Finance

    Corporate governance is the concept underlying the manner that leaders manage organisations (Solomon 2007). As such, corporate governance can take a number of forms. The form of corporate governance depends on the organisational context. The particular conditions of the organisation justify the form of corporate governance. The type of corporate governance implemented in an organisation should align with its context to be effective. Corporate governance applied in an organisation has widespread implications via the outcomes of the decisions made and implemented.
There is no singular or commonly accepted definition of corporate governance. The rationale could be the contextual nature of this concept that limits an absolute definition. In studying corporate governance of organisations, it is important to know the specific definition of corporate governance utilised by the organisation to understand decisions made and the outcomes. The definition of corporate governance adopted by firms could be narrow or broad. 

A narrow definition of corporate governance is the internal control over the assets and liabilities of the firm by considering shareholders benefit (Monks  Minow 2003). The scope of internal management only covers the financial area of operations. This narrow definition refers to the decisions and actions pertaining to the investment and use of company assets as well as the control of liabilities to achieve outcomes that address the interests of shareholders. Corporate governance means the management of the organisation in a manner that upholds the outcomes expected by shareholders, who also comprise stakeholders of the firm. Management works to make the best use of assets and control liabilities to ensure that shareholders receive optimal returns (Solomon 2007). By achieving this, the firm keeps its shareholders and shareholders investments as well as maintains a good investment standing in the market.

Another narrow definition of corporate governance is the management of the interrelationships existing in the firm among the board, managers and supervisors, employees, suppliers, creditors, and consumers (Monks  Minow 2003). This is a narrow definition because of the focus on relationships, which comprise an important aspect of corporate governance. Corporate governance is relationship management of all the people involved in the organisation. The development of a relationship conducive to the achievement of organisational goals to the benefit of all interested parties is the target of corporate governance. This operates based on the premise that the management of organisational processes and outcomes depends on the relationship of the people making the decisions, those that implement decisions, and other parties whose participation is necessary to the success of the organisation.

    The broad definition of corporate governance widens the areas of management covered to consider not only the interests of shareholders but also the concerns of all stakeholders. The broader definition of corporate governance relates to its social responsibility in considering the interests of shareholders, managers and employees, and consumers (Colley et al. 2005).

One broad definition of corporate governance is management of the firm in a manner that supports business growth and success as well as accountability (Tirole 2001). This broad definition involves two goals, which is achievable in an optimum manner by finding the appropriate balance between both goals. Corporate governance that achieves the optimum balance between two goals is able to boost business growth in a manner that supports accountability. This means sufficient auditing should accompany financial and business outcomes. Business growth reflects the methods employed in obtaining this outcome. Accountability provides legitimacy to the methods used in ushering business growth and the business outcome itself. The combination of business growth and accountability fosters the objectives of corporate governance.

    Another broad definition of corporate governance is the exercise of authoritative direction towards the organisation by applying the basic tenets of accountability, honesty, integrity, responsibility and trustworthiness (Tirole 2001 Colley et al. 2005). This definition focuses on the quality of management and leadership as well as the traits of managers and leaders. Corporate governance involves management and leadership that operate based on standards of practice. The standards ensure the exercise of authority within a position of trust, as part of obligation to the organisation, and with recognition of attribution of outcomes to the position and oneself. In this sense, corporate governance serves as a system of checks and balance (Tirole 2001). The system checks the actions of those in authority as well as temper authority with standards of practice to prevent negative outcomes.

Principles of Corporate Governance
    The definitions give rise to three key principles of corporate governance. The application or presence of these principles in the organisation determines the decision-making and policy development process as well as the concurrent outcomes.

    The first principle is organisational architecture. This refers to the framework or system providing guidance and directing the actualisation of the core qualities contained by the vision set by the organisation (Monks  Minow 2003 Colley et al. 2005). The system covers the values adhered to by the executives and managers of the organisation in maximising the wealth of shareholders. The existence of a framework and the type framework implemented determines how well corporate governance follows these values. A poor framework would likely result to unscrupulous decisions and actions and the lack of means to check or punish any wrongdoing. Organisational architecture has two components. One is the provision of a framework to guide decision-making and action. The other is the existence of a system to ensure compliance, prevent non-compliance, and commence procedures in response to non-compliance.

    The second principle is operational architecture.  This pertains to the process and system of managing information on the different business activities and the way of managing information on these business activities (Monks  Minow 2003). Information management is a core aspect of corporate governance. Information supports decision-making and responsiveness to situations. Informed decision-making is a sound corporate governance practice. Information and access to it also explains and reports on decisions and actions that led to a particular outcome. A good information management system fosters decisions and actions sufficiently based on information as well as provide appropriate access to support accountability. Having an independent audit or audit team in covering the financial records of the company is a good information management practice. Weak information management creates opportunities for information manipulation and suppression and unchecked decisions or actions that are likely to result to negative outcomes.

