The Indonesia Capital Market performance from year 2006-2011 is in good run because the historical data of the capital market show the increase of the price and volume of transaction as the year goes by. Even though there are some decreases in price and volume of transaction for the year 2008 as the impact of the Global Crisis, later on in the year 2009 the market moved in positive action as the financial crisis is being handled even not fully recovered. So, the Indonesia Capital Market is in a good condition and can be better in the future as the financial condition is growing from year to year.
The India Capital Market is the weak-form which means that the stock price doesn’t reflect the information available in the market. There the performance of the India Capital Market is relatively stagnant as the increase from year to year for the price and volume is quite the same where it stands around the average volume for 24946.66667 and average price for 14606.9261
German’s capital market relies on bank-intermediated products and not so much on capital market processes. Two of the pillars in German’s three-pillar banking system, the savings banks and the cooperative banks, have special statutes and are not exposed to the control of the capital market through the usual threat of a change in ownership.
At the early begining of January up to September 2006 and also for the January 2007 up to July 2008 the Volume shows up as 0 points.
Therefore the German Market is not only a good option but an excellent opportunity to finance international projects. The project will be initiated, managed and marketed by us including a the assistance of a German Business Law Firm specialized in the issuance of Private Placement Memorandums/Prospectus including the assistance of Economists and Tax Specialists that have over 25 years of experience.
Because these three countries are located in far distance from one to another as geographically in different islands, the capital markets are having a very low correlation one to another and also the events on one country have a very little impacts on the other two countries, vice versa, this is happening as the market indexes and market efficiencies from all three capital markets are likely to be semi-strong and weak-form thus all the information available in the markets are reflected lightly to the price of stocks and also the movement of the capital markets.
Minggu, 01 Mei 2011
The Analysis of German Capital Market
German’s capital market relies on bank-intermediated products and not so much on capital market processes. Two of the pillars in German’s three-pillar banking system, the savings banks and the cooperative banks, have special statutes and are not exposed to the control of the capital market through the usual threat of a change in ownership.
For the situation at the German Capital MarketAt the early begining of January up to September 2006 and also for the January 2007 up to July 2008 the Volume shows up as 0 points. Therefore the German Market is not only a good option but an excellent opportunity to finance international projects. The project will be initiated, managed and marketed by us including a the assistance of a German Business Law Firm specialized in the issuance of Private Placement Memorandums/Prospectus including the assistance of Economists and Tax Specialists that have over 25 years of experience.
For the situation at the German Capital MarketAt the early begining of January up to September 2006 and also for the January 2007 up to July 2008 the Volume shows up as 0 points. Therefore the German Market is not only a good option but an excellent opportunity to finance international projects. The project will be initiated, managed and marketed by us including a the assistance of a German Business Law Firm specialized in the issuance of Private Placement Memorandums/Prospectus including the assistance of Economists and Tax Specialists that have over 25 years of experience.
The Analysis of India Capital Market
The India Capital Market is the weak-form which means that the stock price doesn’t reflect the information available in the market. There the performance of the India Capital Market is relatively stagnant as the increase from year to year for the price and volume is quite the same where it stands around the average volume for 24946.66667 and average price for 14606.92617.
CRISIL Ratings believes that introduction of the base rate mechanism in India’s banking system, with effect from July 1, 2010, will enhance competition in the short-term lending space. Issuance volumes in the debt capital markets are also likely to increase as the highly rated corporates begin to shift towards these markets. Banks with competitive base rates and efficient treasury operations are well placed to benefit from the new scenario. The base rate for public sector banks is in the range of 7.5 per cent to 8.25 per cent, while that for private sector and foreign banks is lower — by 50-100 basis points (bps)
And for the year of 2011, the Indian shares fell for the fifth straight session Monday as a lower-than-expected February factory output reading sparked concerns that high interest rates and rising raw-material prices were hurting economic growth. News of an earthquake in northern Japan, which the Japan Meteorological Agency said had a magnitude of 7.0, spurred further selling late in the session.
Some major single-day falls of the SENSEX have occurred on the following dates:
1. January 21, 2008 --- 1,408.35 points
2. Oct 24, 2008---1070.63 points
3. March 17, 2008 --- 951.03 points
4. July 6, 2009 --- 870 points
5. January 22, 2008 --- 857 points
6. June 27, 2008 --- 600.00 points
7. February 24, 2011 --- 545.92 points
8. November 12, 2010 --- 432 Points
9. November 16, 2010 --- 444.55 Points
10. February 04, 2011 --- 441.92 Points
CRISIL Ratings believes that introduction of the base rate mechanism in India’s banking system, with effect from July 1, 2010, will enhance competition in the short-term lending space. Issuance volumes in the debt capital markets are also likely to increase as the highly rated corporates begin to shift towards these markets. Banks with competitive base rates and efficient treasury operations are well placed to benefit from the new scenario. The base rate for public sector banks is in the range of 7.5 per cent to 8.25 per cent, while that for private sector and foreign banks is lower — by 50-100 basis points (bps)
And for the year of 2011, the Indian shares fell for the fifth straight session Monday as a lower-than-expected February factory output reading sparked concerns that high interest rates and rising raw-material prices were hurting economic growth. News of an earthquake in northern Japan, which the Japan Meteorological Agency said had a magnitude of 7.0, spurred further selling late in the session.
Some major single-day falls of the SENSEX have occurred on the following dates:
1. January 21, 2008 --- 1,408.35 points
2. Oct 24, 2008---1070.63 points
3. March 17, 2008 --- 951.03 points
4. July 6, 2009 --- 870 points
5. January 22, 2008 --- 857 points
6. June 27, 2008 --- 600.00 points
7. February 24, 2011 --- 545.92 points
8. November 12, 2010 --- 432 Points
9. November 16, 2010 --- 444.55 Points
10. February 04, 2011 --- 441.92 Points
The Analysis of Indonesia Capital market
A. Indonesian Capital Market
The Indonesia Capital Market performance from year 2006-2011 is in good run because the historical data of the capital market show the increase of the price and volume of transaction as the year goes by. Even though there are some decreases in price and volume of transaction for the year 2008 as the impact of the Global Crisis, later on in the year 2009 the market moved in positive action as the financial crisis is being handled even not fully recovered. The year 2009 closed with a stellar performance by the Indonesia Stock Exchange. The stock market index was up 85.85 percent, ranked second after the Shenzhen Stock Index, which increased by 115.27 percent, and ahead of other Asian stock indices such as Mumbai, Shanghai, Hong Kong and Singapore.
