the laws or rules governing certain derivative instruments may be ambiguous. Compliance risk exposes an organisation involved in derivatives to fines, civil money penalties, payment of damages, and the voiding of contracts. Besides, legal and compliance risk may adversely affect reputation, business opportunities and expansion potential of the organisation. Foreign Exchange Rates Risk Derivatives traded in the international markets are also exposed to risk of adverse changes in foreign exchange rates. Foreign exchange rates are very volatile. Foreign exchange risk is also known as translation risk. Foreign exchange rates risk in derivatives is the risk to earnings arising from movement of foreign exchange rates. This risk is a function of spot foreign exchange rates and domestic and foreign interest rates. It arises from holding foreign-currency-denominated derivatives such as structured notes, synthetic investments, structured deposits, and off-balance-sheet derivatives used to hedge accrual exposures. Interest Rate Risk Interest rate risk is the risk to earnings or capital arising from movements in interest rates. The magnitude of interest rate risk faced by derivatives from an adverse change in interest rates depends on the sensitivity of the derivative to changes in interest rates as well as the absolute change in interest rates. The evaluation of interest rate risk must consider the impact of complex illiquid hedging strategies or products, and also the potential impact on fee income that is sensitive to changes in interest rates. When trading is separately managed, this impact is on structural positions rather than trading portfolios. Financial organisations are exposed to interest rate risk through their structural balance sheet positions. Transaction risk Another risk associated with derivatives is transaction risk. In fact transaction risk exists in all products and services. Transaction risk is the risk to earnings or capital arising from problems with service or product delivery. This risk is a function of internal controls, information systems, employee integrity, and operating processes. Derivative activities can pose challenging operational risks because of their complexity and continual evolution. Thus, derivatives are subject to various technical risks. The problems surrounding the use of derivatives in recent years have primarily been due to difficulty in understanding these risks and thus using appropriate derivatives for risk management purposes. Derivative use is sometimes misunderstood because, depending on the terms of derivative it may be used to increase, modify, or decrease risk. In addition to the technical risks highlighted herein, there may also be a fundamental risk that the use of these products may be inconsistent with entity-wide objectives. Conclusion Derivatives will continue to be an important business tool for managing an organisation’s risk management. In fact the significance of derivatives is expected to increase with the development of new derivative products that refine and improve the ability to achieve risk management and other objectives. However, it is important that organisation’s using derivatives for risk management completely understand the nature and risks of derivatives. This requires effective control is critical to any well-managed derivative operation. References: Aristotle, Politics, trans. Benjamin Jowett, vol. 2, The Great Books of the Western World, ed. Robert Maynard Hutchins (Chicago: University of Chicago Press, 1952), book 1, chap. 11, p. 453. Bodie, Cane and Marcus (2005), Investments (6th Edition), McGraw Hill. Bodie, Cane and Marcus (2005), Investments (6th Edition), www. highered.mcgraw-hill.com/sites/0072861789/student_view0 [Accessed 30 December 2006] Corporate Use of Derivatives for Hedging http://www.investopedia.com/articles/stocks/04/122204.asp [Accessed 30 December 2006] Frank A. Sortino Stephen E. Satchell, Managing downside risk in financial markets: Theory, Practice and Implementation Gabriel Kolko, Weapons of Mass Financial Destruction, http://mondediplo.com/2006/10/02finance [Accessed 31 December 2006] Internal Control Issues in Derivatives Usage www.coso.org/publications/executive_summary_derivatives_usage.htm [Accessed 31 December, 2006] Kenneth A. Froot, David S. Scharfstein, and Jeremy C. Stein, A Framework for Risk Management, Harvard Business Review, November-December 1994, pp. 91-102. Ludger Hentschel and Clifford W. Smith, Jr., Risks in Derivative Markets, http://fic.wharton.upenn.edu/fic/papers/96/9624.pdf [Accessed 30 December 2006] Market Risk Derivatives, Hedge Funds Challenge Financial Regulators, http://www.ieca.net/news/story.cfm?id=13754 [Accessed 30 December 2006] Rene A Stulz, Demystifying Financial Derivatives, www.cornerstone.com/pdfs/Cornerstone_Research_Demystifying_Financial_Derivatives.pdf Risk Management Guidelines for Derivatives, http://www.bis.org/publ/bcbsc211.pdf [Accessed 31 December 2006] Thomas F. Siems, Financial Derivatives: Are New Regulations Warranted? Financial Industry Studies, Federal Reserve Bank of Dallas, August 1994, pp. 1-13. Thomas F. Siems, Derivatives: In the Wake of Disaster, Financial Industry Issues, Federal Reserve Bank of Dallas (1995): 2-3 Brief 191916Page 1 of 9

