Broadcast Journalists and The Inverted Pyramid Style of Presenting the

In 1965, American broadcast journalist Edward R. Murrow stated, â€Å"We cannot make good news out of bad practice.† Although this quotation was originally in response to critics who wanted him to ignore racial problems to promote a better public image abroad, it can also be applied to the importance of presenting a quality newscast. In America, news media is considered the forth branch of the United States government. This concept stems from a belief that it is the news media's responsibility to deliver clear and accurate information to the populace in a compelling manner. Considering the effect the news has on society, as journalism scholars we need to ask why clarity and attention are important in a newscast and what can be done to ensure clarity and attention is used in a news video or news broadcast? Using the 2010 textbook Broadcast News Handbook and personal experiences from Digital News class, we will analyze the following questions. To do so, we will examine the importance of clarity and attention in a newscast, and then finally take a look at three aspects to ensure clarity and attention is in a news video or news broadcast. First, there is the importance of clarity and attention in a newscast. The history of delivering news has evolved throughout the years. From exchange information via radio to have a having a television channel’s primary objective be producing news, the news media have grown in the methods notifying the public. However, a couple of things that hasn’t change are the media’s goal of delivering clear and engaging products. As Assistant Professor Dave Cupp of the University of North Carolina at Chapel Hill explained in a 2010 article, â€Å"Today the world remains as confusing as ever, and new technolog... ... a report remember to record scenes that involve some sort of action, the viewer will be persuade to pay attention because the are interested in what the people are doing. CONCLUSION By understanding why clarity and attention are important in a newscast and observing three ways to ensure these functions are used in a news video or news broadcast, we can see the responsibility the forth branch has to society. Edward R. Murrow attempted to accomplish these traits in all of his broadcasts. Canadian educator Marshall McLuhan’s contention is that â€Å"the medium is the message.† However, the authors of the textbook believe that the message is the message and the medium is simply a means to get that message to an audience. Regardless which statement you agree with, the main point is that the message is important and we, as reporters, have an obligation to present it.

The Matrix Essay -- essays research papers

The Matrix In 1999 directors/writers Larry and Andy Wachowski (Bound) made a dark and often disturbing Science Fiction film, The Matrix. With the production expertise of Joel Silver (Commando, Predator, Lethal Weapon series, and Die Hard series), Andrew Mason (The Crow, Dark City) and Barrie M. Osborne (Face/Off, The Fan, Child's Play), The Matrix is sure to be a favorite among Science Fiction movie fans for years to come. The Matrix won the Oscar award in all four categories it was nominated for; Best Sound, Best Sound Affects Editing, Best Visual Effects, and Best Film Editing. More DVD’s of The Matrix were sold then the movie â€Å"The Titanic†. The hard work of choreographer Yuen Wo Ping (Iron Monkey, Fists of Legends) make the fight scenes very much in the Hong Kong style of film-making, including the part where one of the fighters taunts the other, by daring them to be aggressive. The music featuring artists like Rob Zombie, Ministry, Deftones, and Monster Magnet, complement s the mood of the movie remarkably well. The Matrix is filled with the spectacular visual effects of a science fiction masterpiece, and at the same time has the killer fight scenes that are included in a true action movie. â€Å"Have you ever had a dream Neo, that you were so sure was real†¦what if you were unable to awaken from that dream? How would you know the difference from the dream world and the real world?† is one of many powerful quotes spouted out by the mysterious Morpheus (Laurence Fishburne) throughout The Matrix. This particular quote however, is important to the audience because it serves as a life preserver to those who might get lost in the movie’s rather complex plot. It helps establish a common ground with each and every viewer alike in that everybody has had an experience where they couldn’t tell if they were dreaming or not. In this apocalyptic science fiction action movie, Thomas Anderson (Keanu Reeves) is a mild mannered young man, who works as a systems programmer for a respectable software company. In his spare time Anderson assumes the role of Neo, a computer hacker who is guilty of every computer crime for which there exists a law against. Throughout his Anderson has had strange dreams of unreality, but hasn't been able to figure out their true meaning. He believes the only way to find the answer is to consult an all-powerful computer hacker (the fore mentioned ... ...e seen in a human being, as he dodges all of the bullets fired at him except one. The visual effect used to show Neo dodging the bullets in slow motion creates a sort of break dancing look that is astonishing. References to this film have appeared in movies as diverse as Battlefield Earth, Charlie's Angels, Deuce Bigalow: Male Gigolo, Kung Pow: Enter the Fist, Osmosis Jones, Scary Move, Shrek, and Swordfish; as well as a few commercials and television shows. The Matrix's popularity has even transferred itself to the computer desktop in the form of screensavers, desktop themes, and wallpaper. The movie ends with the destruction of the agents by our hero Neo. He finally realizes that he is truly the chosen one. He actually begins to see the matrix for what it really is, and uses his own powers to defeat the agents. I feel that I may have spoiled much of the movie for you in my description, but I will have you know that the rest is quite worth your while. Hearing about this movie is not enough. As stated by the mysterious Morpheus towards the beginning of the movie, â€Å"One cannot be told what the matrix is, he must see it himself.† This movie is definitely worth taking the time to see.