There on April 20, 2011 the Jakarta Composite Index hits new record and closed at 3,794.76. Trading volume was about Rp.5.9 trillion ($0.68 billion) and the overall market capitalization up to Rp.3, 384 trillion ($389 billion). For 2011 the performance of the market is increasing as the numbers of events are happening such as the IPO of the Garuda Indonesia. And in the february 2011, the BI rate was increase to 6.75% which is responded positively by the investors at first but then slightly reduced as the investors are hoping the Capital Bank to increase the interest rate again in order to reduce the inflation. So, the Indonesia Capital Market is in a good condition and can be better in the future as the financial condition is growing from year to year.
The Indonesia Capital Market performance from year 2006-2011 is in good run because the historical data of the capital market show the increase of the price and volume of transaction as the year goes by. Even though there are some decreases in price and volume of transaction for the year 2008 as the impact of the Global Crisis, later on in the year 2009 the market moved in positive action as the financial crisis is being handled even not fully recovered. The year 2009 closed with a stellar performance by the Indonesia Stock Exchange. The stock market index was up 85.85 percent, ranked second after the Shenzhen Stock Index, which increased by 115.27 percent, and ahead of other Asian stock indices such as Mumbai, Shanghai, Hong Kong and Singapore.
There on April 20, 2011 the Jakarta Composite Index hits new record and closed at 3,794.76. Trading volume was about Rp.5.9 trillion ($0.68 billion) and the overall market capitalization up to Rp.3, 384 trillion ($389 billion). For 2011 the performance of the market is increasing as the numbers of events are happening such as the IPO of the Garuda Indonesia. And in the february 2011, the BI rate was increase to 6.75% which is responded positively by the investors at first but then slightly reduced as the investors are hoping the Capital Bank to increase the interest rate again in order to reduce the inflation. So, the Indonesia Capital Market is in a good condition and can be better in the future as the financial condition is growing from year to year.
Previous Research
b) Previous Research
a) Sudeep Jain: Indian Shares Fall on Industrial Output Data.
Indian shares fell for the fifth straight session Monday as a lower-than-expected February factory output reading sparked concerns that high interest rates and rising raw-material prices were hurting economic growth. News of an earthquake in northern Japan, which the Japan Meteorological Agency said had a magnitude of 7.0, spurred further selling late in the session.
The Bombay Stock Exchange's Sensitive Index fell 188.91 points, or 1%, to close at 19262.54 after moving between 19242.59 and 19426.30. On the National Stock Exchange, the 50-stock S&P CNX Nifty fell 56.30 points, or 1.0%, to end at 5785.70. Trading volume on the BSE fell to 25.82 billion rupees ($586 million) from Friday's 36.24 billion rupees. Gainers lagged decliners 1,134 to 1,746, while 93 stocks were unchanged.
Mr. Mathews expects Indian shares to remain under pressure due to negative macroeconomic factors such as high crude prices, until software vendor Infosys Technologies kicks off the earnings season Friday. Of the 30 Sensex constituents, 22 ended lower Monday. They were led by Reliance Industries, India's largest company by market capitalization, which fell 1.7% to 1,007.15 rupees.
b) Jim Mueller: How Interest Rates Affect The Stock Market
The first indirect effect of an increased federal funds rate is that banks increase the rates that they charge their customers to borrow money. Individuals are affected through increases to credit card and mortgage interest rates, especially if they carry a variable interest rate. This has the effect of decreasing the amount of money consumers can spend. After all, people still have to pay the bills, and when those bills become more expensive, households are left with less disposable income. This means that people will spend less discretionary money, which will affect businesses' top and bottom lines (that is, revenues and profits).
Therefore, businesses are also indirectly affected by an increase in the federal funds rate as a result of the actions of individual consumers. But businesses are affected in a more direct way as well. They, too, borrow money from banks to run and expand their operations. When the banks make borrowing more expensive, companies might not borrow as much and will pay a higher rate of interest on their loans. Less business spending can slow down the growth of a company, resulting in decreases in profit. (For extra reading on company lending, read When Companies Borrow Money.)
Clearly, changes in the federal funds rate affect the behavior of consumers and business, but the stock market is also affected. Remember that one method of valuing a company is to take the sum of all the expected future cash flows from that company discounted back to the present. To arrive at a stock's price, take the sum of the future discounted cash flow and divide it by the number of shares available. This price fluctuates as a result of the different expectations that people have about the company at different times. Because of those differences, they are willing to buy or sell shares at different prices. When a company is seen as cutting back on its growth spending or is making less profit - either through higher debt expenses or less revenue from consumers - then the estimated amount of future cash flows will drop. All else being equal, this will lower the price of the company's stock. If enough companies experience a decline in their stock prices, the whole market, or the indexes (like the Dow Jones Industrial Average or the S&P 500) that many people equate with the market, will go down.
c) M. Hashem Pesaran: Market Efficiency and Stock Market Predictability
It is often argued that if stock markets are efficient then it should not be possible to predict stock returns, namely that none of the variables in the stock market regression should be statistically significant. Some writers have even gone so far as to equate stock market efficiency with the non-predictability property. But this line of argument is not satisfactory and does not help in furthering our understanding of how markets operate.
The concept of market efficiency needs to be defined separately from predictability. In fact, it is easily seen that stock market returns will be non-predictable only if market efficiency is combined with risk neutrality.
When the Fed increases the federal funds rate, it does not have an immediate impact on the stock market. Instead, the increased federal funds rate has a single direct effect - it becomes more expensive for banks to borrow money from the Fed. However, increases in the discount rate also cause a ripple effect, and factors that influence both individuals and businesses are affected.
a) Sudeep Jain: Indian Shares Fall on Industrial Output Data.
Indian shares fell for the fifth straight session Monday as a lower-than-expected February factory output reading sparked concerns that high interest rates and rising raw-material prices were hurting economic growth. News of an earthquake in northern Japan, which the Japan Meteorological Agency said had a magnitude of 7.0, spurred further selling late in the session.
The Bombay Stock Exchange's Sensitive Index fell 188.91 points, or 1%, to close at 19262.54 after moving between 19242.59 and 19426.30. On the National Stock Exchange, the 50-stock S&P CNX Nifty fell 56.30 points, or 1.0%, to end at 5785.70. Trading volume on the BSE fell to 25.82 billion rupees ($586 million) from Friday's 36.24 billion rupees. Gainers lagged decliners 1,134 to 1,746, while 93 stocks were unchanged.
Mr. Mathews expects Indian shares to remain under pressure due to negative macroeconomic factors such as high crude prices, until software vendor Infosys Technologies kicks off the earnings season Friday. Of the 30 Sensex constituents, 22 ended lower Monday. They were led by Reliance Industries, India's largest company by market capitalization, which fell 1.7% to 1,007.15 rupees.
b) Jim Mueller: How Interest Rates Affect The Stock Market
The first indirect effect of an increased federal funds rate is that banks increase the rates that they charge their customers to borrow money. Individuals are affected through increases to credit card and mortgage interest rates, especially if they carry a variable interest rate. This has the effect of decreasing the amount of money consumers can spend. After all, people still have to pay the bills, and when those bills become more expensive, households are left with less disposable income. This means that people will spend less discretionary money, which will affect businesses' top and bottom lines (that is, revenues and profits).
