Asset and liability management

Asset and liability management ASSET AND LIABILITY MANAGEMENT In banking, asset and liability management (ALM) is used to manage the risks that arise due to mismatches between the assets and liabilities (debts and assets) of the bank. Banks face several risks like the liquidity risk, market risk, interest rate risk, credit risk and operational risk. Asset Liability management (ALM) is a strategic management tool to manage interest rate risk and liquidity risk faced by banks, other financial services companies and corporations. Banks manage the risks of Asset liability mismatch by matching the assets and liabilities according to the maturity pattern or the matching the duration, by hedging and by securitization. Asset and liability management remain high-priority areas for bank regulators, with an emphasis on management of market risk, liquidity risk, and credit risk. Asset/liability managers face the challenge of keeping pace with industry changes as new areas of risk are identified and new tools and models are developed to help measure and manage risk. In other words Asset-Liability Management (ALM) can be known as a risk management technique designed to earn an adequate return while maintaining a comfortable surplus of assets beyond liabilities. It takes into consideration interest rates, earning power, and degree of willingness to take on debt and hence is also known as Surplus Management. But in the last decade the meaning of asset liability management has evolved. It is now used in many different ways under different contexts. ALM, which was actually pioneered by financial institutions and banks, are now widely being used in industries too. The Society of Actuaries Task Force on ALM Principles, Canada, offers the following definition for ALM: Asset Liability Management is the on-going process of formulating, implementing, monitoring, and revising strategies related to assets and liabilities in an attempt to achieve financial objectives for a given set of risk tolerances and constraints. Basis of Asset-Liability Management Traditionally, banks and insurance companies used accrual system of accounting for all their assets and liabilities. They would take on liabilities such as deposits, life insurance policies or annuities. They would then invest the proceeds from these liabilities in assets such as loans, bonds or real estate. All these assets and liabilities were held at book value. Doing so disguised possible risks arising from how the assets and liabilities were structured. Consider a bank that borrows 1 Crore (100 Lakhs) at 6 % for a year and lends the same money at 7 % to a highly rated borrower for 5 years. The net transaction appears profitable the bank is earning a 100 basis point spread but it entails considerable risk. At the end of a year, the bank will have to find new financing for the loan, which will have 4 more years before it matures. If interest rates have risen, the bank may have to pay a higher rate of interest on the new financing than the fixed 7 % it is earning on its loan. Suppose, at the end of a year, an applicable 4-year interest rate is 8 %. The bank is in serious trouble. It is going to earn 7 % on its loan but would have to pay 8 % on its financing. Accrual accounting does not recognize this problem. Based upon accrual accounting, the bank would earn Rs 100,000 in the first year although in the preceding years it is going to incur a loss. The problem in this example was caused by a mismatch between assets and liabilities. Prior to the 1970s, such mismatches tended not to be a significant problem. Interest rates in developed countries experienced only modest fluctuations, so losses due to asset-liability mismatches were small or trivial. Many firms intentionally mismatched their balance sheets and as yield curves were generally upward sloping, banks could earn a spread by borrowing short and lending long. Things started to change in the 1970s, which ushered in a period of volatile interest rates that continued till the early 1980s. US regulations which had capped the interest rates so that banks could pay depositors, was abandoned which led to a migration of dollar deposit overseas. Managers of many firms, who were accustomed to thinking in terms of accrual accounting, were slow to recognize this emerging risk. Some firms suffered staggering losses. Because the firms used accrual accounting, it resulted in more of crippled balance sheets than bankruptcies. Firms had no options but to accrue the losses over a subsequent period of 5 to 10 years. One example, which drew attention, was that of US mutual life insurance company The Equitable. During the early 1980s, as the USD yield curve was inverted with short-term interest rates sky rocketing, the company sold a number of long-term Guaranteed Interest Contracts (GICs) guaranteeing rates of around 16% for periods up to 10 years.Equitable then invested the assets short-term to earn the high interest rates guaranteed on the contracts. But short-term interest rates soon came down. When the Equitable had to reinvest, it couldnt get even close to the interest rates it was paying on the GICs. The firm was crippled. Eventually, it had to demutualize and was acquired by the Axa Group. Increasingly banks and asset management companies started to focus on Asset-Liability Risk.The problem was not that the value of assets might fall or that the value of liabilities might rise. It was that capital might be depleted by narrowing of the difference between assets and liabilities and that the values of assets and liabilities might fail to move in tandem. Asset-liability risk is predominantly a leveraged form of risk. The capital of most financial institutions is small relative to the firms assets or liabilities, and so small percentage changes in assets or liabilities can translate into large percentage