Persuasive Essay Against Capital Punishment -- Papers Death Penalty Ar

Persuasive Essay Against Capital Punishment â€Å"Kill. (Verb) To make someone or something die.† Does anyone really think they have the right to take another person’s life? Apparently yes. Perhaps we should give the judge a knife and tell her that if she has decided that the accused is guilty, she should stab him herself. Perhaps then she would hesitate. But if many people (hundreds or thousands who operate the judicial system) are involved, it spreads, or even divides the feeling of culpability among many. They may feel less guilty, especially if they believe that they are representing the whole society of their country. What makes it seem more â€Å"humane† is the official perspective of it. Death here is a matter of paperwork, not actually a case of ending someone’s life. I am absolutely opposed to the death penalty. In this essay I will try to explain why I think society should not accept this barbaric punishment. The most common argument in favour of the death penalty is that it is a deterrent, i.e. someone who has murder in mind will think better of it when he realises that he could be facing death. However, I do not agree with this. When a murderer commits a crime he believes that he will not be caught. Numerous studies have tried to prove the deterrence factor, but have been unable to. A criminal dreads a lifetime prison sentence more than, or the same as, the death penalty in any case. There are two types of murders: crimes committed on the â€Å"spur of the moment† (i.e. passion crimes which have not been planned) and pre-meditated murder. If it is a crime of passion, the murderer is not thinking of the consequences at t... ... are then disbarred. They have little incentive to fight for the case when their salary may be under  £4 an hour. Finally, who are we to play with the lives of other people? Each person is just one life – how can one life be allowed to designate when the other must finish? Man is man, not God. Only God should have a divine right over a man’s life. Man is equal to man, and for him to take on the role of a superior being can only cause chaos. I believe that it is the duty of a system of justice to protect society from criminals, either by psychological rehabilitation or by imprisoning them for life if necessary; not by murdering them. Capital punishment is used to condemn the guilty of severe crimes. This means: to teach a criminal how to be humane, they must be killed inhumanely. Does this seem logical?

He Nine Steps O the Accounting Cycle

The nine steps of the accounting cycle are You must collect and analyze all transactions. It will determine the effect of their financial position in the business. The equations must balance once the transactions are recorded. Journalize the transactions in the general ledger, which should be organized by the specific account. This should happen at least once a month. The next step is to post to the ledger accounts, this should be step 3 in the accounting process.Prepare a Trial Balance to make sure the process of totaling debits and credits to make sure the sum of debits equals the sum of credits, check to make sure both columns balance out. Journalize and Post Adjusting Entries Use entries that are adjusted: deferrals and accruals. And adjust entries that are made from the company's worksheet, an accounting tool prepared at the end of each period. Make preparation to the Adjusted Trial Balance, This is a sheet used to verify the balance of debits and credits after the adjusting ent ries are made in the accounting cycle.Prepare Financial Statements. Once all adjustments are done, the final trial balance will be used to prepare income statement and balance sheet. Post the Closing Entries and Journalize, and at the end of a fiscal period you must close the temporary accounts. Prepare a post-closing trial balance to make sure that all revenue and expense accounts are already closed, and check the debit and credit balances of all the balance sheet accounts. www. accountingverse. com/accounting-basics/accounting†¦