Therefore, businesses are also indirectly affected by an increase in the federal funds rate as a result of the actions of individual consumers. But businesses are affected in a more direct way as well. They, too, borrow money from banks to run and expand their operations. When the banks make borrowing more expensive, companies might not borrow as much and will pay a higher rate of interest on their loans. Less business spending can slow down the growth of a company, resulting in decreases in profit. (For extra reading on company lending, read When Companies Borrow Money.)
Clearly, changes in the federal funds rate affect the behavior of consumers and business, but the stock market is also affected. Remember that one method of valuing a company is to take the sum of all the expected future cash flows from that company discounted back to the present. To arrive at a stock's price, take the sum of the future discounted cash flow and divide it by the number of shares available. This price fluctuates as a result of the different expectations that people have about the company at different times. Because of those differences, they are willing to buy or sell shares at different prices. When a company is seen as cutting back on its growth spending or is making less profit - either through higher debt expenses or less revenue from consumers - then the estimated amount of future cash flows will drop. All else being equal, this will lower the price of the company's stock. If enough companies experience a decline in their stock prices, the whole market, or the indexes (like the Dow Jones Industrial Average or the S&P 500) that many people equate with the market, will go down.
c) M. Hashem Pesaran: Market Efficiency and Stock Market Predictability
It is often argued that if stock markets are efficient then it should not be possible to predict stock returns, namely that none of the variables in the stock market regression should be statistically significant. Some writers have even gone so far as to equate stock market efficiency with the non-predictability property. But this line of argument is not satisfactory and does not help in furthering our understanding of how markets operate.
The concept of market efficiency needs to be defined separately from predictability. In fact, it is easily seen that stock market returns will be non-predictable only if market efficiency is combined with risk neutrality.
When the Fed increases the federal funds rate, it does not have an immediate impact on the stock market. Instead, the increased federal funds rate has a single direct effect - it becomes more expensive for banks to borrow money from the Fed. However, increases in the discount rate also cause a ripple effect, and factors that influence both individuals and businesses are affected.
The Comparison and Relationship
Factors Measurement
a) Interest Rates
Interest rates determine the cost of doing business for firms and return on assets such as bonds, which serve as substitutes for stocks. Thus, an increase in interest rates makes bonds more attractive relative stocks therefore the price of the stocks will fall subjectively.
b) Average Price
The average price per share is important to know for tax purposes and the average price per share also determines the break-even point for a stock. (www.investorglossary.com)
c) Volume of Transaction
The number of shares or contracts traded in a security or an entire market during a given period of time. It is simply the amount of shares that trade hands from sellers to buyers as a measure of activity. If a buyer of a stock purchases 100 shares from a seller, then the volume for that period increases by 100 shares based on that transaction.
Investopedia explains Volume as an important indicator in technical analysis as it is used to measure the worth of a market move. If the markets have made strong price move either up or down the perceived strength of that move depends on the volume for that period. The higher the volume during that price move the more significant the move. (www.investopedia.com)
Market timers often use volume as an indicator of future price change. For instance, some traders believe that a surge in trading volume on a stock is a precursor to a rapid change in price. The theory is that important news does not reach everyone at the same time, so an unexpected increase in volume suggests important news has been leaked.
d) The Capital Market Efficiency
The assumptions about what information is available to investors and reflected in the price in the Capital Market. Hence, the economist believed and defined three levels of market efficiency:
1. Weak form: all the past prices for a stock were impounded into today’s price; price today simply followed a random walk with no correlation with the past patterns.
2. Semi-Strong form: today’s price reflected not only the all past prices, but also all publicly available information.
3. Strong form: today’s price reflected all the information that could be acquired through a close analysis of the company and the economy.
e) The Capital Market Index
A 'national' index represents the performance of the stock market of a given nation—and by proxy, reflects investor sentiment on the state of its economy. The most regularly quoted market indices are national indices composed of the stocks of large companies listed on a nation's largest stock exchanges, such as the American S&P 500, the Japanese Nikkei 225, and the British FTSE 100.
D. Comparison
Indonesia India German
Interest Rate 0,0675 0.075 0,0125
Average Closing Price 2170,14 14745,4 6171,5
Volume of Transaction 1697181152 24946,7 17054702
Market Efficiency semi-strong weak-form Semi-Strong
Market Index Capitalization- Cap-weighted Total Return
weighted
E. Relationship
Because these three countries are located in far distance from one to another as geographically in different islands, the capital markets are having a very low correlation one to another and also the events on one country have a very little impacts on the other two countries, vice versa, this is happening as the market indexes and market efficiencies from all three capital markets are likely to be semi-strong and weak-form thus all the information available in the markets are reflected lightly to the price of stocks and also the movement of the capital markets.
a) Interest Rates
Interest rates determine the cost of doing business for firms and return on assets such as bonds, which serve as substitutes for stocks. Thus, an increase in interest rates makes bonds more attractive relative stocks therefore the price of the stocks will fall subjectively.
b) Average Price
The average price per share is important to know for tax purposes and the average price per share also determines the break-even point for a stock. (www.investorglossary.com)
c) Volume of Transaction
The number of shares or contracts traded in a security or an entire market during a given period of time. It is simply the amount of shares that trade hands from sellers to buyers as a measure of activity. If a buyer of a stock purchases 100 shares from a seller, then the volume for that period increases by 100 shares based on that transaction.
Investopedia explains Volume as an important indicator in technical analysis as it is used to measure the worth of a market move. If the markets have made strong price move either up or down the perceived strength of that move depends on the volume for that period. The higher the volume during that price move the more significant the move. (www.investopedia.com)
Market timers often use volume as an indicator of future price change. For instance, some traders believe that a surge in trading volume on a stock is a precursor to a rapid change in price. The theory is that important news does not reach everyone at the same time, so an unexpected increase in volume suggests important news has been leaked.
d) The Capital Market Efficiency
The assumptions about what information is available to investors and reflected in the price in the Capital Market. Hence, the economist believed and defined three levels of market efficiency:
1. Weak form: all the past prices for a stock were impounded into today’s price; price today simply followed a random walk with no correlation with the past patterns.
2. Semi-Strong form: today’s price reflected not only the all past prices, but also all publicly available information.
3. Strong form: today’s price reflected all the information that could be acquired through a close analysis of the company and the economy.
e) The Capital Market Index
A 'national' index represents the performance of the stock market of a given nation—and by proxy, reflects investor sentiment on the state of its economy. The most regularly quoted market indices are national indices composed of the stocks of large companies listed on a nation's largest stock exchanges, such as the American S&P 500, the Japanese Nikkei 225, and the British FTSE 100.
