...fourth largest company according to “Global Forbes” in 2000. The company’s leading position in the global financial services market gives it significant bargaining power. However, exposure to the U.S sub prime crisis was the reason for its collapse. The AIG Financial Products unit, unfortunately, was operating as a company within the larger company in that the 500 employees of the unit who specialized in derivatives and complex financial contracts that were tied to subprime mortgages, sold credit default swaps (CDS) to financial institutions who in turn sold mortgage-based securities to the public. This of course contributed to the financial crisis of 2008 in that banks sold mortgages to people who were not credit worthy, because they received credit protection as a result. AIG made these collateralized debt obligations deals with a very small fraction of actual money on hand. Because most of the CDOs were attached to home mortgages, and AIG’s counterparties involved themselves in bad mortgage lending and did not have sufficient capital to cover loans, AIG was facing bankruptcy due to the fact that now it had to honor its contractual obligations towards these financial institutions all at once during the 2008 crisis. Even AIG could not predict the direction of the mortgage market despite having financial experts using...
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...Group (AIG) and American International Group Financial Products (AIGFP) were directly in the center of the collapse. Within AIG and AIGFP, a few managers stood out when it came to involvement in the financial scandal. Maurice “Hank” Greenberg is one manager that undeniably stands out. He was the founder and Chief Executive Officer of AIG until 2005. He micromanaged his workers and gave them little freedom (Bandler, Boyd, and Burke). Obviously, his managing tactics influenced the demographics of AIG tremendously. Joe Cassano, another core manager, was the CEO of AIGFP. He implemented credit-default swaps (CDSs) and oversold them, resulting in AIG having to file for bankruptcy because it couldn’t pay the buyers of these CDSs back (Serwer and Sloan). While these two men were heavily involved in the cause of the collapse, they raised many questions regarding the fact that AIG’s questionable decisions passed regulations and audits. Many people have looked into how AIG and AIGFP didn’t cause fuss while they were getting audited. How did they pass all of these regulations without any problems? It has been noted that Greenberg had previous relations with a lot of so-called “big-shots” in the business world that could have had an impact on the results of these audits and regulation checks (Cass Business School). This may or may not have influenced the result of AIG during 2007 and could have potentially prevented the financial crisis if regulators did end up lying about AIG. Many...
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...Computerizing a Paper System: Introducing Electronic Data Interchange to AIG Tamaerra Lodge IS535ON_J Professor Brooke January 22, 2012 Table of Contents Proposal Topic……………………………………………………………1 Business Problem……………………………………………....1 Benefits to Organization………………………………………...2 Business and Technological Approaches……………………….2 Audience………………………………………………………..3 Milestone 1 Restating the Problem……………….…………………………..4 Company Background………………..…………………………4 Business Issues…………………………………………………5 Benefits of Electronic Data……………………………………...5 Initial Business/Technical Approach …………………………...6 High Level Solution…………………………………………….7 References……………………………………………………………...8 1 Proposal Topic This proposal briefly discusses the timely process in which the risk management department of American International Group(AIG) uses to quote their commercial auto(CA) business lines, how it effects the deliverance of quotes to their clients and approaches to a solution. AIG uses a standardized commercial auto rating system(CARS) that electronically outputs a rating. The input procedure isn't electronic by any means and can be very timely and costly due to the number of people involved, the excessive amount of paper being used and the turn around time for their clients to receive a quote. If AIG adopted a more technical approach to their quoting procedure, time and paper...