After the Journey Essay

Steve Clark, who wrote â€Å"Travel Writing and Empire† believes that â€Å"the traveller is altered, sometimes changed utterly† when he or she journeys in an unfamiliar environment; some stories from real life do prove this statement.   There are also well-known fictional travellers who can show how significant and life-changing journeys can be, and this is where we focus.   However, before dealing with these characters, imagine travelling to foreign countries, immersing in other cultures, and either fighting against or indulging in the new experiences.   These experiences, negative or positive, become part of the traveller’s life, however little the effect may appear. Robinson Crusoe’s wanderlust has led him to an experience that he has never thought possible.   All he has longed for is a taste of adventure, but what he has to give in exchange for this adventure is practically his whole life.   Meanwhile, Lemuel Gulliver only wants to relate his travels to other people. He professes that â€Å"I rather chose to relate plain matter of fact in the simplest manner and style, because my principal design was to inform, and not to amuse thee.† (Swift, 1962)   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   â€Å"Robinson Crusoe’s† plot begins with disobedience.     Both Robinson Crusoe’s parents have opposed his desire to go on a voyage. â€Å"He asked me what reasons, more than a mere wandering inclination, I had for leaving father’s house and my native country, where I might be well introduced, and had a prospect of raising my fortune by application and industry, with a life of ease and pleasure†. (Defoe)   Crusoe is reminded by his father that he does not need to seek his fortune or win honour of some kind.   His later wretched condition reminds him of his father’s warnings. â€Å"Robinson Crusoe† is believed to be based on the life of Alexander Selkirk who has run away to sea in 1704.   He has made a request to be left alone in an uninhabited island before being rescued after five years. (Bibliomania) Crusoe’s experience is of course more imaginative and more complex, as Daniel Defoe adds in more adventures for the castaway. Although Crusoe’s situation is not contrived like Selkirk’s, who has clearly requested to be left alone, his strong desire to continue setting out to sea even after a perilous first voyage has led him to a similar fate.   Surviving the first voyage, Robinson Crusoe has continued his adventures and has ended up living in an uninhabited island alone. Crusoe has started the voyage as an inexperienced young man who has lived in comfort; he cannot have gone through his voyages without being changed in some manner.   Crusoe’s love for travel is undeniable.   He has risked not only a secure livelihood in order to pursue the adventure, but also his life.   As a person, he already does not conform to what the society expects of him.   Nevertheless, the castaway experience is still extreme even to an adventurer. Crusoe has to do things that he wouldn’t normally do given his former comfortable lifestyle.   A man who has not been trained to practice a trade, he has learned to create necessary tools and gear ranging from clay containers and clothes, to even a canoe. He has become very self-sufficient and resourceful as needed by the situation.   His daily experiences also range from peaceful inventions to discovering cannibals, saving a native whom he has named â€Å"Friday† and has even earned himself a fortune.   These experiences themselves can affirm that Robinson Crusoe is not the same man who has left his home for the first time.   Robinson Crusoe, who has been expected to live comfortably and without much risk, has proven himself to be capable of seeking his fortune on his own.   He not only changes himself in the process, but he also changes the perceptions of what a person must or must not do in society. Through his example, people are able to see that it can be profitable, although difficult, to go outside of the box that people of Crusoe’s time seem to have locked themselves in.   Crusoe experiences changes in his attitude towards religion.   Even though there is no longer a physical church to attend a mass in, it is in his solitude and with a Bible in hand that he is able to commune with God and nature.    Some critics have noted this as a sign that â€Å"Robinson Crusoe† is a morality story which begins with disobedience and results to conversion. (The Development of the Novel)   What cannot be changed in Crusoe, however, is his humanity.   Humans still long for the company of other human beings.   He does meet and obtain the companionship of the native, Friday, but he is unused to the other man’s culture.   Crusoe later develops a more open-minded attitude towards other cultures because of his immersion into their worlds.   He even tries to understand the cannibalistic ways of the natives. Now, we look at â€Å"Gulliver’s Travels.†Ã‚   Gulliver’s adventures are more fantastical than Crusoe’s.   He encounters little people and giants, and other strange communities.   There must be a change in Gulliver after years of travelling to such places.   In fact, Gulliver has to adapt in each of the four places that he visits. Like Crusoe’s first voyage, Gulliver’s first venture is met with dangerous weather.   This results to his being shipwrecked in Lilliput, where he describes the people to be less than six inches tall. (Swift, 1962)   Gulliver has to convince the Lilliputians that he is harmless.   He later gains their trust and has become the community hero, having been able to help the little people against their rival, the Blefescudans. Gulliver no longer wants to comply with the Lilliputians’ further demands and has to flee to save his life.   After his stay in Lilliput, his numerous adventures include an encounter with giants who make him feel like a Lilliputian, and meeting horses who rule over Yahoos, who are uncivilized human beings. During the various encounters, Gulliver is introduced to different kinds of civilisations.   