changes in capital. Accrual accounting could disguise the problem by deferring losses into the future, but it could not solve the problem.Firms responded by forming asset-liability management (ALM) departments to assess these asset-liability risk. Techniques for assessing Asset-Liability Risk Techniques for assessing asset-liability risk came to include Gap Analysis and Duration Analysis. These facilitated techniques of managing gaps and matching duration of assets and liabilities. Both approaches worked well if assets and liabilities comprised fixed cash flows. But cases of callable debts, home loans and mortgages which included optio.ns of prepayment and floating rates, posed problems that gap analysis could not address. Duration analysis could address these in theory, but implementing sufficiently sophisticated duration measures was problematic Accordingly, banks and insurance companies started using Scenario Analysis. Under this technique assumptions were made on various conditions, for example: * Several interest rate scenarios were specified for the next 5 or 10 years. These specified conditions like declining rates, rising rates, a gradual decrease in rates followed by a sudden rise, etc. Ten or twenty scenarios could be specified in all. * Assumptions were made about the performance of assets and liabilities under each scenario. They included prepayment rates on mortgages or surrender rates on insurance products. * Assumptions were also made about the firms performance-the rates at which new business would be acquired for various products, demand for the product. * Market conditions and economic factors like inflation rates and industrial cycles were also included. * Based upon these assumptions, the performance of the firms balance sheet could be projected under each scenario. If projected performance was poor under specific scenarios, the ALM committee would adjust assets or liabilities to address the indicated exposure. Let us consider the procedure for sanctioning a commercial loan. The borrower, who approaches the bank, has to appraise the banks credit department on various parameters like industry prospects, operational efficiency, financial efficiency, management qualities and other things, which would influence the working of the company. On the basis of this appraisal, the banks would then prepare a credit-grading sheet after covering all the aspects of the company and the business in which the company is in. Then the borrower would then be charged a certain rate of interest, which would cover the risk of lending. * But the main shortcoming of scenario analysis was that, it was highly dependent on the choice of scenarios. It also required that many assumptions were to be made about how specific assets or liabilities will perform under specific scenario. Gradually the firms recognized a potential for different type of risks, which was overlooked in ALM analyses. Also the deregulation of the interest rates in US in mid 70 s compelled the banks to undertake active planning for the structure of the balance sheet. The uncertainty of interest rate movements gave rise to Interest Rate Risk thereby causing banks to look for processes to manage this risk. In the wake of interest rate risk came Liquidity Risk and Credit Risk, which became inherent components of risk for banks. The recognition of these risks brought Asset Liability Management to the centre-stage of financial intermediation. Today even Equity Risk, which until a few years ago was given only honorary mention in all but a few company ALM re ports, is now an indispensable part of ALM for most companies.. Some companies have gone even further to include Counterparty Credit Risk, Sovereign Risk, as well as Product Design and Pricing Risk as part of their overall ALM. * Now a days a company has different reasons for doing ALM. While some companies view ALM as a compliance and risk mitigation exercise, others have started using ALM as strategic framework to achieve the companys financial objectives. Some of the business reasons companies now state for implementing an effective ALM framework include gaining competitive advantage and increasing the value of the organization. Asset-Liability Management Approach ALM in its most apparent sense is based on funds management. Funds management represents the core of sound bank planning and financial management. Although funding practices, techniques, and norms have been revised substantially in recent years, it is not a new concept. Funds management is the process of managing the spread between interest earned and interest paid while ensuring adequate liquidity. Therefore, funds management has following three components, which have been discussed briefly. A. Liquidity Management Liquidity represents the ability to accommodate decreases in liabilities and to fund increases in assets. An organization has adequate liquidity when it can obtain sufficient funds, either by increasing liabilities or by converting assets, promptly and at a reasonable cost. Liquidity is essential in all organizations to compensate for expected and unexpected balance sheet fluctuations and to provide funds for growth. The price of liquidity is a function of market conditions and market perception of the risks, both interest rate and credit risks, reflected in the balance sheet and off-balance sheet activities in the case of a bank. If liquidity needs are not met through liquid asset holdings, a bank may be forced to restructure or acquire additional liabilities under adverse market conditions. Liquidity exposure can stem from both internally (institution-specific) and externally generated factors. Sound liquidity risk management should address both types of exposure. External liquidit y risks can be geographic, systemic or instrument-specific. Internal liquidity risk relates largely to the perception of an