    The third principle is maximisation of the wealth of shareholders. This is the process of increasing the value in the market of common stock prices (Monks  Minow 2003). Corporate governance means having a policy on the maximisation of shareholder wealth. Shareholders are valuable stakeholders in the company and maximisation of stock prices is a means of furthering the interests of shareholders. The practice of maximising shareholders wealth is a balancing act. In the case of institutional stockholders, there should be effective management of interests. Institutional stockholders have a significant impact on corporate governance by influencing areas of investment and other related decisions. Institutional stockholders have a significant share in the firm and actions done by these stockholders communicate messages to other stockholders and the market. The influence of institutional stockholders can have positive or negative outcomes. The maximisation of shareholders wealth requires the careful management of institutional stockholders through good organisational and operational architecture (Monks  Minow 2003). Executive compensation is also another concern in the maximisation of shareholders wealth. On one hand, the compensation of executives serves as incentive to do a good job in corporate governance. Executives receive high compensation because of the rigours of the job as well as to motivate effective exercise of authority. On the other hand, an insufficient or excessive compensation can lead to poor performance and negative outcomes for the firm. In managing reasonable compensation, the justification is standard practice and the limit based on the situation of the firm. Compensation based on firm performance alone can lead to manipulation of share price. A more reasonable justification for the value of compensation is service rendered (Monks  Minow 2003).

Corporate Governance in Listed Companies
    Listed companies refer to the business organisations that have registered their shares in the stock exchange for purposes of trading publicly (Hansmann 1996). By trading their shares publicly, listed companies are able to draw capital from investors, who in turn entrust capital to the company based on expectations of prudent investment management decisions and returns. On the part of listed companies, they create organisational or business conditions that reflect their ability for prudent management. Corporate governance determines how well companies can create these conditions. On the part of investors, they consider the best company with impeccable management standards and market reputation. The corporate governance of a company is one way of determining the best firm to invest in.

    Agency is a concept that describes the relationship that emerges between the company and stakeholders (Jenson  Meckling 1976). By being in an agency relationship, there exists a contract or agreement between the parties in interest. Agency involves a relationship based on trust between the parties. The principal is the investor who entrusts capital, via the purchase of share, for the agent or the company to invest. The fiduciary relationship involves obligations and liabilities in case of failure to comply.

Two specific agency relationships are pertinent to the study of corporate governance. One relationship is what emerges between executives and managers of the company and shareholders (Jenson  Meckling 1976). Executives and managers of the company are agents with responsibility over decision-making on the manner of using and investing capital received through share offerings. Shareholders are the principal by trusting the executives and managers with the use and investment of their money.

The other is the agency relationship between bondholders and shareholders (Jenson  Meckling 1976). These two parties in interest have varying involvement and stakes in the company. Shareholders invest in the company based on the current and expected value of shares. Bondholders are creditors by lending a certain amount to the firm in exchange for the return of the principal amount plus an interest or value depending on the agreement with the firm. The decision to lend depends on assessments of risk and expected changes in risk levels. The higher the risk in the operations of the firm, the less likely that bondholders will lend or the higher the interest.

While shareholders influence investment decisions based on the impact of share value and are willing to take greater risks, bondholders are not as inclined to support risky investments. Shareholders can influence corporate decisions that could adversely affect the bondholders. Shareholders exercise influence through executive or management decisions. In case the investment succeeds, bondholders do not gain additional benefit because returns are of a fixed value. The benefit is only to the extent of ensuring the return of the principal amount and the agreed upon interest. If the investment fails, bondholders also share in any loss because this affects the ability of the firm to return the principal and any additional returns. Shareholders can also decide not to support financially sound investments by refusing to infuse capital for funding. The investment plan may benefit bondholders more by increasing the security of the claims of these creditors. Bondholders have first claim over the assets of the firm in case of losses or failure. (Bowie  Freeman 1992)

The difference in perspective can lead to conflicts that directly affect corporate governance. The relationship between bondholders and shareholders reflect on the effectiveness of corporate governance via decision-making. Decisions can operate to the benefit of either or both shareholders and bondholders depending on the type of decision made and the outcome. The decisions also have an impact on the furtherance of relationship between the firm and its stakeholders. Shareholders can refuse to continue dealings with the firm based on the trend of decisions made by the company. Bondholders can refuse to lend more or increase demands in exchange for loans in the future. (Bowie  Freeman 1992) Concurrently, a balanced and equitable relationship between bondholders and shareholders reflect good corporate governance by preventing conflict while addressing the interests of the stakeholders.

Capital Structure Decision in Listed Companies
Corporate governance in listed companies involves capital structure decisions. The capital structure of companies is the combination and composition of financial liabilities (Marks et al. 2005). There is no certainty over the financial capital of firms because this depends on sources. As such, the sources of financial capital exercise a certain level of control over firms. Firms can have two types of financial liability. One is debt and the other is equity. (Godfred et al. 2009) The sources of these two types of financial capital represent two of the primary investors in companies. Incurring any of these liabilities involves varying benefits, degree of control, and risks as shown in Table 1 below.
Table 1 Distinction between Debt and Equity Capital Structure

Source (Kochhar 1997)

The parties providing debt-based capital to firms gain a fixed value added to the return of the premium. The relationship is contractual and debt holders experience protection based on the terms of the agreement. Debt holders exercise a limited degree of control over decision-making in the firm with influence pertaining mostly to compliance with contractual obligations. The parties providing equity to the firm hold a residual claim to the firms financial condition and incur greater risk in investment decisions made by the firm. As such, equity holders exercise greater control over decision-making. (Marks et al. 2005 Godfred et al. 2009)