D. Comparison
Indonesia India German
Interest Rate 0,0675 0.075 0,0125
Average Closing Price 2170,14 14745,4 6171,5
Volume of Transaction 1697181152 24946,7 17054702
Market Efficiency semi-strong weak-form Semi-Strong
Market Index Capitalization- Cap-weighted Total Return
weighted
E. Relationship
Because these three countries are located in far distance from one to another as geographically in different islands, the capital markets are having a very low correlation one to another and also the events on one country have a very little impacts on the other two countries, vice versa, this is happening as the market indexes and market efficiencies from all three capital markets are likely to be semi-strong and weak-form thus all the information available in the markets are reflected lightly to the price of stocks and also the movement of the capital markets.
German Capital Market ( DAX )
a. History
The DAX (Deutscher Aktien IndeX, formerly Deutscher Aktien-Index (German stock index)) is a blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. Prices are taken from the electronic Xetra trading system. According to Deutsche Börse, the operator of Xetra, DAX measures the performance of the Prime Standard’s 30 largest German companies in terms of order book volume and market capitalization.
b. Recent Performance
The X-DAX Index (DAX) climbed 47.53 points to 7,313.05. The measure, derived from trading in DAX Index futures, provides an estimate of German’s benchmark index. The DAX rose 46.3 points, or 0.6 percent, to 7,295.49 on April 21.
Deutsche Boerse AG (DB1) (DB1 GY): NYSE Euro next said its takeover by Deutsche Boerse to create the world’s biggest exchange operator will produce 100 million Euros ($146 million) more in cost savings than previously announced. The shares rose 0.8 percent to 55.10 Euros.
Kabel Deutschland AG (KD8 GY): Kabel Deutschland Holding AG (KD8) and ProSiebenSat.1 Media AG (PSM) are likely candidates to join the DAX Index when their owners sell more of their stakes, increasing the number of shares traded, Euro am Sonntag reported April 24. Kabel Deutschland’s shares rose 2 percent to 40.69 Euros. ProSiebenSat.1 Media (PSM GY) fell 2.6 percent to 18.05 Euros.
The DAX (Deutscher Aktien IndeX, formerly Deutscher Aktien-Index (German stock index)) is a blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. Prices are taken from the electronic Xetra trading system. According to Deutsche Börse, the operator of Xetra, DAX measures the performance of the Prime Standard’s 30 largest German companies in terms of order book volume and market capitalization.
b. Recent Performance
The X-DAX Index (DAX) climbed 47.53 points to 7,313.05. The measure, derived from trading in DAX Index futures, provides an estimate of German’s benchmark index. The DAX rose 46.3 points, or 0.6 percent, to 7,295.49 on April 21.
Deutsche Boerse AG (DB1) (DB1 GY): NYSE Euro next said its takeover by Deutsche Boerse to create the world’s biggest exchange operator will produce 100 million Euros ($146 million) more in cost savings than previously announced. The shares rose 0.8 percent to 55.10 Euros.
Kabel Deutschland AG (KD8 GY): Kabel Deutschland Holding AG (KD8) and ProSiebenSat.1 Media AG (PSM) are likely candidates to join the DAX Index when their owners sell more of their stakes, increasing the number of shares traded, Euro am Sonntag reported April 24. Kabel Deutschland’s shares rose 2 percent to 40.69 Euros. ProSiebenSat.1 Media (PSM GY) fell 2.6 percent to 18.05 Euros.
Indian Capital Market ( BSE SENSEX )
a. History
The Bombay Stock Exchange SENSEX (acronym of Sensitive Index) more commonly referred to as SENSEX or BSE 30 is a free-float market capitalization-weighted index of 30 well-established and financially sound companies listed on Bombay Stock Exchange.
The 30 component companies which are some of the largest and most actively traded stocks are representative of various industrial sectors of the Indian economy. Published since January 1, 1986, the SENSEX is regarded as the pulse of the domestic stock markets in India. (www.wikipedia.com)
The Index was initially calculated based on the "Full Market Capitalization" methodology but was shifted to the free-float methodology with effect from September 1, 2003. The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float methodology.
Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time (From 1979 onwards). Small wonder, the SENSEX has over the years become one of the most prominent brands in the country.(www.tradersedgeindia.com)
b. Recent Performance
In India, inflation in the first three months of 2011 exceeded a central bank forecast. The increase in wholesale prices last month was more than all 28 estimates in a Bloomberg survey, where the median was 8.36 percent. India’s bonds slumped, driving 11-year bonds yields to a two-month high, after the inflation report. The yield on the 8.08 percent note due August 2022, the most-traded government debt, raised four basis points to 8.24 percent at the 5 p.m. close in Mumbai, according to the central bank’s trading system.
Expansion in India’s $1.3 trillion economy has boosted consumer demand and spurred manufacturing, car sales and credit growth, stoking price risks. Central bank Governor Duvvuri Subbarao on March 17 increased the repurchase rate by a quarter points to 6.75 percent. The next monetary-policy announcement is due May 3.
“Inflation remains stubbornly high and above the level expected by policy makers,” Royal Bank of Canada said in a report after yesterday’s wholesale-price release. “The RBI has been among the most proactive of emerging-market central banks in normalizing policy rates over the last 12 months, but this persistence in price pressures suggests that policy makers will need to do more. (http://www.bloomberg.com/news/2011-04-15/overheating-threatens-asia-as-china-india-rate-rises-fail-to-tame-prices.html)
The Bombay Stock Exchange SENSEX (acronym of Sensitive Index) more commonly referred to as SENSEX or BSE 30 is a free-float market capitalization-weighted index of 30 well-established and financially sound companies listed on Bombay Stock Exchange.
The 30 component companies which are some of the largest and most actively traded stocks are representative of various industrial sectors of the Indian economy. Published since January 1, 1986, the SENSEX is regarded as the pulse of the domestic stock markets in India. (www.wikipedia.com)
The Index was initially calculated based on the "Full Market Capitalization" methodology but was shifted to the free-float methodology with effect from September 1, 2003. The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float methodology.
Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time (From 1979 onwards). Small wonder, the SENSEX has over the years become one of the most prominent brands in the country.(www.tradersedgeindia.com)
b. Recent Performance
In India, inflation in the first three months of 2011 exceeded a central bank forecast. The increase in wholesale prices last month was more than all 28 estimates in a Bloomberg survey, where the median was 8.36 percent. India’s bonds slumped, driving 11-year bonds yields to a two-month high, after the inflation report. The yield on the 8.08 percent note due August 2022, the most-traded government debt, raised four basis points to 8.24 percent at the 5 p.m. close in Mumbai, according to the central bank’s trading system.