institution in its various markets: local, regional, national or international. Determination of the adequacy of a banks liquidity position depends upon an analysis of its: * Historical funding requirements * Current liquidity position * Anticipated future funding needs * Sources of funds * Present and anticipated asset quality * Present and future earnings capacity * Present and planned capital position As all banks are affected by changes in the economic climate, the monitoring of economic and money market trends is key to liquidity planning. Sound financial management can minimize the negative effects of these trends while accentuating the positive ones. Management must also have an effective contingency plan that identifies minimum and maximum liquidity needs and weighs alternative courses of action designed to meet those needs. The cost of maintaining liquidity is another important prerogative. An institution that maintains a strong liquidity position may do so at the opportunity cost of generating higher earnings. The amount of liquid assets a bank should hold depends on the stability of its deposit structure and the potential for rapid expansion of its loan portfolio. If deposit accounts are composed primarily of small stable accounts, a relatively low allowance for liquidity is necessary. Additionally, management must consider the current ratings by regulatory and rating agencies when planning liquidity needs. Once liquidity needs have been determined, management must decide how to meet them through asset management, liability management, or a combination of both. B. Asset Management Many banks (primarily the smaller ones) tend to have little influence over the size of their total assets. Liquid assets enable a bank to provide funds to satisfy increased demand for loans. But banks, which rely solely on asset management, concentrate on adjusting the price and availability of credit and the level of liquid assets. However, assets that are often assumed to be liquid are sometimes difficult to liquidate. For example, investment securities may be pledged against public deposits or repurchase agreements, or may be heavily depreciated because of interest rate changes. Furthermore, the holding of liquid assets for liquidity purposes is less attractive because of thin profit spreads. Asset liquidity, or how salable the banks assets are in terms of both time and cost, is of primary importance in asset management. To maximize profitability, management must carefully weigh the full return on liquid assets (yield plus liquidity value) against the higher return associated with less liquid assets. Income derived from higher yielding assets may be offset if a forced sale, at less than book value, is necessary because of adverse balance sheet fluctuations. Seasonal, cyclical, or other factors may cause aggregate outstanding loans and deposits to move in opposite directions and result in loan demand, which exceeds available deposit funds. A bank relying strictly on asset management would restrict loan growth to that which could be supported by available deposits. The decision whether or not to use liability sources should be based on a complete analysis of seasonal, cyclical, and other factors, and the costs involved. In addition to supplementing asset liquidity, liability sources of liquidity may serve as an alternative even when asset sources are available. C. Liability Management Liquidity needs can be met through the discretionary acquisition of funds on the basis of interest rate competition. This does not preclude the option of selling assets to meet funding needs, and conceptually, the availability of asset and liability options should result in a lower liquidity maintenance cost. The alternative costs of available discretionary liabilities can be compared to the opportunity cost of selling various assets. The major difference between liquidity in larger banks and in smaller banks is that larger banks are better able to control the level and composition of their liabilities and assets. When funds are required, larger banks have a wider variety of options from which to select the least costly method of generating funds. The ability to obtain additional liabilities represents liquidity potential. The marginal cost of liquidity and the cost of incremental funds acquired are of paramount importance in evaluating liability sources of liquidity. Consideration m ust be given to such factors as the frequency with which the banks must regularly refinance maturing purchased liabilities, as well as an evaluation of the banks ongoing ability to obtain funds under normal market conditions. The obvious difficulty in estimating the latter is that, until the bank goes to the market to borrow, it cannot determine with complete certainty that funds will be available and/or at a price, which will maintain a positive yield spread. Changes in money market conditions may cause a rapid deterioration in a banks capacity to borrow at a favorable rate. In this context, liquidity represents the ability to attract funds in the market when needed, at a reasonable cost vis-Ã  -vis asset yield. The access to discretionary funding sources for a bank is always a function of its position and reputation in the money markets. Although the acquisition of funds at a competitive cost has enabled many banks to meet expanding customer loan demand, misuse or improper implementation of liability management can have severe consequences. Further, liability management is not riskless. This is because concentrations in funding sources increase liquidity risk. For example, a bank relying heavily on foreign interbank deposits will experience funding problems if overseas markets perceive instability in U.S. banks or the economy. Replacing foreign source funds might be difficult and costly because the domestic market may view the banks sudden need for