Financial management involves the decision on the capital structure of the firm with implications on the utilisation and management of the finances of the firm. Firms transact with providers of capital financing to generate funds. The share in the cash flow from the investment of capital obtained depends on the extent of capital sourced through debt or equity. The debt-to-equity ratio is the measure of the cash flow share of debt and equity holders. A debt-based capital structure means creditors as the primary source of capital and that the share of the debt holders depends on contractual provision. The duration of share of debt holders could also be short or long-term but this has a definite period as indicated in the contract. An equity-based capital structure means that shareholders are the primary source of funding and the share of equity holders depends on the shifts in share value. Equity holders have residual claims to cash flow, which means the share extends in the long-term. (Marks et al. 2005 Godfred et al. 2009)

If corporate governance were to maximise the wealth of shareholders, then the debt-to-equity ratio covers a lesser proportion shared by debt holders. Nevertheless, there are costs associated with having a debt-based or equity-based capital structure. The decision over the particular capital structure of the firm should then consider benefits as well as costs. Sound decision-making over capital structure indicates the need to target optimal debt-to-equity ratio, which depends on the firms strategic assets (Marks et al. 2005). On one hand, the firms that are able to establish successfully an efficient capital structure are likely to realise the optimum value of its strategic assets. On the other hand, firms that are unable to establish an efficient capital structure will likely experience downturn in performance. An efficient capital structure, which aligns capital sources with resources, ushers firm benefits (Godfred et al. 2009).

Board of Directors and the Capital Structure Decision
Financial decisions over capital structure form part of the decisions of the board of directors of a listed company. The board of directors plays an important role in the corporate governance of firms, particularly pertaining to decisions over debt versus equity. The composition and size of the board of directors of listed companies determine the decision over capital structure.

Size of the Board and Capital Structure Decision-Making
    Earlier studies showed that decision-making in larger groups is more difficult. The explanation is greater diversity of perspectives accompanied by the difficulty and longer time it takes to come up with an agreement. In larger groups, the decision-making process involves many compromises (Kogan  Wallach 1966). The result is a decision that is not radical when compared to decisions made in smaller groups (Moscovici  Zavalloni 1969).

In latter studies, there is also preference for small board size. The explanation for preferring lesser number of board members is technology and organisational change. The onset of information and communications technology has enabled better access and sharing of information (Jensen 1993). This means that the rationale of having a large board to prevent unscrupulous decisions may no longer be as strong. In addition, the shift towards efficiency has directed preference for cost cutting through downsizing and streamlining (Lipton  Lorch 1992).

Another explanation in preferring smaller board size is effectiveness, with large groups being less effective than small groups (Hermalin  Weisbach 2003). By having many members, challenges in the agency function arises. Some of the board members may become free riders depending on the influence of the other members and the expected benefits of deciding one way or the other. Having a large group of decision-makers weakens responsibility over contributions to decision-making.
Discussion is also difficult in a large group. Obtaining all ideas from many people takes too much time and there is no certainty of uniformity in perspective. Large groups are not very cohesive as a body (Lipton  Lorch 1992). The difficulty of coordinating variances weighs more than the benefits of having many members in the board (Jensen 1993). A large board carries the benefit of enabling diversity in terms ideas and advice to cover all perspectives needed to support informed and objective decision-making (Dalton  Dalton 2005). When the board is very large, its role shifts to becoming merely symbolic instead of assuming a role in management (Hermalin  Weisbach 2003).

However, there are also downsides to having very small board membership. The board members may not be sufficiently diverse in terms of skills and experience to provide expert advice and make good decisions (Dalton  Dalton 2005). The very small number of board members would also likely lead to preoccupation with making decisions and neglect of their role in monitoring the activities of the firm (Jensen 1993).

In terms of the decision-making and monitoring role, there is divergence in opinion over the better size. One opinion considers small boards as more appropriate when the primary role of the board is monitoring because of the lower cost of coordination and better outcomes (Yermack 1996 Eisenberg et al. 1998). Another opinion considers a large board as better in the monitoring function, especially in firms with complex operations such as by having a number of business units (Mak  Li 2001).
The difference in opinion implies that the optimal number of board members depends on the characteristics of the company and the directors (Raheja 2005). A small board can work for some listed companies while a large board can also work for other companies. While the size of the board depends on the circumstances of the company, a recommended size is 7 to 8 members (Lipton  Lorch 1992). Having a smaller or larger number creates problems to prevent optimal fulfilment of board functions. Decision-making over capital structure involves challenges when the size of the board is too small or too large. The management of the size of the board affects decisions on the capital structure of the firm. The impact on the preference towards one capital structure or the other also depends on board composition.

Composition of the Board and Capital Structure Decision-Making

    The board of directors of listed companies comprise of internal and external or independent directors. The internal and external directors share some functions. There are functions that exclusively emerge from the situation of these directors.