Information Technology Ethics Essay

Definitions -the right to be alone – the most comprehensive of rights, and the right most valued by people. (Justice Louis Brandeis, Olmstead v. US, 1928) -the right of individuals to control the collection and use of information about themselves. Legal Aspects Protection from unreasonable intrusion upon one’s isolation. Protection from appropriation of one’s name or likeness.  Protection from unreasonable publicity given to one’s private. Protection from publicity that unreasonably places one in a false light before the public. RECENT HISTORY OF PRIVACY PROTECTION Communication Act of 1934 -it restricted the government’s ability to secretly intercept communications. However, under a 1968 federal statute, law enforcement officers can use wiretapping if they first obtain a court order. Wiretapping – the interception of telephone or telegraph communications for purpose of espionage or surveillance. Freedom of Information Act (FOIA) – (passed -1966, amended-1974) provides the public with the means to gain access to certain government records such as the spending patterns of an agency, the agency’s policies and the reasoning behind them, and the agency’s mission and goals. Fair Credit Reporting Act (1970) – this act regulates the operations of credit-reporting bureaus, including how they collect, store, and use credit information. – it is designed to promote accuracy, fairness, and privacy of information in the files of credit reporting companies and to check verification systems that gather and sell information about people. Privacy Act (1974) – declares that no agency of the U.S. government can conceal the existence of any personal data record-keeping system, and that any agency that maintains such a system, must publicly describe both the kind of information in it and the manner in which the information will be used. – the Central Intelligence Agency (CIA) and the law enforcement agencies are excluded from this act. – the Organization for Economic Cooperation and Development (OECD) â€Å"Fair Information Practices† are often held up as a model of ethical treatment of consumer data for organization to adopt. Summary of the 1980 OECD privacy guidelines Principle Guideline Collection limitation Limit the collection of personal data. All such data must be obtained lawfully and fairly with the subject’s consent and knowledge. Data Quality Personal data should be accurate, complete, current and relevant to the purpose for which it is used. Purpose Specification The purpose for which personal data is collected should be should be specified and should not be changed. Use Limitation Personal data should not be used beyond the specified purpose without a persons consent or by authority of law. Security Safeguards Personal data should be protected against unauthorized access, modification, or disclosure. Openness principle Data policies should exist and a â€Å"data controller† should be identified. Individual participation People should have the right to review their data, to challenge its correctness, and to have incorrect data changed. Accountability A â€Å"data controller† should be responsible for ensuring that the above principles are met. Children’s Online Protect Act (COPA)(1998) – The law states that a website that caters to children must offer comprehensive privacy policies, notify their parents or guardians about its data collection practices, and receive parental consent before collecting any personal information from children under 13 years of age. European Company Directives 95/46/EC (1998) – requires any company that does business within the borders of 15 Western European nations to implement a set of privacy directives on fair and appropriate use of information. Summary of the European Data Privacy Principle Notice Tell all customer what is done with their information. Choice Give customer a way to opt out of marketing. Onward Transfer Ensure that suppliers comply with the privacy policy. Access Give customer access to their information. Security Protect customer information from unauthorized access. Data Integrity Ensure that information are accurate and relevant. Enforcement Independently enforce the privacy policy. Better Business Bureau Online (BBB Online) and TRUSTe – independent, nonprofit initiatives that favor an industry-regulated approach to data privacy which concerned about the government regulation that could have a negative impact on the Internet’s use and growth, and that such regulation would be costly to implement and difficult to change. The BBB Online Seal adheres that the website has a high level of data privacy. The seal program identifies online businesses that honor their own stated privacy policy. The TRUSTe’s main rule is that websites should openly communicate what information it gathers, its use, to whom it will be shared, and does the consumer has a choice of opting out. Gramm-Leach-Bliley Act (1998) -this act required all financial-services institutions to communicate their data privacy policies and honor customer data-gathering preferences by July 1, 2001. This was to make them take actions to protect and secure customers’ nonpublic data from