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...Derivative triggered the financial terror Jiho Jang Warren Buffett already said the derivatives “financial weapons of mass destruction.” It’s not surprising. The derivative products have triggered the most destructive financial crisis since the stock market crash in our history. The causes of financial crisis in the late 2000s are still controversial. Some assert that it is just the financial system, and regulation failure and the other insist that resulted from the financial engineering failures. The explosive growth in derivative contracts occurred after 1999 when the Glass-Steagall Act was repealed, which allowed banks to operate as brokerage. Glass-Steagall, adopted in 1933, separated brokerages and banks to ensure banks would no longer be involved in risky transactions. And credit rating agencies were slow to downgrade the credit rating of the securities. Because the rating agencies did not disclose the downgrades in time, many investors were misled to think that securities were still safe to invest in, and it accelerated the market crisis uncontrollably. The initial intention of derivatives was to defend against risk and protect against the losses and downside. However, derivatives were the most important tools to trigger the financial market collapse. Those tools usually used to take on more risk to maximize profits and returns rather than to defend against risk and to protect against the losses. All kinds of financial products are transferred to the...
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... to bring so much value to a business. Kiva describes their system, “Using hundreds of autonomous mobile robots and sophisticated control software, the Kiva Mobilerobotic Fulfillment System enables extremely fast cycle times with reduced labor requirements, from receiving to picking to shipping. The result is a building that is quick and lowcost to set up, inexpensive to operate and easy to change anywhere in the world.” In the video in the “If Programmers Made Planes” I think the major idea of this advert is continuous improvement. Unlike the airplane which cannot fly unless every component is functioning properly software can often exist with incomplete features or things that need improvement. All modern software solutions should be designed /coded in a fashion which allows for easy improvement, bug fixing, and seamless...
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...derivatives, a heated debate broke out over their application in a dislocated market. The foremost concern was that forcing financial institutions to mark down assets to their current market prices actually causes further declines. Regulators largely dismissed such concerns, but acknowledged that the existing standards could use additional clarification and modification. Many scholarly studies have since concurred that the rules should not be replaced, but suggest that additional measures should be taken to avoid their potential procyclical effects. Journal of Derivatives & Hedge Funds (2011) 17, 122–132. doi:10.1057/jdhf.2011.6; published online 9 June 2011 Keywords: mark-to-market; fair value accounting; credit default swaps; derivatives; AIG INTRODUCTION And it came to pass at the end of two full years,...
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...The Role of Financial Institutions & Risk Management in Subprime Crisis Vikrant Joshi The Role of Financial Institutions & Risk Management in The Subprime Crisis This paper discusses the role of financial institutions & their risk management strategies in the subprime mortgage crisis. The downturn in the housing and mortgage markets precipitated the first phase of the financial crisis in August 2007 when the solvency of a number of large financial firms was threatened by huge losses in complex structured financial securities. Why did these firms have such high concentrations in mortgage-related securities? Given the information available to firms at the time, these high concentrations in mortgage-related securities violated basic principles of modern risk management. Introduction: This paper analyzes the role of financial institutions in the light of risk management and corporate governance in the events leading to the subprime crisis. This paper explores the following question: Given the tremendous advances in financial risk measurement and management, why was the solvency of large and complex financial firms threatened by large losses in the mortgage market? First, the subprime mortgage market was about $1.3 trillion. Even a very high percentage loss in this market seemed manageable, given the overall size of U.S. and world debt markets. Commonly cited reasons such as high mortgage defaults in 2006 and 2007 do not provide a sufficient...
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...Are Science and Religion in Conflict? Name PHI 103 Instructor Date The economic crisis that struck the world between 2008 to 2009 had such resounding adverse impacts that brought even the mightiest economies to its knees. Even at present, the far-reaching effects of the crisis remain almost palpable and may be seen in high unemployment rates, economies still in recession and seemingly insurmountable national deficits. The United States, where the crisis had its beginnings continues to suffer from the recession even if it is gradually recovering. The present problems in the Euro zone may be partly attributed to the recession of 2008. Because of these, many scholars, economic analysts, researchers and businessmen continue to endeavor up to now to discern what the real cause of the economic crisis was in the hopes that it will not happen again. Many people attribute the global economic meltdown to the collapse of the subprime sector in the United States. To put it simply, the mortgage sector was blamed for the crisis because of how many financial instruments were collateralized by mortgages of people who had bad credit histories. When too many of them failed to meet their obligations, it began a series of defaults that ultimately collapsed not only the mortgage industry but the financial industry as well. All those that have investments in both sectors, local and foreign entities, also became affected as they lost what they have invested...