Internal directors exercise two management roles. One is to contribute to corporate governance by protecting the interest of shareholders and the other is ensuring compliance with the contractual relations of the company and its board (Williamson 1985). Internal directors also assume the monitoring role in providing other directors with first-hand data on operations (Boumosleh  Reeb 2005). The rationale for internal directors as direct sources of information is their involvement in decision-making over operations and investment activities of the company. External directors do not experience the same position. As such, outside directors likely pose questions that internal directors should be able to address (Anderson  Reeb 2004). Part of the monitoring role of internal directors is towards the CEO. While the monitoring function over the decisions and actions of the CEO could be indirect since the CEO also exercise a monitoring role over internal directors, the latter can perform this function by providing information to external directors in case of observed remiss by the CEO (Boumosleh  Reeb 2005). By sharing information, internal directors significantly contribute to effective monitoring.

However, in actual corporate practice, internal directors are likely to side with the CEO. As the top executive, the CEO holds the power over the appointment of executives. It is common for CEOs to appoint directors that would likely be loyal. The loyalty to the CEO of directors can work both ways. On one hand, loyal CEO proves beneficial in supporting sound decisions that target the maximisation of shareholder wealth and pursuing performance goals. On the other hand, loyalty can also carry the downside of poor monitoring in case of untoward actions of the CEO. (Sirmans et al. 2006)

    External directors share the monitoring role with internal directors. As external directors, they exercise independent judgment. External directors balance the monitoring of executive decisions and company operations. Part of the monitoring function is to evaluate management practices and manager actions. External director should also be able to contribute to building firm strategy. They should also exercise vigilance in ensuring the accuracy of financial information shared by the company and check on the risk management practices of the company. (Klein 2002) By being in a position of independence, external directors are necessary to effective corporate governance.

    Board composition should have both internal and external directors. Internal directors hold direct information that external director do not have. External directors bring in an outside perspective to balance the oversight functions of the board. By lacking bias, external directors can strengthen corporate governance. Boards with more independent directors are likely to prevent or minimise fraud. The ratio of internal and external directors in the board ranges from one-third to half depending on the jurisdiction. (Beasly 1996 Klein 2002)

    Studies on the size of independent directors in the board of listed companies cites positive results from increasing the number of independent directors, including greater returns in stock price and higher profitability (Rosenstein  Wyatt 1990 Denis  Sarin 1997) as well as accurate financial reporting and lesser earnings management (Peasnell et al. 2005 Osma  Belen 2007). The implication of this is that the shift in the composition of the board by increasing or decreasing internal and external directors affects the factors considered by shareholders as favourable. Increasing the number of external directors has association with obtaining more equity-based capital from greater shareholder investment.

    Other studies show a different outcome in other aspects. Performance declines when substituting internal with external directors as shown by the negative relationship between the number of external directors and Tobins Q index, which determines prospects for growth relative to cost in replacing assets (Agrawal  Knoeber 1996). Past profitability is also low in having a greater number of external directors in the board (Bhagat  Black 1997 Klein 1998). Slow growth and profitability create risk. The implication is that the composition of the board affects decisions on capital structure. A greater number of independent directors in the board appear to create a less desirable condition in obtaining more debt-based capital because of risk.   

OECD Corporate Governance Principles and Listed Companies
    Listed companies have the leeway to determine their own corporate governance practices and system depending on their particular situation. However, there are guides to effective corporate governance. Countries that are members of the Organisation for Economic Co-operation and Development (OECD) can adopt the Principles of Corporate Governance issued by OECD in 1999. These principles are encompassing by providing guidance to all stakeholders in both public and private companies. Since its original introduction, the principles have undergone revision to reflect developments.

    The principles cover six areas of corporate governance, which are 1) establishment of the basis for a framework of good corporate governance 2) rights of shareholders 3) equitable treatment of shareholders 4) role of stakeholders in corporate governance 5) disclosure and transparency and 6) role of the board. The last section on the role of the board covers the provision of strategic direction to the company, monitoring of company management, and ensuring accountability of the board to the both the firm and its shareholders. (OECD 2004)

The OECD Principles of Corporate Governance does not provide an exact size or composition that comprises an effective board for companies. The principles comprise the consideration in managing board size and structure. The impact of the management of board size and structure on the capital structure decision on companies depends on the context of the company as well as the manner of adopting the principles into its corporate governance practices.     Saudi Arabia is not a member of the OECD. However, the OECD corporate governance principles have become an international standard as a corporate governance framework. The corporate governance system in Saudi Arabia covering listed and other types of companies apply the principles.  

Corporate Governance of Saudi Arabian Listed Companies
    Corporate governance as a formal framework for companies is in its early stage. Prior to the establishment of the law focusing on corporate governance, regulation of business practice in Saudi Arabia is through the Company Law of 1965, which adopted British law. The Company Law set the legal framework for business aspects including business establishment, company registration, capitalisation, partnership, audit, accounts, and number of directors.