funds negatively. Again over-reliance on liability management may cause a tendency to minimize holdings of short-term securities, relax asset liquidity standards, and result in a large concentration of short-term liabilities supporting assets of longer maturity. During times of tight money, this could cause an earnings squeeze and an illiquid condition. Also if rate competition develops in the money market, a bank may incur a high cost of funds and may elect to lower credit standards to book higher yielding loans and securities. If a bank is purchasing liabilities to support assets, which are already on its books, the higher cost of purchased funds may result in a negative yield spread. Preoccupation with obtaining funds at the lowest possible cost, without considering maturity distribution, greatly intensifies a banks exposure to the risk of interest rate fluctuations. That is why banks who particularly rely on wholesale funding sources, management must constantly be aware of the composition, characteristics, and diversification of its funding sources. Procedure for Examination of Asset Liability Management In order to determine the efficacy of Asset Liability Management one has to follow a comprehensive procedure of reviewing different aspects of internal control, funds management and financial ratio analysis. Below a step-by-step approach of ALM examination in case of a bank has been outlined. Step 1 The bank/ financial statements and internal management reports should be reviewed to assess the asset/liability mix with particular emphasis on. * Total liquidity position (Ratio of highly liquid assets to total assets) * Current liquidity position (Minimum ratio of highly liquid assets to demand liabilities/deposits) * Ratio of Non Performing Assets to Total Assets * Ratio of loans to deposits * Ratio of short-term demand deposits to total deposits * Ratio of long-term loans to short term demand deposits * Ratio of contingent liabilities for loans to total loans * Ratio of pledged securities to total securities Step 2 It is to be determined that whether bank management adequately assesses and plans its liquidity needs and whether the bank has short-term sources of funds. This should include * Review of internal management reports on liquidity needs and sources of satisfying these need.. * Assessing the banks ability to meet liquidity needs Step 3 The banks future development and expansion plans, with focus on funding and liquidity management aspects has to be looked into. This entails. * Determining whether bank management has effectively addressed the issue of need for liquid assets to funding sources on a long-term basis. * Reviewing the banks budget projections for a certain period of time in the future. * Determining whether the bank really needs to expand its activities. What are the sources of funding for such expansion and whether there are projections of changes in the banks asset and liability structure. * Assessing the banks development plans and determining whether the bank will be able to attract planned funds and achieve the projected asset growth. * Determining whether the bank has included sensitivity to interest rate risk in the development of its long term funding strategy. Step 4 Examining the banks internal audit report in regards to quality and effectiveness in terms of liquidity management. Step 5 Reviewing the banks plan of satisfying unanticipated liquidity needs by. * Determining whether the banks management assessed the potential expenses that the bank will have as a result of unanticipated financial or operational problems. * Determining the alternative sources of funding liquidity and/or assets subject to necessity. * Determining the impact of the banks liquidity management on net earnings position. Step 6 Preparing an Asset/Liability Management Internal Control Questionnaire which should include the following Whether the board of directors has been consistent with its duties and responsibilities and included o A line of authority for liquidity management decisions. o A mechanism to coordinate asset and liability management decisions. o A method to identify liquidity needs and the means to meet those needs. o Guidelines for the level of liquid assets and other sources of funds in relationship to needs. Does the planning and budgeting function consider liquidity requirements. Are the internal management reports for liquidity management adequate in terms of effective decision making and monitoring of decisions. Are internal management reports concerning liquidity needs prepared regularly and reviewed as appropriate by senior management and the board of directors. Whether the banks policy of asset and liability management prohibits or defines certain restrictions for attracting borrowed means from bank related persons (organizations) in order to satisfy liquidity needs. Does the banks policy of asset and liability management provide for an adequate control over the position of contingent liabilities of the bank. Is the foregoing information considered an adequate basis for evaluating internal control in that there are no significant deficiencies in areas not covered in this questionnaire that impair any controls. Guidelines on Asset-Liability Management (ALM) System -Amendments Reserve Bank had issued guidelines on ALM system vide Circular dated February 10, 1999, which covered, among others, interest rate risk and liquidity risk measurement / reporting framework and prudential limits. As a measure of liquidity management, banks are required to monitor their cumulative mismatches across all time buckets in their Statement of Structural Liquidity by establishing internal prudential limits with the approval of the Board / Management Committee. As per the guidelines, the mismatches (negative gap) during the time buckets of 1-14 days and 15-28 days in the normal course, are not to exceed 20 per cent of the cash outflows in the respective time buckets. 