unauthorized access or use. KEY PRIVACY AND ANONYMITY ISSUES GOVERNMENTAL ELECTRONIC SURVEILLANCE Federal Wiretap Act (U.S. Code Title 18 Part 1, Chapter 119, Wire and Electronic Communications Interception and Interception of Oral Communications) – it requires processes to obtain court authorization for surveillance of all kinds of electronic communications, including e-mail, fax, internet, and voice, in criminal investigation. A court order must be issued based on probable cause before a wiretap can commence. roving tap – government authority to obtain a court order that does not name a specific telephone or e-mail, but allows them to tap any phone lines or internet accounts that the suspect uses. Electronic Communication Privacy Act of 1986 (ECPA, U.S Code Title 18, part 2, Chapter 206) – standards for access to stored e-mail and other electronic communications and records. ECPA amended Title III (Omnibus Crime Control and Safe Streets Act of 1968) – extended the title III’s prohibitions against the unauthorized interception (use of person’s oral or electronic communications). -this act failed to address emerging technologies such as wireless modems, cellular, data networks, etc. thus, this communication can still be legally intercepted. Foreign Intelligence Surveillance Act of 1978 (FISA) – allows wiretapping of aliens and citizens in the U.S. based on a finding of probable cause that the target is a member of a foreign terrorist group or an agent of a foreign power. Executive Order 123333 (U.S. Pres. Reagan, 1982) – legal authority for electronic surveillance outside the U.S. It permits intelligence agencies to intercept communications outside the U.S. without a court order. Communication Assistance for Law Enforcement Act (CALEA, 1994) – it covers radio-based data communication. The Federal Communications Commission (FCC) required providers of Internet phone and broadband services to ensure that their equipment can allow police wiretaps. USA Patriot Act of 2001 – Gives sweeping new powers to Domestic law enforcement and International intelligence agencies. It contains several sunsets that gives the government much more surveillance capability. Sunset provisions – can terminates itself or portions after a specific date unless further actions is taken to extend the law DATA ENCRYPTION Cryptography – the science of encoding messages so that only the sender and the intended receiver can understand them. Encryption – the process of converting an electronic message into a form that can be understood only by the intended recipients. Public key encryption system uses two keys Message receiver’s public key – readily available Message receiver’s private key – kept secret Private key encryption system Single key to encode and decode messages RSA (named after Rivest, Shamir and Adleman) – is a public key encryption algorithm, the basis for much of the security that protects Web consumers and merchants. PGP ( Pretty Good Privacy) – uses 128 bit encryption that represents a total of 2128 . DES (Digital Encryption Standard) – the standard for encryption, it employs a 56 bit key that represents 7.2Ãâ€"1016 . (It can now be crack using brute methods) AES (Advanced Encryption Standards) – requires crackers to try as many as 1.1Ãâ€"1077 combinations. IDENTITY THEFT – occurs when someone steals key pieces of personal information to gain access to a person’s financial accounts. – fastest growing form of fraud in the United States. Phishing – is an attempt to steal personal identity data by tricking users into entering the information on a counterfeit Website. Spear-phishing – is a variation in which employees are sent phony emails that look like they came from high-level executives within their organization. Spyware – is a term for keystroke-logging software that is downloaded to users computer without adequate notice, consent, or control for the user. It creates a record of keystrokes entered into the computer with or without internet and will send to the email of the spy when internet connections are available. Identity Theft and Assumption Deterrence Act of 1998 – the congress passed this act to fight identity fraud, making it a federal felony punishable by a prison sentence of 3 -25 years. – researchers estimated that 1 of 700 identity crimes were led to conviction. CONSUMER PROFILING – Companies openly collect personal information about Internet users. They also obtain information without users permission through the use of cookies. – marketing firms uses this information in building databases that contains consumer behavioral data. They want to know about who the users are, what they like, how they behave, and what motives them to buy. Cookies – a text file that a website puts on your hard drive so that it can remember your information later on. Affiliated Websites – is a group or collection of websites served by a single advertising network. 3 Types of Data Gathered POST – it is entered into a blank fields on an affiliated website when a consumer signs up for a service. GET – it reveals what the consumer requested product in a specific store. Click-Stream Data – it is the tracking of the information the user sought and viewed. 