Expansion in India’s $1.3 trillion economy has boosted consumer demand and spurred manufacturing, car sales and credit growth, stoking price risks. Central bank Governor Duvvuri Subbarao on March 17 increased the repurchase rate by a quarter points to 6.75 percent. The next monetary-policy announcement is due May 3.
“Inflation remains stubbornly high and above the level expected by policy makers,” Royal Bank of Canada said in a report after yesterday’s wholesale-price release. “The RBI has been among the most proactive of emerging-market central banks in normalizing policy rates over the last 12 months, but this persistence in price pressures suggests that policy makers will need to do more. (http://www.bloomberg.com/news/2011-04-15/overheating-threatens-asia-as-china-india-rate-rises-fail-to-tame-prices.html)
Indonesian Capital Market ( Jakarta Composite Index )
a. History
Jakarta Stock Exchange (JSX) or in Indonesian Bursa Efek Jakarta (BEJ) was a stock exchange based in Jakarta, Indonesia, before it merged with the Surabaya Stock Exchange to form the Indonesian Stock Exchange. Originally opened in 1912 under the Dutch colonial government, it was re-opened in 1977 after several closures during World War I and World War II. After being reopened in 1977, the exchange was under the management of the newly created Capital Market Supervisory Agency (Badan Pengawas Pasar Modal, or Bapepam), which answered to the Ministry of Finance. Trading activity and market capitalization grew alongside the development of Indonesia's financial markets and private sector – highlighted by a major bull run in 1990. On July 13, 1992, the exchange was privatized under the ownership of Jakarta Exchange Inc. As a result, the functions of Bapepam changed to become the Capital Market Supervisory Agency. On March 22, 1995 JSX launched the Jakarta Automated Trading System (JATS). In September 2007, Jakarta Stock Exchange and Surabaya Stock Exchange merged and named Indonesian Stock Exchange by Indonesian Minister of Finance. (www.wikipedia.com)
b. Recent Performance
Indonesia’s rupiah retreated from a seven-year high as the central bank kept its key lending rate unchanged for a second month today. Benchmark bonds declined.
Bank Indonesia kept its benchmark reference rate at 6.75 percent, it said in Jakarta today, a decision predicted by all 18 economists surveyed by Bloomberg News after inflation slowed for a second month in March. Consumer prices rose 6.65 percent last month from a year earlier, compared with an increase of 6.84 percent in February, according to official data released April 1. Core inflation, which excludes food and fuel, accelerated to 4.45 percent from 4.36 percent.
The rupiah fell 0.1 percent to 8,663 per dollar as of 5:17 p.m. in Jakarta, according to data compiled by Bloomberg. The currency touched 8,637 yesterday, the strongest level since April 28, 2004.
The currency’s appreciation may continue this year, Bank Indonesia Governor Darmin Nasution told reporters in Jakarta today. Still, the central bank wants to ensure the currency won’t strengthen too fast, Deputy Governor Hartadi Sarwono said at the same briefing. (http://www.bloomberg.com/news/2011-04-12/rupiah-declines-on-speculation-central-bank-may-hold-key-rate.html)
Jakarta Stock Exchange (JSX) or in Indonesian Bursa Efek Jakarta (BEJ) was a stock exchange based in Jakarta, Indonesia, before it merged with the Surabaya Stock Exchange to form the Indonesian Stock Exchange. Originally opened in 1912 under the Dutch colonial government, it was re-opened in 1977 after several closures during World War I and World War II. After being reopened in 1977, the exchange was under the management of the newly created Capital Market Supervisory Agency (Badan Pengawas Pasar Modal, or Bapepam), which answered to the Ministry of Finance. Trading activity and market capitalization grew alongside the development of Indonesia's financial markets and private sector – highlighted by a major bull run in 1990. On July 13, 1992, the exchange was privatized under the ownership of Jakarta Exchange Inc. As a result, the functions of Bapepam changed to become the Capital Market Supervisory Agency. On March 22, 1995 JSX launched the Jakarta Automated Trading System (JATS). In September 2007, Jakarta Stock Exchange and Surabaya Stock Exchange merged and named Indonesian Stock Exchange by Indonesian Minister of Finance. (www.wikipedia.com)
b. Recent Performance
Indonesia’s rupiah retreated from a seven-year high as the central bank kept its key lending rate unchanged for a second month today. Benchmark bonds declined.
Bank Indonesia kept its benchmark reference rate at 6.75 percent, it said in Jakarta today, a decision predicted by all 18 economists surveyed by Bloomberg News after inflation slowed for a second month in March. Consumer prices rose 6.65 percent last month from a year earlier, compared with an increase of 6.84 percent in February, according to official data released April 1. Core inflation, which excludes food and fuel, accelerated to 4.45 percent from 4.36 percent.
The rupiah fell 0.1 percent to 8,663 per dollar as of 5:17 p.m. in Jakarta, according to data compiled by Bloomberg. The currency touched 8,637 yesterday, the strongest level since April 28, 2004.
The currency’s appreciation may continue this year, Bank Indonesia Governor Darmin Nasution told reporters in Jakarta today. Still, the central bank wants to ensure the currency won’t strengthen too fast, Deputy Governor Hartadi Sarwono said at the same briefing. (http://www.bloomberg.com/news/2011-04-12/rupiah-declines-on-speculation-central-bank-may-hold-key-rate.html)
Introduction of Capital Market
Investopedia.com explains Capital Market as a market in which individuals and institutions trade financial securities. Organizations/institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds. Thus, this type of market is composed of both the primary and secondary markets. And as both the stock and bond markets are parts of the capital markets. For example, when a company conducts an IPO, it is tapping the investing public for capital and is therefore using the capital markets. This is also true when a country's government issues Treasury bonds in the bond market to fund its spending initiatives.
The Businessdictionary.com explains Capital Market as a financial market that works as a conduit for demand and supply of debt and equity capital. It channels the money provided by savers and depository institutions (banks, credit unions, insurance companies, etc.) to borrowers and investees through a variety of financial instruments (bonds, notes, shares) called securities. A capital market is not a compact unit, but a highly decentralized system made up of three major parts: (1) stock market, (2) bond market, and (3) money market. It also works as an exchange for trading existing claims on capital in the form of shares.
According to Indonesian Law: Article 1.13 Law No.8 1995, The Capital Market is the activity of trading and offering securities to the public, the activity of a public company with respect to securities it has issued, and the activities of securities-related institutions and professions
The Businessdictionary.com explains Capital Market as a financial market that works as a conduit for demand and supply of debt and equity capital. It channels the money provided by savers and depository institutions (banks, credit unions, insurance companies, etc.) to borrowers and investees through a variety of financial instruments (bonds, notes, shares) called securities. A capital market is not a compact unit, but a highly decentralized system made up of three major parts: (1) stock market, (2) bond market, and (3) money market. It also works as an exchange for trading existing claims on capital in the form of shares.