2. Having regard to the international practices, the level of sophistication of banks in India and the need for a sharper assessment of the efficacy of liquidity management, Reserve Bank of India has reviewed guidelines on 24th October 2007 and decided that : (a) the banks may adopt a more granular approach to measurement of liquidity risk by splitting the first time bucket (1-14 days at present) in the Statement of Structural Liquidity into three time buckets viz. Next day , 2-7 days and 8-14 days. (b) the Statement of Structural Liquidity may be compiled on best available data coverage, in due consideration of non-availability of a fully networked environment.Banks may, however, make concerted and requisite efforts to ensure coverage of 100 per cent data in a timely manner. (c) the net cumulative negative mismatches during the Next day, 2-7 days, 8-14 days and 15-28 days buckets should not exceed 5 % ,10%, 15 % and 20 % of the cumulative cash outflows in the respective time buckets in order to recognise the cumulative impact on liquidity. (d) banks may undertake dynamic liquidity management and should prepare the Statement of Structural Liquidity on daily basis. The Statement of Structural Liquidity, may, however, be reported to RBI, once a month, as on the third Wednesday of every month. 3. The format of Statement of Structural Liquidity has been revised suitably and is furnished. The guidance for slotting the future cash flows of banks in the revised time buckets has also been suitably modified and is furnished at Annex II. 4. To enable the banks to fine tune their existing MIS as per the modified guidelines, the revised norms as well as the supervisory reporting as per the revised format would commence with effect from the period beginning January 1, 2008 and the reporting frequency would continue to be monthly for the present. However, the frequency of supervisory reporting of the Structural Liquidity position shall be fortnightly, with effect from the fortnight beginning April 1, 2008. Asset Liability Management in Indian Context The post-reform banking scenario in India was marked by interest rate deregulation, entry of new private banks, and gamut of new products along with greater use of information technolog.To cope with these pressures banks were required to evolve strategies rather than ad hoc solutions. Recognising the need of Asset Liability management to develop a strong and sound banking.system, the RBI has come out with ALM guidelines for banks and FIs in April 1999.The Indian ALM framework rests on three pillars. Â · ALM Organisation (ALCO) The ALCO or the Asset Liability Management Committee consisting of the banks senior management including the CEO should be responsible for adhering to the limits set by the board as well as for deciding the business strategy of the bank in line with the banks budget and decided risk management objectives. ALCO is a decision-making unit responsible for balance sheet planning from a risk return perspective including strategic management of interest and liquidity risk. The banks may also authorise their Asset-Liability Management Committee (ALCO) to fix interest rates on Deposits and Advances, subject to their reporting to the Board immediately thereafter. The banks should also fix maximum spread over the PLR with the approval of the ALCO/Board for all advances other than consumer credit. Â · ALM Information System The ALM Information System is required for the collection of information accurately, adequately and expeditiously. Information is the key to the ALM process. A good information system gives the bank management a complete picture of the banks balance sheet. Â · ALM Process The basic ALM processes involving identification, measurement and management of risk parameter.The RBI in its guidelines has asked Indian banks to use traditional techniques like Gap Analysis for monitoring interest rate and liquidity risk. However RBI is expecting Indian banks to move towards sophisticated techniques like Duration, Simulation, VaR in the future. For the accrued portfolio, most Indian Private Sector banks use Gap analysis, but are gradually moving towards duration analysis. Most of the foreign banks use duration analysis and are expected to move towards advanced methods like Value at Risk for the entire balance sheet.some foreign banks are already using VaR for the entire balance sheet. Conclusion ALM has evolved since the early 1980s.Today, financial firms are increasingly using market value accounting for certain business lines. This is true of universal banks that have trading operations.Techniques of ALM have also evolved.The growth of OTC derivatives markets has facilitated a variety of hedging strategies. A significant development has been securitization, which allows firms to directly address asset-liability risk by removing assets or liabilities from their balance sheets. This not only eliminates asset-liability risk; it also frees up the balance sheet for new business. Thus, the scope of ALM activities has widened. Today, ALM departments are addressing (non-trading) foreign exchange risks as well as other risks. Also, ALM has extended to non-financial firms. Corporations have adopted techniques of ALM to address interest-rate exposures, liquidity risk and foreign exchange risk. They are using related techniques to address commodities risks. For example, airlines hedging of fuel prices or manufacturers hedging of steel prices are often presented as ALM. Thus it can be safely said that Asset Liability Management will continue to grow in future and an efficient ALM technique will go a long way in managing volume, mix, maturity, rate sensitivity, quality and liquidity of the assets and liabilities so as to earn a sufficient and acceptable return on the portfolio.