A major change occurred in 2003 with the establishment of the Saudi Arabia Capital Market Authority (SACMA) tasked to monitor the stock exchange. SACMA took the role of drafting the Corporate Governance Regulation (CGR), the first law focusing solely on corporate governance. In 2006, the CGR underwent a major reform with the intention of improving corporate governance of companies in Saudi Arabia. Part of the reform was providing guidelines for corporate governance in listed companies. (Ramady 2005) The implementation of the CGR was in three stages. The first stage is the publication of the CGR to make companies aware of the existing legal framework for corporate governance in Saudi Arabia. The second stage is more directed education of companies to motivate adoption of the CGR. The third stage is the reform of the CGR together with widespread implementation. At present, listed companies fall under staggered phases with some companies in the more advanced stage relative to other companies. (World Bank 2009)

With the presence of a formal legal framework on corporate governance, albeit this remains in its development stage and will likely be subject to reforms, listed companies are encouraged to utilise the principles and provisions in developing their respective corporate governance system. Part of the motivation to comply is the responsibility of listed companies to report to SACMA on their compliance. The report covers matters on the functions and obligations of the board of directors, the formation of the board, the committees established as part of corporate governance including the nomination and audit committees, the meetings held by the board, and the system of remuneration for members of the board.

An effective corporate governance framework plays an important role in supporting effective financial decisions, such as on capital structure, of listed companies in Saudi Arabia. With a developing corporate governance framework for listed companies, investigating the impact of board size and composition on capital structure decisions contributes to the assessment of the regulations as guidance and the implementation by listed companies of the framework.

Q1. Internalization
The business model used by Tiffany Company is the distribution model which involves a chain of intermediaries like distributors and retailers. The distribution channels used by this company include U.S Retail, Direct Marketing and International Retail. It is also evident that the company had segmented its market into market niche so as to reach all the customers together with increasing its sales.  Tiffany Company used also used internalization as a method of trading its securities.

Exchange rates fluctuations and political and social issues are some of the risks which emerge from business internalization. A fluctuation in exchange rates is an economic risk and results to a cyclical pattern in the economic growth. Brokers who trade securities during these periods are subject to risks of losses. Instability in the economic growth leads to inflation which increased prices and hence low demand for the securities. Political and social issues have a great impact on the economy and especially when it comes to buying of securities. Politicians have a great influence on security trading since most of they are the law makers.

The society also has an influence in security trading since they decide on where and how to purchase the securities. The companys internalization progressed well with the company shares being held by shareholders and this made the company to be profitable where it grew and was able to generate funds internally. As a result the company offered its security stock to the market for sale. The process of internalization by Tiffany Company led to reduction of company risks. The fact that the stock of Tiffany Company was held by shareholders made the company profitable in that it was able to open 16 stores which accounted for 50 of the total sales.

This made the company be profitable in such a way that they were able to generate a 100 million non-collateralized revolving credit facility available at interest rates based upon Eurodollar rates, certificate of deposit or money market rates. It also maintained a relatively moderate level of cash dividend so that it may be able to retain majority of its earnings. By doing this the company was able to escape some risks associated with fluctuations in exchange rates.

Q4. Risk Management instruments
Foreign exchange option is a financial instrument where the owner is given the right to exchange money into another currency at the pre-agreed rate of exchange and at a specific date. Future contracts on the other hand is a unvarying contract which is signed by two parties to either buy or sell a certain asset of a given quantity and quality at a specified date and a specified price. They are not direct securities like bonds and stocks but a type of derivative contract. Foreign exchange rate is an instrument used to manage commodity risks while future contracts are instruments used to manage price risks.

The advantages of future contract include the price is determined by forces of demand and supply, it gives the asset holder a duty to make the delivery depending on the asset terms and it does not give the buyer any responsibility to establish a position which was previously held by the seller. The disadvantages of future contracts include The disadvantages of future contracts include its a legal obligation, some standardized features may be impossible to obtain and one must pay a deposit before engaging in future contracts.

The advantages of foreign exchange include the trading is done through an electronic media, it the most liquid market option, its capable of trading volumes of commodities and the trader has the right to exchange one currency into another. Its disadvantages include products traded using this instrument carry high chances of risk, the investor have a limited liability, one currency can dominate the other and the owner does not have an obligation to exchange one currency into the other.

Tiffany Company should use foreign exchange rate to manage exchange-rate risk. By using this instrument the company will be in a position to exchange its currency at an agreed period and agreed rate of exchange. The right to agree on the rate of exchange could have helped the company to manage risks which result from fluctuations in exchange rates. That is the company will only be able to exchange its currencies only when the rates are favorable for them hence reducing exchange-rate risks.

The existence of virtual universities in the modern world and in the future is now a reality more than ever in the history of the world. During the invention of the internet, the rush to create websites by companies was referred to as a gold rush that would eventually fade away. That assumption has however been proved wrong as the world has become significantly computerized with all enterprise adopting use of customized computer generated software. This is a pointer to the fact that the evolution of the educational superhighway where learning can take place without limits of time and geography will continue becoming more common as technology improves.

The future for online education appears to be set for a complete revolution especially as the young people who were born in the technology age reaches the need to acquire higher education. There is however considerations that ought to be considered even as the online education goes top notch in the future. These include the need to assess the pedagogical principles associated with the emergence of online instruction and the virtual University. There is also the need to assess whether the virtual school is reliable, cost effective and sound. In addition, there is need to evaluate the skills that learners require and the skills and expertise that the virtual schools are going to offer. Another critical consideration is to analyze the ways through which virtual teachers can most effectively provide supportive, interactive and critical learning environment to the learners.