According to Indonesian Law: Article 1.13 Law No.8 1995, The Capital Market is the activity of trading and offering securities to the public, the activity of a public company with respect to securities it has issued, and the activities of securities-related institutions and professions
Rabu, 24 November 2010
Conclusion
In this company we can see progress of fluctuation in stock price of BNI within a year from January 2nd, 2010 up to October 29th, 2010 by seeing the average stock return with 0.00353 which means that at least the investor whom holds the stock of this company will gain 0.00353 or 0,353% profit per day. The Beta was calculated as 0.793645942. This beta means that the market will influence the stock return by 79.36%. We can take further explanation that every time the market return is increased or decreased for $1, then the stock return will have an increase or decrease in price for $ 0.7936 as a response to the beta relationship it holds.
There are some cases that we can see in the table of stock price showing that stock return has e opposite movement from the market return. When the market is increasing because special events that occurred that day, the stock return was increasing with the value greater than 1.5 and vice-versa.
PT Bank Negara Indonesia Announces Earnings Results for the First Nine Months. PT Bank Negara Indonesia reported a net profit of IDR 2.95 trillion in the first nine months of 2010, up 59.33% from the same period last year
So this company is quite the right place for risk seeker to invest their money in, since it could be classified as an aggressive stock company (Beta more than 1.0- average) but for those that does not enjoy risk or want to play it safe, it would be best not to put all of your money in this company, Although, a good investor would invest not only in one place but in several places. So in other words, do not put all your money in one basket since you might lose them and be left with nothing.
Again supported by the fact of the products which are categorized as the stars and cash cow such as: Individual, Credit Card, Corporate and BNI Syariah which will generate profit in the future, holding the investment in the Pt.Bank Nasional Indonesia.Tbk is a very compromising action that need to be taken by the investors whom are likely to receive benefits in term of monetary and also reputation.
There are some cases that we can see in the table of stock price showing that stock return has e opposite movement from the market return. When the market is increasing because special events that occurred that day, the stock return was increasing with the value greater than 1.5 and vice-versa.
PT Bank Negara Indonesia Announces Earnings Results for the First Nine Months. PT Bank Negara Indonesia reported a net profit of IDR 2.95 trillion in the first nine months of 2010, up 59.33% from the same period last year
So this company is quite the right place for risk seeker to invest their money in, since it could be classified as an aggressive stock company (Beta more than 1.0- average) but for those that does not enjoy risk or want to play it safe, it would be best not to put all of your money in this company, Although, a good investor would invest not only in one place but in several places. So in other words, do not put all your money in one basket since you might lose them and be left with nothing.
Again supported by the fact of the products which are categorized as the stars and cash cow such as: Individual, Credit Card, Corporate and BNI Syariah which will generate profit in the future, holding the investment in the Pt.Bank Nasional Indonesia.Tbk is a very compromising action that need to be taken by the investors whom are likely to receive benefits in term of monetary and also reputation.
BCG Matrix and Analysis
file:///E:/picture_bcg_matrix.gif
PT.Bank Nasional Indonesia is having 6 main products:
1. Individual:
BNI card
BNI Instant
Credit Card
BNI Griya
2. Corporate:
Cash Collateral Credit
Credit Card
Primary Cooperative Credit
3. Syariah:
BNI Hasanah Card
Personal Loan
Commercial Loan
4. Credit Card
5. Investor Relationship
6. CSR
For the Stars the products are:
1. Individual:
a. BNI card
b. BNI Instant
c. Credit Card
d. BNI Griya
The Individual product can be concluded as the stars product because most of the financial activities happen in the daily business run of this company use the individual products such as BNI card, BNI Instant, Credit Card which those products participated in giving high profit and income to the whole company.
2. Corporate:
a. Cash Collateral Credit
b. Credit Card
c. Primary Cooperative Credit
As mentioned in the official website of Bank Nasional Indonesia that its main objective is to help the small-middle business owner in increasing the value of their companies, the BNI product for corporate is working on giving the loan to the small-middle business owner with certain interest. This type of product is able gain high interest in the business doers and also the investors, local and foreign, and trust Bank Nasional Indonesia as their business partner.
3. Credit Card
The use of credit card increases from year to year in Indonesia. Because of that, this type of product is a very promising product which will generate cash-flow and also profit from its objection. Thus later on the supporting article will be explained further how much percentage that the credit card participates in the company as a business product.
The Cow Cash, the products are:
1. BNI Syariah
As mentioned in the website that the BNI Syariah is not much different with the BNI in giving the service and product. For instance, the different product it holds is about the profit share and also the selling and doing business using the Islamic rules. This type of product is concluded as the cash cow product because it’s market grow in a very slow movement but it generates quite much money since Indonesia has a majority of Moslem people whom may consider using the BNI Syariah product at the first hand. Further explanation about this product’s profitability will be explained later on the article below.
The Dog:
There is no such product that can be put in here since the BNI is still a growing company which has few products but most of them are the promising products that will generate some profits along the way.
The Question Mark:
1. CSR
2. Investor Relationship
These two products are put in the question mark because most of the time they don’t generate monetary profit while they need lots of cash in doing so. As the purpose of the products to maintain the public and investors relationship with the company, these two products are considered with high demands but low return. These two products will increase the market share of the company because it builds good image for the company so people will use company’s products.
PT.Bank Nasional Indonesia is having 6 main products:
1. Individual:
BNI card
BNI Instant
Credit Card
BNI Griya
2. Corporate:
Cash Collateral Credit
Credit Card
Primary Cooperative Credit
3. Syariah:
BNI Hasanah Card
Personal Loan
Commercial Loan
4. Credit Card
5. Investor Relationship
6. CSR
For the Stars the products are:
1. Individual:
a. BNI card
b. BNI Instant
c. Credit Card
d. BNI Griya
The Individual product can be concluded as the stars product because most of the financial activities happen in the daily business run of this company use the individual products such as BNI card, BNI Instant, Credit Card which those products participated in giving high profit and income to the whole company.
2. Corporate:
a. Cash Collateral Credit
b. Credit Card
c. Primary Cooperative Credit
As mentioned in the official website of Bank Nasional Indonesia that its main objective is to help the small-middle business owner in increasing the value of their companies, the BNI product for corporate is working on giving the loan to the small-middle business owner with certain interest. This type of product is able gain high interest in the business doers and also the investors, local and foreign, and trust Bank Nasional Indonesia as their business partner.
3. Credit Card
The use of credit card increases from year to year in Indonesia. Because of that, this type of product is a very promising product which will generate cash-flow and also profit from its objection. Thus later on the supporting article will be explained further how much percentage that the credit card participates in the company as a business product.