I love my india Essay

This essay describes about the Incredible India which is an eco-tourism business in India. It basically focuses upon to identify the sustainable policies which they use to make the tourists destination more sustainable. It even describes the policy they use such as Bio-logical-diversity, resource efficiency and environment purity. After describing each and every policy it states about the effectiveness of the policy and how does it help to reduce the negative impact on the environment. As it has been mentioned below such as under Bio-logical diversity it includes working with national parks and protected areas, and working with private parks and reserves. Under resource efficiency it includes Minimizing the water consumption by the tourism sector, Minimizing the consumption of energy, Promoting a reduce, recycle, and reuse mentality. Under the section of environmental purity it includes Promoting the use of more sustainable transport, Limitations over the use of harmful chemicals, minimizing the wastage and disposes it carefully, influencing the development of new tourism facility. After that for additional information it has also stated the government policies. To start up with let’s focus on the eco-tourism. The word eco-tourism came from a marketing agency who was actually promoting Costa Rica as a rain forest destination after that it was seen as an exact market for the WTO (World Tourism organization). Eco-tourism is more than a catch phrase for nature loving and recreation. Eco-tourism is mainly for sustaining the world’s natural and cultural environment. So it actually accommodates and entertains the visitors in such a way which has a minimum impact on the native cultures in the location they are operating in. Saving the natural luxuries and forest life from getting destructed is called as eco-tourism (Incredible India, n.d.). There is no specific definition for the eco-tourism; the World Tourism Organization defines eco-touris as â€Å"Tourism which involves visiting to the natural areas which are undisturbed, with a specific objective of studying, enjoying and admiring the natural beauty and the wild animals and plants, and any other cultural aspects found in these areas is known as Eco-tourism† (Piedrablanca, 2007). The Eco-tourism business which has been chosen is Incredible India. Before identifying their sustainable policies let’s focus more about Incredible India. The ministry of tourism is the agency is the formulation of all the national policies and various programmes and for the co-ordination of other activities for the central government. The ministry is headed by the union minister and controlled by the minister of state of tourism (Incredible India, n.d.). Here are some of the major sustainable policies. 1) Bio-logical Diversity: This policy states regarding the support to the natural areas, and wild-life and minimize damage to them. This is an area where most of the negative and positive impacts can be felt. The environments which actually attract the tourists are destructed, so due to that this policy actually helps to protect the bio-diversity. Such as working with private parks and reserves, this includes that the private parks do have the high level of conservation, and makes sure that the private parks do not draw off the resources, which includes tourism income. After discussing about the bio-logical diversity let’s bit focus upon its effectiveness. a) Working with national parks and other protected areas: It actually gives the opportunity to strengthen the protection to avoid the negative impacts on the tourism, and focus upon the sustainaible tourism that would increase the visitor awareness and support for conservation. This important policy issues include: Arranging up the national guideline s on sustainable tourism in protected areas. Extending the coverage areas for both terrestrial and marine to protect the areas, such as buffer zones. Optimizing the level of use of park admissions to support its range of objectives. b) Working with private parks and reserves: This policy actually encourages the people to work with private parks and reserves. This policy includes the priorities such as: It actually helps to maintain the high conservation of the private parks and its standards. It helps to make the public and private parks in to single bio-diversity plan. 2) Resource efficiency: This policy states to minimize the use of non-renewable resources in the development and process of tourism conveniences and service. A sustainable future is completely depended upon the management of the resources to make  sure about the availability of the resources in the present and for the upcoming generation. Resources which are non-renewable and which are limited are of main concern such as land, fresh water, fossil fuels and so on. Fresh water is an very important resource which lacking but are been consumed at the higher level by the tourists. It has been proved that tourists do use 15 to 20 times more water than the locals, due to that most of the tourist’s destinations in India are providing limited fresh water for the tourists. Let’s discuss more about the policy and what all it includes. a) Minimizing the water consumption by the tourism sector: As it has been discussed above that the tourists actually consume more resources than what locals do so to restrict it to certain level this policy includes, Limiting the water hungry facilities such as golf, and swimming pools Encourages the installation of water through technology which has low flow showers and toilets. Improving the infrastructure such as leakages. b) Minimizing the consumption of energy: There are some following points which helps to minimize the consumption of energy in to the tourist destination such as, They provide renewable energy resources in most of the tourist destinations in India. They encourage resource efficient transport choices. They even encourage the tourists to be responsible in terms of using the energy. C) Promoting a reduce, recycle, and reuse mentality: Eco-tourism businesses such as Incredible India are mainly focusing on encouraging the reuse of the materials. And the policies which are used to support are as follows: a) Purchasing to supplies from sustainable sources. This can be actually help by the good information on local accessibility of such sources. b) Minimizing use of unnecessary packaging. c) Encouraging the creativity from the products which are been used so it can be reused. 