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...How did Financial Reporting Contribute to the Financial Crisis? Mary E. Barth Graduate School of Business Stanford University Stanford, CA, 94305 mbarth@stanford.edu. Wayne R. Landsman Kenan-Flagler Business School University of North Carolina at Chapel Hill, Chapel Hill, NC 27599 wayne_landsman@unc.edu. May 2010 Forthcoming, European Accounting Review, 2010 We appreciate comments from seminar participants at the Bank of Spain, Rob Bloomfield, Elicia Cowins, Hilary Eastman, Gavin Francis, Christian Kusi-Yeboah, Jim Leisenring, Martien Lubberink, Richard Rendleman, David Tweedie, and an anonymous reviewer. We acknowledge funding from the Center for Finance and Accounting Research at UNC-Chapel Hill and the Stanford Graduate School of Business Center for Global Business and the Economy. Electronic copy available at: http://ssrn.com/abstract=1601519 How did Financial Reporting Contribute to the Financial Crisis? Abstract We scrutinize the role financial reporting for fair values, asset securitizations, derivatives, and loan loss provisioning played in the Financial Crisis. Because banks were at the center of the Financial Crisis, we focus our discussion and analysis on the effects of financial reporting by banks. We conclude fair value accounting played little or no role in the Financial Crisis. However, transparency of information associated with asset securitizations and derivatives likely was insufficient for investors to assess...
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...How did Financial Reporting Contribute to the Financial Crisis? Mary E. Barth & Wayne R. Landsman a a b Graduate School of Business , Stanford University , Stanford, CA, USA b Kenan–Flagler Business School , University of North Carolina at Chapel Hill , Chapel Hill, NC, USA Published online: 07 Jul 2010. To cite this article: Mary E. Barth & Wayne R. Landsman (2010) How did Financial Reporting Contribute to the Financial Crisis?, European Accounting Review, 19:3, 399-423, DOI: 10.1080/09638180.2010.498619 To link to this article: http://dx.doi.org/10.1080/09638180.2010.498619 PLEASE SCROLL DOWN FOR ARTICLE Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) contained in the publications on our platform. However, Taylor & Francis, our agents, and our licensors make no representations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of the Content. Any opinions and views expressed in this publication are the opinions and views of the authors, and are not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be relied upon and should be independently verified with primary sources of information. Taylor and Francis shall not be liable for any losses, actions, claims, proceedings, demands, costs, expenses, damages, and other liabilities whatsoever or howsoever caused arising directly or indirectly in connection with, in relation to or arising out of the...
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...The foundations of Henri Fayol’s administrative theory Daniel A. Wren David Ross Boyd Professor Emeritus and Curator, Harry W. Bass Business History Collection, University of Oklahoma, Norman, Oklahoma, USA Arthur G. Bedeian Boyd Professor, Louisiana State University, Baton Rouge, Louisiana, USA John D. Breeze Independent Scholar and Business Owner/Manager, Calgary, Alberta, Canada Keywords Management theory, History Abstract Among modern scholars and students there is an increasing distance between the fundamenta l thoughts of early management writers and contemporary , often secondary , accounts of how these pioneers develope d their ideas. This shortcomin g can be remedied by seeking original sources from when a pioneer’s ideas were being formulated and from the context within which this occurred. We examine examples of how others have furthered our understandin g of management history by the discovery and translation of pioneerin g writings and present a rare, out-of-prin t translation and a previousl y untranslate d and unpublishe d presentatio n from the French pioneer, Henri Fayol. These presentation s to his colleague s in the mineral industr y reveal Fayol’s early reflection s as they would later evolve into his classica l book, Administratio n Industriell e et Ge Ârale. Âne Management Decision 40/9 [2002 ] 906±918 # MCB UP Limited [ISSN 0025-1747] [DOI 10.1108/0025174021044110 8] As management historians, we are seldom able to trace the formative thinking...