The Cow Cash, the products are:
1. BNI Syariah
As mentioned in the website that the BNI Syariah is not much different with the BNI in giving the service and product. For instance, the different product it holds is about the profit share and also the selling and doing business using the Islamic rules. This type of product is concluded as the cash cow product because it’s market grow in a very slow movement but it generates quite much money since Indonesia has a majority of Moslem people whom may consider using the BNI Syariah product at the first hand. Further explanation about this product’s profitability will be explained later on the article below.
The Dog:
There is no such product that can be put in here since the BNI is still a growing company which has few products but most of them are the promising products that will generate some profits along the way.
The Question Mark:
1. CSR
2. Investor Relationship
These two products are put in the question mark because most of the time they don’t generate monetary profit while they need lots of cash in doing so. As the purpose of the products to maintain the public and investors relationship with the company, these two products are considered with high demands but low return. These two products will increase the market share of the company because it builds good image for the company so people will use company’s products.
Factors that influence the Ri and Rm
Taken from the Bloomberg Business Week April edition, we can see that the IHSG is having the chance in getting better in the BEI for the following months.
From the INILAH.COM, Jakarta the movement of IHSG for the closing for Thursday (25/3/2010) the index is quite high with increase of 24, 3 point (0.88%) to the level 2.799,15
PT Bank Negara Indonesia Announces Earnings Results for the First Nine Months. PT Bank Negara Indonesia reported a net profit of IDR 2.95 trillion in the first nine months of 2010, up 59.33% from the same period last year
From the INILAH.COM, Jakarta the movement of IHSG for the closing for Thursday (25/3/2010) the index is quite high with increase of 24, 3 point (0.88%) to the level 2.799,15
PT Bank Negara Indonesia Announces Earnings Results for the First Nine Months. PT Bank Negara Indonesia reported a net profit of IDR 2.95 trillion in the first nine months of 2010, up 59.33% from the same period last year
Analysis of Beta
Beta is the sensitivity of the stock return to the return of the market portfolio. In another words, Beta is used to measure the change in stock return when there is a change in the market return. And in this company the Beta was calculated as 0.793645942. This beta means that the market will influence the stock return by 79.36%. We can take further explanation that every time the market return is increased or decreased for $1, then the stock return will have an increase or decrease in price for $ 0.7936 as a response to the beta relationship it holds.
There are some cases that we can see in the table of stock price showing that stock return has e opposite movement from the market return. When the market is increasing because special events that occurred that day, the stock return was increasing with the value greater than 1.5 and vice-versa.
So this company is quite the right place for risk seeker to invest their money in, since it could be classified as an aggressive stock company (Beta more than 1.0- average) but for those that does not enjoy risk or want to play it safe, it would be best not to put all of your money in this company, Although, a good investor would invest not only in one place but in several places. So in other words, do not put all your money in one basket since you might lose them and be left with nothing.
There are some cases that we can see in the table of stock price showing that stock return has e opposite movement from the market return. When the market is increasing because special events that occurred that day, the stock return was increasing with the value greater than 1.5 and vice-versa.
So this company is quite the right place for risk seeker to invest their money in, since it could be classified as an aggressive stock company (Beta more than 1.0- average) but for those that does not enjoy risk or want to play it safe, it would be best not to put all of your money in this company, Although, a good investor would invest not only in one place but in several places. So in other words, do not put all your money in one basket since you might lose them and be left with nothing.
Analysis of Average and Standard Deviation
An average is a single value that is meant to typify a list of values. If all the numbers in the list are the same, then this number should be used. If the numbers are not the same, an easy way to get a representative value from a list is to randomly pick any number from the list. (Taken from www.wikipedia.com ) We can see progress of fluctuation in stock price of BNI within a year from January 2nd, 2010 up to October 29th, 2010 by seeing the average stock return with 0.00353 which means that at least the investor whom holds the stock of this company will gain 0.00353 or 0,353% profit per day. Average in return investment of 0,003102 can also mean that the change of price from one day to the next day is only in a light change.
Even though that there are some special days where the change is happening in a very high portion or very low portion, but likely it happened because of special occasion by an event related to financial or economic life which will be explained later on the IHSG situations within a year.
In finance, standard deviation is applied to the annual rate of return of an investment to measure the investment's volatility. Standard deviation is also known as historical volatility and is used by investors as a gauge for the amount of expected volatility. The standard deviation or return investment for the Bank Negara Indonesia, Tbk. as 0.020656 which means that the differences between the expected return and the actual return is 2% so that the investors whom are about to buy the stock of this company can predict at high percentage of correctness of the upcoming price in the coming days.
For the market return, average value of 0.001787 means that the investor whom is hoping to gain some profits from the market return will at least receive 0.1787% profit from the market price. Some major increase or decrease happened as the responses to the situational condition that was happening in the BEJ at the year of 2010. We can see the situation in the BEJ later on the IHSG situations within a year.
For the standard deviation of market return, the calculation result for 0.012901 or 1.2901%. So it means that the difference between the investors’ expected return and actual return from the market (IHSG) is quite small since it’s around than 1% but we have to note down that some fluctuations, that happened to make a highest price in the IHSG or the lowest price, were due to the occasional situations that happen within a year.
Some special events are influencing the fluctuation in the market and also stock price of the company. The upcoming discussion will be talking about what has been happening in the IHSG along the year of 2010.
Even though that there are some special days where the change is happening in a very high portion or very low portion, but likely it happened because of special occasion by an event related to financial or economic life which will be explained later on the IHSG situations within a year.
In finance, standard deviation is applied to the annual rate of return of an investment to measure the investment's volatility. Standard deviation is also known as historical volatility and is used by investors as a gauge for the amount of expected volatility. The standard deviation or return investment for the Bank Negara Indonesia, Tbk. as 0.020656 which means that the differences between the expected return and the actual return is 2% so that the investors whom are about to buy the stock of this company can predict at high percentage of correctness of the upcoming price in the coming days.
For the market return, average value of 0.001787 means that the investor whom is hoping to gain some profits from the market return will at least receive 0.1787% profit from the market price. Some major increase or decrease happened as the responses to the situational condition that was happening in the BEJ at the year of 2010. We can see the situation in the BEJ later on the IHSG situations within a year.
For the standard deviation of market return, the calculation result for 0.012901 or 1.2901%. So it means that the difference between the investors’ expected return and actual return from the market (IHSG) is quite small since it’s around than 1% but we have to note down that some fluctuations, that happened to make a highest price in the IHSG or the lowest price, were due to the occasional situations that happen within a year.
Some special events are influencing the fluctuation in the market and also stock price of the company. The upcoming discussion will be talking about what has been happening in the IHSG along the year of 2010.
Company Profile
Initially referred to by its unabbreviated name of Bank Negara Indonesia when it was established in 1946, BNI is the first bank formed and owned by the Indonesian Government.