3) Environmental Purity: This is the policy which is been followed by Incredible India, which actually helps to reduce the waste, and other harmful gases this helps to  maintain and improve the quality of the air, water, land, and health and bio-diversity. These actions illustrate all the pollution prevention and control throughout the lifecycle for the development of the tourism, during and after the use of facilities, and impacts on tourists themselves (unep, 2005). To minimize the pollution of air, land, water and the generation of waste made by the visitors. To do that there are certain policies which is been followed by Incredible India, such as a) Promoting the use of more sustainable transport: This includes Favours low impact of transport. This actually put on both journeys to and within the destination. Most of the tourists in India are encouraged to go by walking or by cycling within the destination, which actually reduces the negative impact on the environment. b) Limitations over the use of harmful chemicals: They are also putting on some limitations over the chemicals which might be harmful for the environment such as pesticides, fungicides, and chlorine in to the swimming pools. The enterprise even contributes over the depletion of the ozone layer by releasing CFC in to the atmosphere from packaging insulations, air conditioners and so on. c) Minimizing the wastage and dispose it carefully: Tourism is a kind of industry which is a major producer of the waste and disposable of non-degradable waste is an important issue especially in to the remote areas. These wastes can be real danger to the life of wild-life. Due to that government are providing some facilities where these wastes can be disposed of safely. d) Influencing the development of new tourism facility: Government of India are taking some intiatives to provide some new tourism facilities in such a way where it is least harmfull for the environment, such as: The location of new development, this includes the location in terms of the sensitivity of the areas environment and its setting for example public transport links. Construction should be taken place in such a way where there is minimum harm to the environment (Frangialli, Toepfer, 2005). These are the following additional government policies for the development of the sustainable eco-tourism. a) The local community should be involved for the economic development of the area. b) The resources which are been used for the eco-tourism, and lively hood by  the local habitants should be recognized and try them to minimize it. c) The scale of the eco-tourism should be compatible with the environment and socio-cultural features of the local community. d) These things should be planned for the development of the local area which should be supported by and integrated uses of land avoiding inter- sectorial conflicts. These are the policies which have been set and followed by the Incredible India (Incredible India, n.d.). e) It is very much necessary to have balance between the development and conservation. f) It is necessary to have the commitment within the whole nation for the for the development of the sustainable and tourism. g) There should be proper and effective control systems which are devised at a proper place (Global forest coaliation, n.d.) To conclude with it is necessary for the eco-tourism businesses to follow the policies which are been set up by the business to keep the environment clean and green which would basically attract the tourists to visit the destination. It is even necessary to encourage the tourists to have the minimum wastage and even encouraging them regarding the limit the wastage of resources. Not only that it necessary to co-operate with the locals and encourage them to stop using the harmful chemicals which could be dangerous to the environment. References: Adventure tourism in Ecuador. (n.d.). www.piedrablanca.org. Retrieved September 1, 2012, from www.piedrablanca.org/ecotourism-defination.htm Frangialli, F., & Toeper, K. (n.d.). Making Tourism for more sustainaible. www.unep.fr. Retrieved September 1, 2012, from http://www.unep.fr/shared/publications/pdf/DTIx0592xPA-TourismPolicyEN.pdf Incredible India. (n.d.). www.gourkanjilal.com. Retrieved September 30, 2012, from http://gourkanjilal.com/CTA-part1.pdf Incredible India. (n.d.). www.IncredibleIndia.org. Retrieved September 1, 2012, from http://www.incredibleindia.org/index.php/about-us Life as Commerce-India case study on Eco-tourism on market based conservation mechanism. (n.d.). globalforestcoalition.org. Retrieved September 30, 2012, from http://globalforestcoalition.org/wp-content/uploads/2010/11/Casestudy-Ecotourism-in-India1.pdf

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Globalization Outsourcing and Offshoring Software...