4 Ways to Limit/Stop deposit Cookies Set browsers to limit or stop cookies or browse the web using the incognito browsing mode which will remove all marks of your browsing. Manually delete cookies in your hard drives. Download and install cookie management program. Or use anonymous proxy websites to browse websites. However, some websites lock users to browse in their page when cookie is disabled. Personalization software – it is used by marketers to optimize the number, frequency and mixture of their ad placements. It is also used to evaluate how visitors react to new ads. Types of Personalization Software Rule-based – used business rules that are tied to customer provided preferences or online behaviors to determine the most appropriate page views and product information to display. Collaborative Filtering – offers consumer recommendations based on the types of product purchased by other people with similar buying habits. Types of Personalization Software (Continued) Demographic Filtering – it augments click stream data and user supplied data with demographics information associated with user zip codes to make product suggestions. Contextual Commerce – associates product promotions and other e-commerce offerings with specific content a user may receive in a new story online. Platforms for Privacy Preferences (P3P) – shields users from site that don’t provide the level of privacy protection  they desire. Instead of forcing users to find and read through the privacy policy for each site they visit, P3P software in the computers browser will download the privacy policy for each site, scan it and notify users if the policy does not match their preferences. The World Wide Web Consortium, an international privacy group whose members include Apple, Commerce One, Ericsson, and Microsoft, created P3P and is supporting its development. TREATING CONSUMERS DATA RESPONSIBILITY -Strong measures are required to avoid customer relationship problems. Code of Fair Information Practices – most widely accepted approach to treating consumers data responsibly. Guidelines of Code of Fair Information Practices and the 1980 OECD an organizations collects only personal information that is necessary to deliver its product and services. Company ensures that the information is carefully protected and accessible only by those with a need to know, and that consumers can review their own data and make corrections. Company informs customers if it intends to use it’s information for research or marketing, and it provides a means for them to opt out. Chief Privacy Officer (CPO) – executive to oversee data privacy policies and initiatives. Duties of CPO Avoid government regulations and reassure customers that their privacy will be protected. Stop or modify major company marketing initiatives. Training employees about privacy and checking the companies privacy policy for potential risks. Figuring out if gaps exist and how to fill them. Developing and managing a process for customer privacy disputes. WORKPLACE MONITORING Employers monitor workers – Ensures that corporate IT usage policy is followed Fourth Amendment cannot be used to limit how a private employer treats its employees. – Public-sector employees have far greater privacy rights than in the private industry. Privacy advocates want federal legislation – To keeps employers from infringing upon privacy rights of employees. SPAMMING – the transmission of the same email message to a large number of people. Spammers target individual users with direct email messages, building their mail list by scanning Usenet postings, buying mail lists or searching the web for addresses. – extremely inexpensive method of marketing. – used by many legitimate organizations. – can contain unwanted and objectionable materials. Controlling the Assault of Non-Solicited Pornography and Marketing(CAN-SPAM)  the act says it is legal to spam provided that the message meet a few basic requirements: (1) spammers cannot disguise identity, (2) there must be a label in the message specifying that it is an ad or solicitation, and (3) include a way that the recipient can stop the receiving of spam. The act failed to slow the flow of spam but instead, it actually increased the flow of spam by legalizing it. ADVANCED SURVEILLANCE TECHNOLOGY Advanced surveillance technology provide a new data gathering capabilities, however, these advance can also diminish individuals privacy. Advocates of the technology argue that people have no legitimate expectations of privacy in a public place. Camera Surveillance – is one of the most common advanced system used in surveillance nowadays. It has the capability to record events, detecting unusual behaviour, automatically capturing important events, and used in monitoring day to day events in different places. Facial Recognition Software There have been numerous experiments with facial recognition software to help identify criminal suspects and other undesirable characters. It has been first tested by the Rampart Division of the Los Angeles Police Department and yielded a result. Global Positioning System (GPS) These are chips placed in different devices to monitor locations of the  users. It is useful in locating callers of 911, parents monitoring their children, etc.