Historical records indicate that on the eve of the 30th of October 1946, or merely a few months after its formal establishment, the Bank distributed the first currency bills ever issued by Indonesia’s Government popularly known at the time as ORI, or ‘Oeang Republik Indonesia’ (Currency of the Republic of Indonesia).
In fact, this day is commemorated annually as the National Finance Day while the date of the Bank's establishment - the 5th of July - was designated as National Bank Day
BNI’s legal status was upgraded in 1992 to that of a state-owned limited corporation under the name of PT Bank Negara Indonesia (Persero) and the bank decided to become a public company through its initial public offering of its shares in 1996.
In keeping with the spirit of the heroic national struggle that is rooted in its history, BNI strives to provide the best services for the country and to ultimately become the Pride of the Nation, today and always.
Historical records indicate that on the eve of the 30th of October 1946, or merely a few months after its formal establishment, the Bank distributed the first currency bills ever issued by Indonesia’s Government popularly known at the time as ORI, or ‘Oeang Republik Indonesia’ (Currency of the Republic of Indonesia).
In fact, this day is commemorated annually as the National Finance Day while the date of the Bank's establishment - the 5th of July - was designated as National Bank Day
BNI’s legal status was upgraded in 1992 to that of a state-owned limited corporation under the name of PT Bank Negara Indonesia (Persero) and the bank decided to become a public company through its initial public offering of its shares in 1996.
In keeping with the spirit of the heroic national struggle that is rooted in its history, BNI strives to provide the best services for the country and to ultimately become the Pride of the Nation, today and always.
Rabu, 01 September 2010
Response to the risk
Responses to minimize the risk.
There are several ways to minimize the risk;
1. Risk avoidance.
Either by removing of a particular threat or eliminating the source of risk. For example in removing the source of risk for contaminated land, the company create a better managed system related to the wasted materials so it doesn’t corrupted the land and building. And also for human error, the company stressed out the point how to work there for the workers so the workers will work accordingly, without creating any problems due to the human errors.
2. Risk reduction
When the risk is already occured, risk reduction may involve either lowering its probability or lessening its impact. For example in the company is that when the workers is pouring the chemical liquids from the barrel to the plactic bag. To reduce the damage of chemical reaction that irritates the skin, the workers use plactic glove.
3. Risk transfer
Insurance is the most popular technique for risk transfer in which only the potential financial consequences of a risk are transferred and not the responsibility for managing the risk. So in another words, this risk transfer is sharing the impact of the risk that being taken by the company with the third party. Sometimes the shared risk is about the financial impact of the certain accident.
4. Risk retention
In the case of planned risk retention, this involves the complete or partially assumption of the potential impact of the risk. In final, this risk reduction may only be cost-effective up to a point, thereafter becoming more costly than beneficial.
There are several ways to minimize the risk;
1. Risk avoidance.
Either by removing of a particular threat or eliminating the source of risk. For example in removing the source of risk for contaminated land, the company create a better managed system related to the wasted materials so it doesn’t corrupted the land and building. And also for human error, the company stressed out the point how to work there for the workers so the workers will work accordingly, without creating any problems due to the human errors.
2. Risk reduction
When the risk is already occured, risk reduction may involve either lowering its probability or lessening its impact. For example in the company is that when the workers is pouring the chemical liquids from the barrel to the plactic bag. To reduce the damage of chemical reaction that irritates the skin, the workers use plactic glove.
3. Risk transfer
Insurance is the most popular technique for risk transfer in which only the potential financial consequences of a risk are transferred and not the responsibility for managing the risk. So in another words, this risk transfer is sharing the impact of the risk that being taken by the company with the third party. Sometimes the shared risk is about the financial impact of the certain accident.
4. Risk retention
In the case of planned risk retention, this involves the complete or partially assumption of the potential impact of the risk. In final, this risk reduction may only be cost-effective up to a point, thereafter becoming more costly than beneficial.
Type of Risk
Type of Risk and the Analysis
1. Dynamic risk
It is concerned with maximizing opportunities which also means that there will be potential gains as well as potential losses. Because the purpose of business is gaining the profits, the owner of the business is risking its money and capital assets in buying-selling the goods and assets. Thus the differences between the buying price and selling price will determine whether it creates profits or not. But it’s not the only determinant in deciding the business is creating profit. The time value of money is also important. If we can sell the goods is a very short time lag after we buy it, the profits are mentioned as higher and also better. Higher because it creates profits as soon as possible, better it term of the profit received can be used to buy another products or assets.
2. Contingent risk
This risk happens when the company is affected directly by an event in the area beyond its direct control but on which it has a dependency (I.e. weak suppliers). As a reseller company, this company relies on the distribution system which is taking the main issue. Because the fastest the delivery takes places, the better performance the company possess in fullfilling the demand from public.
3. Customer risk
. The dependency on one client creates vulnerability because that client can take its business away or be taken over by a rival. This risk can be managed by creating a larger customer base (having more than one customer). As a reseller company, this type of risk is having a very small chance to be happen because the customers vary in a widespread kind of handicraft makers.
4. Purchasing risk
many businesses are designing and implementing new performance measurement systems and finding a particular challenge in developing measures for some key elements of purchasing contribution which are now regarded as strategic but which have not been historically analyzed and measured in any serious way.
5. Reputation risk : this type of risk arise as a consequence of another risk, such as fraud, a building destroyed, failure to attend to complaints, lack of respect of others.
1. Dynamic risk
It is concerned with maximizing opportunities which also means that there will be potential gains as well as potential losses. Because the purpose of business is gaining the profits, the owner of the business is risking its money and capital assets in buying-selling the goods and assets. Thus the differences between the buying price and selling price will determine whether it creates profits or not. But it’s not the only determinant in deciding the business is creating profit. The time value of money is also important. If we can sell the goods is a very short time lag after we buy it, the profits are mentioned as higher and also better. Higher because it creates profits as soon as possible, better it term of the profit received can be used to buy another products or assets.
2. Contingent risk
This risk happens when the company is affected directly by an event in the area beyond its direct control but on which it has a dependency (I.e. weak suppliers). As a reseller company, this company relies on the distribution system which is taking the main issue. Because the fastest the delivery takes places, the better performance the company possess in fullfilling the demand from public.
3. Customer risk
. The dependency on one client creates vulnerability because that client can take its business away or be taken over by a rival. This risk can be managed by creating a larger customer base (having more than one customer). As a reseller company, this type of risk is having a very small chance to be happen because the customers vary in a widespread kind of handicraft makers.
4. Purchasing risk
many businesses are designing and implementing new performance measurement systems and finding a particular challenge in developing measures for some key elements of purchasing contribution which are now regarded as strategic but which have not been historically analyzed and measured in any serious way.
5. Reputation risk : this type of risk arise as a consequence of another risk, such as fraud, a building destroyed, failure to attend to complaints, lack of respect of others.
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