In recent years off shoring of high paying service jobs to counties such as India have received a lot of media attention. What are the long and short-term effects of these changes in terms of employment, income distribution and economic growth? Is the outsourcing of services a different phenomenon than simply importing steel? Economic theory and past history point to the fact the trade provides net economic gains but if it also redistributes wealth, affects worker employment the short run and wages in the long run. It is easy to find literature that tells of the growth of the American economy with the increased use of outsourcing. It is however a different story when one asks the question who is reaping the benefit of the new lower†¦show more content†¦In the past three years it is estimated that off shoring accounted about .5 million people laid off by Goldman Sachs. Forrester projects that the number of outsourced jobs will grow to from about 400,000 to 3.3 million by 2015. That averages 250,000 layoffs per year or less than two percent other approximately 15 million Americans who involuntarily lose their each year. Up to 14 million Americans work in occupations susiptable to off shoring. Occupations such as financial analysts, medical technicians, paralegals and computer and math professiona ls according to a recent study at UC Berkeley by Ashok Bardhan and Cynthia Kroll. Gathering information about the extent of outsourcing is extremely difficult. The Department of Labor relies on employers to voluntarily report in surveys whether they have had any layoffs due to off shoring. Employers are understandably reluctant to be forthcoming with such information. The Brookings Institute held a Data Workshop to discuss problems gathering data on this topic. With the current surveying methods the potential magnitude in underestimating the import levels and overseas job displacement is significant was one conclusion of the workshop. Off shoring should result in net gains for the US. A study by the McKinsey consulting firm estimated the net savings of moving some jobs off shore is about 50 percent. The wage differential between US and foreignShow MoreRelatedEffects of Globalization: Globalization and the Effects on the United States Economy1713 Words   |  7 PagesGlobalization has affected every aspect of the business community in one way or another. Globalization in a simple sense is a business’s movement from one country to another. This is done for a number of reasons; amount of readily available resources, labor market, increased number of customers, and to ultimately become more profitable. There is a decisive advantage for a business to move overseas, but there are a number of drawbacks globalization creates on the local economy. When businessesRead MoreInterpreting Concepts of The World Is Flat Essay1782 Words   |  8 Pagesallows one to reach far away opportunities. 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While many think outsourcing refers to using a service provider in another (usuall y cheaper) country that is not necessarily the case. Outsourcing can be done to a company that is located anywhere, the location isn’t important.† (Offshoring vs. Outsourcing, n.d.). There are many reason a businessRead MoreWorld Is Flat Essay1784 Words   |  8 Pagesallows one to reach far away opportunities. The three Globalizations contrast in many ways. Globalization 1.0, lasting from 1492 to about 1800, was about countries and muscles. Its force driving the process of global flattening was the amount of muscle your country had. The key agent of change in Globalization 2.0, which lasted from 1800 to 2000, was the power of multinational companies, which went global for markets and labor. Globalization 3.0, beginning in 2000 flattened the playing field evenRead MoreFirst Social Impact On Changing Career Models1453 Words   |  6 Pagesupward, linear series through one or two firms or consist stable employment in one progression. Terjesen (2006) claims that globalization and technology have changed the essence of careers and of the psychological employment agreement which was initially regarded as exchange of employee loyalty for job security, and this contract has moreover been damaged by the pressure of outsourcing, particularly when employees are required to train individuals from overseas who are possibly take their jobs. A studyRead MoreOutsourcing and the US Economy Essay2349 Words   |  10 PagesOutsourcing – Dont Get Bangalored? As the world has gotten â€Å"smaller† in terms of trade, outsourcing has become a hot topic in much political and economic debate in the United States. An Associated Press-Ipsos poll in May 2004, found that 69 per cent of Americans thought that outsourcing hurts the US economy while only 17 per cent thought it helped . President Bush’s chief economic advisor Greg Mankiw has stated â€Å"outsourcing†¦is something that we should realize is probably a plus for the economyRead MoreThe Pros and Cons of Globalization Essays1584 Words   |  7 Pagesinterdependent world economy is the outcome of the process of Globalization. Various definitions of Globalization are available. 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