Managing the Virtual University
For the management of a virtual university to be effective, the management issues ought to be first laid down after which strategic management decisions would be adopted. Issues that ought to be considered in management includes the development of online programs that would effectively offer an on demand service, wide range of modules choices and real time interactions between instructors and learners. A prudent organization strategy would involve the establishment of several departments each assigned a specific role. For instance, there should be a department consisting of IT savvy faculty whose role would be to develop the instructional programs and post them in the universities web.

There should also be a department dealing with customer care whose role should be to handle all correspondence within the virtual university. In addition, an IT department would be established to ensure the effective control of internet facilities that would enable dispatch of information and teleconferencing between the lecturers and the learners. It is to be noted here that management practices practiced in the traditional universities would also require adherence. Such includes time observance by instructors and students, integration of professionalism in instruction and an emphasis on the development of quality instructional materials posted to the online learners. The advantages that could be associated with an effectively managed virtual university instructional programs includes

The provision of an on demand service-The most profound and visible effects of a virtual university is the elimination of geographical barriers and time constraints. Learning materials are easy to access since they can be downloaded anywhere in the expanse of the civilized globe. This implies that students can request materials for instruction and the faculty can relay necessary information in real time. There is also a fundamental change in learning emphasis and learning becomes more students centered. The need for a physical university which is clogged by geographical and time barriers is reduced as students become more focused on the learning experience rather than the learning location. The virtual universities have a great potential for becoming larger and virtual as the student body enlarges and diversifies. More people who were initially limited to access information and admission places can gain access to educational courses of their choice from any part of the world.

Reduction of construction costs-Since the virtual universities do not have limitation in time and space, the university can admit as many students as possible, almost without limit.  The University would reduce a focus on physical development as it invests more on funding the virtual education. This calls for institutions management to remain relevant in the coming age. It is highly likely that the near future will see massive investment in training on faculty members on expertise and skills required to conduct training via online programs.

Great Choice of modules-The virtual universities education is able to provide students with a wide range of choice on the modules that they consider taking. It is possible in the virtual universities to take consecutive modules offered from different institutions spread in different geographical locations at the same time. The success of virtual universities however depends on the institutions concerned attention on making sure that their enrolled students reach the minimum requirements and adhere to the set guidelines for graduation.

Improved and easy administration-The administration of virtual universities are improved in terms of their ability to monitor and conference with stakeholders and students online. This includes assessing students learning behavior as well as recording their choices, logging activity and interactions. The fact that materials can be processed online implies that the administration do not waste time with logistics and is therefore able to chat and conference with learners any time they need assistance.

Automated assessment-It is possible to generate online sophisticated grading systems that can test for plagiarism and other crucial functions of grading. For instance, questions requiring multiple choice answers can easily be assessed online and the report card processed immediately for the student. With technology, it is currently possible to have online generated tests with an automated grading system which can evaluate and grade students assignments and tests in very short time thereby revolutionizing the way grading has been traditionally done. This implies that the time that has traditionally been wasted on physical grading will be allocated and utilized for more meaningful tasks.
Improved faculty role-The virtual university presents the faculty with unlimited interaction with individual students. According to Pall off and Pratt the dividing line between the lecturers and the learners is progressively diminished in a virtual university as both of them become partner browsers in the cyberspace library. This effectively reduces the role of traditional teachers to less authoritarian practices.

Geographical Positioning of the Virtual University
It would be prudent to locate the headquarters of the virtual university within the geographical reach of the founders and brain behind it. The virtual university is highly technical skills dependent and is bound to experience shortcomings associated with technology programs. As such, having a good percentage of the technical skills within a common geographic zone would add value to the university. This is because the technical teams such as customer care, IT specialists and program developers can easily conference and suggest improvements when need arises. However, the virtual university can outsource labor in any part of the world and can therefore do so if the existing technical team in the ground can effectively coordinate instruction globally. Based on this, I would consider locating the headquarters in my home country.

Chinas earlier exchange rate have been controlling the capital outflows surplus running on both the overall current and capital account in its Balance of Payment, and accumulating in large amounts the the international reserves. This was not the best system to be adopted as there was a significant undervaluation of the currency, the renminbi (RNB). The China RNB undervaluation is at a preliminary estimates of 15 to 25 order. Anyway the currency misalignment in this manner could be corrected through solving the appreciation trade model for RMB appreciation that would actually yield BOP equilibrium of China. Alternatively, China could fairly contribute towards global payment imbalances reduction especially the United States currency (dollars).
   
The current China exchange rate system can be said to be an ongoing work. In the year 2005, July after a whole year of discussion the government it took to revaluing the China RMB by 2.1, changing to a basket from the dollar peg, giving the RMB chance to float more freely. It expanded the forward market in august by permitting the foreign and local banks with licenses to to take part in foreign exchange market interbank to transact RMB with interbank market and clients, the banks had the power to independently determine the forward rates. By September it did away with inconsistency existing between the rules for dollar fluctuations and basket fluctuations. In the new found Chinese exchange rate regime in July, daily dollar fluctuations were to be restricted to 0.3 per day, while the basket daily fluctuations restricted to 1.5 per day. The major problem in this system was that if the dollar had advantage and moved 2 againstother currencies, event that is not precedented, it may be almost impossible following the rules.1 Due to this, in 23rd September PBOC (Peoples Bank of China) changed RMBs fluctuation by a 3 per day rate against the major currencies non-dollar, Yen and Euro currencies. On 25th November, the regime system regulators chose to continue with market makers system to trade RMB for other currencies. Parallel to this, PBOC improved banks ability on foreign currency hedging through the first ever conducted currency swap domestically, it sold 6 billion to about ten domestic banks. In January 2006, PBOC allowed over counter foreign exchange transactions, running concurrently was the centralized APMC (Automatic Price Matching System), this was basically intended to establish more market oriented  price finding .
   