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...Financial Services Practice Journey III: The Next Frontier in Property and Casualty Insurance The Challenge of Profitable Growth Journey III: The Next Frontier in Property and Casualty Insurance The Challenge of Profitable Growth Contents Introduction Dramatic improvement and a paradigm shift 1 A Paradigm Shift The exit of undisciplined capacity Strengthened risk management skills Stronger foundational pillars The Implications The risk journey continues – with profitable growth as the new frontier 7 9 10 13 17 Continuous improvement of risk management Growing profitably in a competitive industry Lessons and barriers Levers to drive growth Upgrading the foundational pillars Conclusion Looking forward 17 21 28 38 43 Journey III: The Next Frontier in Property and Casualty Insurance The Challenge of Profitable Growth 1 Introduction Dramatic improvement and a paradigm shift In our first Journey report, covering 1979 to 1993, we reached three main conclusions about performance in the property and casualty insurance industry: 1. Risk management is the primary driver of success, not investment performance, expense management or financial leverage. We suggested that risk management had four components: enterprise risk management, capital management, product market management, and transaction excellence. 2. Performance is remarkably consistent and selfreinforcing. Winners keep winning, while persistent underperformers tend to be acquired...
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...PREFACE In today’s corporate and competitive world, I find that insurance sector has the maximum growth and potential as compared to the other sectors. Insurance has the maximum growth rate of 70-80% while as FMCG sector has maximum 12-15% of growth rate. This growth potential attracts me to enter in this sector and SBI LIFE INSURANCE has given me the opportunity to work and get experience in highly competitive and enhancing sector. This job training also helped me a lot in understanding the process and the challenges faced in building effective distribution channels for life insurance products by establishing network of life insurance advisors or tied agency channel. Table Of Contents Declaration ............................................................................................ Acknowledgement ..................................................................................... Preface ....................................................................................................... Table of contents ....................................................................................... Company Profile ........................................................................................ Chapter: Introduction Purpose ............................................................................................. Scope ..............................................
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...MGMT 407.341 (CRN: 60240), Business Ethics Tuesdays and Thursdays, 4:34 PM to 7:15 PM Summer Semester, June 7 to July 30, 2010 Fort Hood SDC, Room # D-112 A member of the Texas A&M System since 1917 Instructor: Mr. John La Lone, BS-BA, MS-HRM Department: Management, Marketing, and Administrative Systems Office: Room 135A Phone: (254) 519-5472 E-mail: lalone@tarleton.edu Office Hours: Monday, Tuesday, Wednesday and Thursday: 1:30 PM to 4:00 PM. By appointment only. Office Secretary: Ms. Gabriele Fischbacher (254) 519-5437, Fax (254) 526-8403 A portion of this course is delivered via Blackboard Online Learning. http://online.tarleton.edu/Dual/DualLoginPage.htm You are required to check in online via e-mail within Blackboard within two days of this class. 1.0 Course Description: This course is designed to provide the student with a basic examination of the manager’s personal, social, and environmental responsibilities to oneself, ones employees, customers, the general public, the government and other agencies. It is also intended to totally familiarize the student with a basic understanding of Personal Business Ethics Concepts in today’s modern workplace environment. Emphasis will be placed upon the manager’s social and environmental responsibilities to employees, customers and the public. 1.1 Prerequisites: There are no pre-requisites for this course. 1.2 Expanded Course Description: The objective of this course is for each student...
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...Table Of Contents Declaration ............................................................................................ Acknowledgement ..................................................................................... Preface ....................................................................................................... Table of contents ....................................................................................... Company Profile ........................................................................................ Chapter: Introduction Purpose ............................................................................................. Scope ............................................................................................. Limitation............................................................................................ Research methodology....................................................................... Chapter: Findings ............................................................................................. Suggestions ............................................................................................. Annexure ................................................................................................. Refrence and Biblography ...................................................................... Company Profile: ...
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