Life Span and Development and Personality

Life Span Development ad Personality Christina Schwartz PSY/300 17 March 2013 Richard Alpert Abstract I have selected a famous individual from the 20th and/or 21st century; Princess Diana. I conducted research concerning the background of Diana to determine what forces impacted her life from the viewpoint of developmental psychology. Diana Frances Spencer, better known as Princess Diana or Lady Di was born in 1961 in Norfolk; she was the younger daughter of Edmund Roche and Frances Rosche. In 1964 Diana’s parents divided and her mother remarried Peter Kydd.Diana’s education came from a private boarding school for girls in Norfolk. In 1977, after finishing her education Diana went to see her father to join him and her sister Sarah in attending an event knowing that wealthy upper class royalty were on the guest list. This would be the first encounter with Charles the Prince of Whales, but it wasn’t until a 1980 festivity after a polo match that she would run into P rince Charles again. Fast forward a little over a year to February 1981 when Prince Charles proposed, and Diana accepted; the engagement was officially announced on February 24th at a press conference.During that press conference the two were asked if they were in love, Diana responded with ‘of course’ and Charles with ‘whatever love is’ which much later in time would be reflected back on revealing a more accurate image of what the marriage truly entailed (Reynolds, 2011). Diana was born into wealth and royalty with her father Earl Spencer who was a personal aide to King George VI and to Queen Elizabeth II, and the godson of Queen Mary. (Lewis, 2013) After Diana’s parents divorced in 1964 her father gained guardianship of the children and her mother somewhat disconnected herself from their lives after running away with a wealthier man.Diana being born into royalty, and being subjected to a certain lifestyle, a certain expectation of future endeavors and relationships from infancy set the tone in her future and what was to come. Although Diana’s road to love, happiness, and a family would come, it had its difficult times, as a young child the absence of her mother was difficult to handle. Diana had feelings of abandonment and rejection after her mother left, but took comfort in caring for her youngest sibling; her brother Charles (Princess-Diana. om, 2013). Taking the motherly role for her younger brother came naturally, and with this would come the interest in being around and caring for younger children, along with having a family of her own some day. Although hereditary traits along with environmental factors influenced Diana’s persona there is a level of moral and cognitive psychological development that is intertwined with her experiences. Moral development has a biological emphasis, which focuses on characteristic goodness of individuals.In the midst of the engagement announcement and planning a wedding with Prince Charles Diana had her first of many negative experiences with the paparazzi. One of the first popular images that caused uproar in the royal family was taken by cleaver paparazzi while Diana was attending to a kindergarten class. He positioned Diana and two children strategically with the sun beaming down behind them while Diana was wearing a thin white skirt, which revealed a silhouette of her legs; from the moment the photo was published Diana learned she could not be so trusting of others and built a guard to the outside world.At first it may have been a subconscious defense mechanism, but it developed into something much more serious. B. F. Skinner who developed a personality theory stated, â€Å"Personality is acquired and maintained through the use of positive and negative reinforcers† (Credo, 2001). Although Diana was born into royalty she did not carry a high profile until the relationship with Prince Charles, the significance of her appearance in general, much less in the media never crossed her mind.This experience was a turning point in her life that leads us to believe she carried traits that associate with Skinner’s behavioral theory. Diana had to learn the hard way that not everyone in her forthcoming life would be her friend. The famous photo symbolizes Diana’s trust in others being taken advantage of as a negative reinforcement; she would never allow such a thing to happen to her again. Although the chaos of the photo eventually passed in hindsight the photo was just the precursor of what was to come.After marriage and children Diana became known for her charity work and her loving, charismatic personality. Social-cognitive theories emphasize interactions between a person and events according to (Credo, 2001). One might say social-cognitive personality theories contradict with Diana’s personality; one also might say this theory is what turned Diana into the iconic humanitarian she was. All individuals endure n egative experiences but we also learn from them through reinforcement and through revision of outcomes.Diana took her experiences good and bad and used it as motivation to do worthy things for other people. B. F. Skinner believed that positive behavior, which