To assess china s sensitivity in imports and exports to changes in renminbi real exchange rate, I estimate the standard export and import equations. We are interested in the long run equation so we will use the co integration techniques. On top of that I use form import export equations to eliminate bias in equations. Anyway to eliminate omitted variables problems we include the determinants of demand.2
and supply in the reduced equation form. The estimation equations are
Xt  o  1  REERt  Yt  n  i3, i controlst  t
Xt  o  1  REERt  Yt  n  i3, i controlst  t

Where Xt is China export volume
Mt is China import volume
REERt is real effective exchange rate of the reniminb
Yt is foreign demand
YtWWb is china s domestic demand.2
The parameters estimated are 1 export exchange elasticity, 2  income export elasticity, 1  imports exchange rate elasticity, 2  import income elasticity.
  
The Chinese processing sector is very important for the economy we therefore estimate the ordinary exports and the processing sectors separately, the same is applied in ordinary imports and imports for processing. The Chinese data is difficult to work with evidently because no export and import price indexes are available at the aggregate levels. Hence the use of proxy price data. We use China s CPI (Consumer Price Index) as export prices proxy basically because China s National Bureau of Statistics doesn t give producer price index prices. Import prices proxy, we calculate China s weighted index 25 most significant trade partner s export prices and deflate imports index of China. As test of robustness, Hong Kong SAR was used as China s proxy prices of export and results maintained.      

Where N is the currencies involved in the index, which is the with currency weight and reri,  is the bilateral real exchange rate going against every China s trade partners. We use REER, BIS constructed as the robustness test there was a change in the results.3
   
The exports exchange rate elasticity is expected to be negative, as the products from China come to the global market. In Chinese case, the imports exchange elasticity is not clear as expected. If gained power of purchasing is stronger than the decreased demand following the related exports fall then imports should be fostered by a real appreciation. The import structure will also affect the reaction. Price elasticity are expected to be positive if domestic production are mainly substituted by imports.4 However, if the imports generally goods investments taken to the export sector, which is the common factor in China, then appreciation will negatively affect them.
   
Foreign Chinese exports demand is measured through global imports (don t include imports to China) and deflated through the world price index of imports. It s obvious that some production based tactics measures were used, though the data for every month don t exist. For China s local demand for these ordinary imports, industrial production volume is used. GDP is always used to measure the entire nation s output, in the wake of 2005 statistical reform in China, it is about to produce the GDP statistics for the period 1994-2005.5 And for the imports for process sing, processed exports are use as the demand factor for the long run purposes. We expect positive income elasticity for both imports and exports.
   
Additional controls are therefore placed in the import and export equations on their relevance basis in the literature of trade and in the Chinese case. Relevance of rebates of VAT (Value Added Tax) are tested for the case of exports used in China as policies to either discourage or encourage exports depending on the cycle of the business. A positive VAT sign rebates is expected. Capacity utilization measure is used to introduce considerations supply in the reduced form equation. The a priori should be that high utilization capacity should indicate towards the significant supply constraints, which might hinder growth of export. Capacity utilization can therefore be defined in brief as the difference between industrial production the trend in it, Hodrick-Prescott filter is used to calculate the latter.6
   
Finally, inward FDI (Foreign Direct Investment) real stock is the last control variable that is in the export equation. While the export and trade relations are well drawn in literature, it could be very relevant particularly to China now that large capacity of FDI is being directed towards the export industry. Although someone may think that FDI stock increase should foster the exports of China, the production chain complicated structures may bring complications in such an a priori.
   
Let s now move to the import equation, we have to include import tariffs because they have reduced substantially, particularly since China joined the WTO. The FDI stock is the second control. We expect, by principle, to get a positive coefficient on the stock of FDI because the foreign firms are more likely to prefer using imported machinery, parts and components in their production processes than the Chinese firms.7 However as the companies from the foreign countries start to direct their whole chains of production to China, import needs could be reduced and accompanied with FDI stock increase.
   
Finally, both the imports and exports equations include a deterministic trend when it is significant statistically. The variable of the trend should be vital in trapping improvements in
production and the reforms that are ongoing in the China economy, which cannot be measured easily anyway.
   
All the other variables in the model except the import tariffs and VAT rebates measured as value share of imports and exports are all in logarithms. The standard seasonal pattern may not be exactly followed by the Chinese data use of an adjustable series is preferred as we introduce dummies for Chinese December and the New Year.
   
We choose to use every month data for this period 1994 to 2005. Starting the analysis before the year 1994 would have definitely made little sense because there was China s market reforms breakthrough in the same year. Some of these reforms about China market were relevant to all the questions we were asking, i.e. there was unification in the 2 exchange rate systems, a compulsory imports planning was done away with and a reduction in the quotas and licensing requirements. And lastly reforms on prices were pushed forward, renminbi could be converted on the current account and development of private sector derived some benefits from the company laws initiated.