His understanding of what an empire is broadens, as he encounters the various kinds of kingdoms, with their unique beliefs and practices.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   â€Å"Gulliver’s Travels† is tagged as a satire; Critics believe in the need to study Jonathan Swift’s background in order to fully understand the historical context in which he is writing the novel.   Swift is reported to have prior political influence, when he was still supporting the Whig Party.   He shifts his alliance to the Tory Party upon hearing that the Whig Party is opposed to the Anglican Church.   When the Whig Party gains more influence, Swift loses his.   This is believed to have caused Swift’s hostility against the government in London. (Glasgow University Library)   The different characters within the various communities Gulliver encounters in the story are said to be based on real political figures. Lemuel Gulliver is altered by his many adventures.   He has learned that there is not just one type of community for which the others are based.   For each new place, he has to adapt in order to fit into the norm.   Each adaptation is a change in Gulliver.   In fact, his immersion into the world of Houyhnhnms, which are horse-like creatures, has even created a dislike for humans in him.   Gulliver has to re-accustom himself to life with ordinary people when he goes home. â€Å"My wife and family received me with great surprise and joy, because they concluded me certainly dead; but I must freely confess the sight of them filled me only with hatred, disgust, and contempt; and the more, by reflecting on the near alliance I had to them†. (Swift, 1962) This is proof enough that journeys can totally alter the traveller, as is with Gulliver who not only changes a bit but drastically. â€Å"It is easy for us who travel into remote countries, which are seldom visited by Englishmen or other Europeans, to form descriptions of wonderful animals both at sea and land. Whereas a traveller’s chief aim should be to make men wiser and better, and to improve their minds by the bad, as well as good, example of what they deliver concerning foreign places.† (Swift, 1962) The above declaration by Gulliver signifies his belief that the traveller can effect a change in how other people think.   Even in real societies, people who have experience living in, or visiting foreign places come back with new beliefs that either blend with or completely erase their old ones.   They may not be completely different people, because Robinson Crusoe still longs for the company of fellowmen, but there are definite changes.   Each experience in life leaves indelible marks in the person who goes through it. Moreover, Gulliver has to undergo an adjustment period after being almost chameleon-like in his adjustments in different civilisations.   Robinson Crusoe has to transition from his comfortable and secure life to a life that is at times spent in solitude and sometimes spent in danger.   He also becomes better in touch with his spiritual side, while becoming a person who can survive anywhere.   It can be then concluded that the two classic novels, â€Å"Gulliver’s Travels† and â€Å"Robinson Crusoe† support Steve Clark’s idea that journeying into unfamiliar territory will alter or change the traveller completely. References Bibliomania. (n.d.). Retrieved October 18, 2007, from Bibliomania: Free Online Literature and Study Guides: http://www.bibliomania.com/0/0/17/31/frameset.html Defoe, D. (n.d.). Robinson Crusoe. Retrieved October 17, 2007, from Dead Men Tell No Tales: http://www.deadmentellnotales.com/onlinetexts/robinson/crusoe.shtml Glasgow University Library. (n.d.). Special Collections Department. Retrieved October 18, 2007, from http://special.lib.gla.ac.uk/exhibns/month/jan2006.html Swift, J. (1962). Gulliver’s Travels and Other Writings. (M. K. Starkman, Ed.) New York: Bantam Books. The Development of the Novel. (n.d.). Retrieved October 18, 2007, from University of St. Andrews: http://www.st-andrews.ac.uk/~cjmm/Crusoelec.html   

Children Getting Parents in Trouble

Although children are a parents responsibility, parents are not constantly with their children to keep them from doing irresponsible acts. Parents can only control what their children are doing if they are in their sight. Children will often blame their parents for their actions when in reality the child is either pressured by a friend, curious, or wanting to live the â€Å"life of a teenager† and have fun. It is argued that parents should know where their children are but, children are not stupid and have many ways of working around that. They could tell their parents that they are going to go to their friends house and spend the night. The parents can only trust that their child is actually there. Then, there is a problem with parents who do not care at all about what their children do. If a child (child 1) was to spend the night at a friends house (child 2) and the parents of child 2 did not care at all about what the kids did and the kids went out to a party and got really drunk causing them to make some bad decisions, probably drunk driving, arsine, or murder. Than the parent that should have been watching the children is at partial fault. But they are not always the ones who get charged for the crime and it’s the other parents who get the blame. Parents can not help the curiosity that their children have. Children know right from wrong and know that what they are doing is not appropriate. They need to be punished for what they have done, if every child got away with crime and their parents were charged, than the child would never learn from their mistakes and think that they will be able to get away with anything and continue to commit crimes.

Enterprise Risk Management

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