receives positive reinforcement, causes the individual to adjust displays of process and the same with negative actions and reinforcements. Diana faced some serious challenges in her lifetime being in the public eye and the wife of a Prince as well as the mother of two boys, William and Henry. With the media watching the families every move it was only a matter of time until the truth was leaked out.The truth, being that Diana was living in a world full of lies and betrayal. Through the years there had been speculation of Charles’ infidelity, with a life long friend Camilla. It wasn’t until Diana un-expectantly showed up at the country home in Highgrove and found the house a mess, with couch cushions on the floor, bath towels dirtied and so fourth; it was obvious what was taking place. Through this period Charles accused Diana of self-mutilation, being depressed, eating disorders, and even possible boarder line personality disorder, which was never confirmed.With the deterioration of the marriage full fledged it wasn’t long before Diana had her own lover outside of her marriage as well. During such a destructive time in Diana’s marriage, family, and life in general she still managed to continue and expand on her charity work. In 1987 Diana visited the first ward for AIDS sufferers in Britain (Reynolds, 2011). She expressed empathy and concern for the ill individuals as well as those within the Red Cross and other charities. The ability to do for others while her marriage and family are being torn apart in the public eye displays characteristics of a truly remarkable human being.The cognitive-social approach states â€Å"personality reflects a constant interplay between environ mental demands and the way the individual process information about the self and the world† (Kowalski & Westen, 2011). It seems as though Diana made a conscious decision to not let the media, or the position she held as the Princess of Whales to make or break her interest in charitable work and motherhood. Through the divorce of the couple Diana was forced to detach from more than 100 charities she associated with, but continued to work for the ones she could.She was able to take her negative experiences in her marriage, process them mentally, accept them emotionally and move forward with her son’s and a new life. The strength she portrayed in front of the world signifies behavioral characteristics of cognitive-social theories, even more so after her tragic death. Before, during, and after Diana’s death individuals still find her work notable and encouraging; it is not often this world has been touched by someone so heartfelt and caring, even through the trials a nd tribulations of her life.References 1. (Reynolds, 2011) http://www. oxforddnb. com. ezproxy. apollolibrary. com/view/article/68348? docPos=1 2. (Lewis, 2013) http://womenshistory. about. com/od/diana/p/princess_diana. htm 3. (Princess-Diana. com, 2013) http://www. princess-diana. com/diana/childhood. htm 4. (Credo, 2001) http://www. credoreference. com. ezproxy. apollolibrary. com/entry/worldsocs/personality_theories 5. (Kowalski & Westen, 2011) https://ecampus. phoenix. edu/content/eBookLibrary2/content/eReader. aspx

Essay on Military - 731 Words

Military Organizational Structure The Toad Military Organizational Structure Organization involves a intentional formalized structure of roles. People working together towards a common goal, but in specialized areas. The overall effectiveness of any particular association is directly proportional to the functioning of its members. As a firm increases in size the participants lose sight of the concept of teamwork. To maintain the competitive edge a corporation must remain flexible. To this end, varying styles of organizational structure have been implemented. Much of this framework is determined by the business type, goals to be achieved, and even the sociological level of advancement. Our armed forces today reflect this philosophy.†¦show more content†¦These numbers alone are not sufficient for adequate results in reaction to many needed operations. To make up for the lack of qualified people, the reserve forces are part of the new reactionary force. In any contingency worldwide these assets may be called up with short notice for global engagement. National Guard personnel serve under the command authority of their respective state or territorial governors until mobilized for a federal mission. This unique status does involve some creative managerial solutions. As a National Guard member I have noticed a uncommon organizational structure utilized. In some ways my unit is organized as a network system. The network is comprised of formal and informal structures. Work has been divided among varies specialized shops centering around maintaining expertise in that one area. Other aspects of the unit show a matrix structure to be present. The fact I have more than one supervisor, as in a project and functional manager illustrate (Wheelen and Hunger 231). This is manifested by the emphasis that work is important not the formal structure surrounding it (Nohria and Eccles 193). 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