We now test for integration order of the variables involved in the analysis as a preliminary test. We use ADF (Augmented Dickey-Fuller) tests for unit root existence. Almost all the variables are found to be non-stationary in the levels but are stationary in the initial differences. Co integration vectors existence is then tested using the Johansen procedure. We find vector co integration (at least one) for every variable group.9 Co integration vectors presence gives us the chance to estimate lagged determinants regression and their differences using the approach of non-linear least squares as proposed by Loretan and Phillips. Approaches like these yield consistent and unbiased estimates of both the short run and long run parameters.
  
Apart from regressions on import and export equations for our full samples shown earlier (1994-2005), we must also run regression like those in the shorter periods let s say from the year 2000 to 2005 concentrating on the WTO influence period. It is important to consider to differentiate between ordinary trade and processed, running equations for each separately in both import and export case. Three was the short term lag maximum number introduced ultimately we only include the statistically significant ones.  

As expected the China s exports exchange rate elasticity for the long term both ordinary and processed are negative and significant in both the full sample and the one after WTO entry. When transformed appropriately, the long run impact estimated for real exchange rate is about -1.3 for the exports processed in both periods. And for the ordinary exports it reduces from -2.3 for the whole term to -1.6 for more current period. (These results are similar to results that have been founded for U.S, U.K among other OECD states.

For both the processed and ordinary exports, the positive effect of the long run is very small and is not significant statistically in the full sample, though it does become statistically significant after acquiring the WTO membership. To add to that, for most of the current sample, the Chinese export income elasticity is around 1 as is expected.
   
On the control variables, capacity utilization has significant impact over the exports only with a delay of one month or contemporaneously. The capacity utilization sign is negative in conjunction with the idea that proposing that large production shares stays in high growth times in the domestic market. VAT rebates statistically insignificant in all of the specifications we therefore don t include them in the final estimations. The FDI stock data begins in 1997 which is the explanatory variable but only at the more current sub period. A FDI stock surprisingly does not affect the exports of Chinese   an extent that is statistically significant. The trend goes on positive for all the equations while the exports are seen to be reducing at the Chinese New year and reduce during December. If the trends are not included in the estimation both the FDI stock and World demand coefficients would definitely become positive and statistically significant. However the exchange rate elasticity results would remain unchanged.
   
Finally, the imports exchange rate elasticity always come out negative and significant with an exception of imports for processing usually for the latter sub period, where the exchange rate negative coefficient is significant at only the level

The trend of forecasting and estimating the future has always been a difficult one for companies across the globe. The 1930s was the initial period when development into forecasting and predicting models for businesses became relevant for managerial decision making. The use of forecasting and predicting models of consumer demand was the initial area where managers liked to get forecasts for. Ford Motor Company was one of the pioneers in the Western half of the world that used forecasting to make business decisions effective and timely.

Firms employ forecasting techniques in a wide variety of areas for the purpose of decision making. Sales forecasting or rather consumer demand estimation is the most popular area where businesses use some kind of forecasting in order to project their future position. Companies employ a variety of techniques for the estimation of their sales in the future. Linear, self-corrective, aggregate demand forecasting and regression estimations are the most important models that companies use in order to forecast their sales. This area of forecasting is very important for companies due to the fact that this enables a company to formulate their business decisions of expansion, profits and losses. Though forecasting is not an accurate science, it sure gives the business decision makers some direction as to the movement of the future. Businesses engage in forecasting sales in order to project their future positions  on the basis of these projections managers are able to make decisions regarding various business strategies.

Companies like Wal-Mart and K-Mart are perhaps the largest users of forecasting models in the retail stores segment. Sales forecasting enables such retailers to find out whether their position will be better in the future or whether there will be a shortage of liquidity owing to some external reasons. On the basis of the forecasts then, the managers will be able to make decisions ranging from borrowing money to meet the short-term liquidity to perhaps opening a new store to meet the growing demand in that area.

Production companies like Walls rely heavily on forecasting to produce adequate amount of goods. Since the products they produce are fast moving consumer goods that are perishable, it is imperative that there is a good match between the demand and supply of the products. A slight over estimation would mean losses for the company would mean losses while under estimation would mean lost sales. Thus, it is very necessary for fast moving consumer goods companies to estimate their demand curves and thus make appropriate decisions so that they can be competitive and profitable in the marketing place.

On the other hand, companies also need to estimate their costs as time passes. Costing is an important element of business operations. Companies saving on small percentages of their costs are able to get a lot higher increase in the net income. Forecasting future costs is central to making revenue decisions and deciding upon strategic opportunities. Cost estimation is important when it comes to the point in determining the future cash flows and financial position of a company. For companies, it is important to know whether costs will be going up or not further it is important to forecast the percentages by which it will be going up. Financial decision making is completely based upon the net positions of companies in the future. Companies plan for it in advance and thus it is necessary for them to know the market position in future by accurate forecasting and estimation.

Companies across the globe are engaged in a great deal of forecasting and estimation techniques for several domains. The primary purpose of forecasting in sales and cost estimation provides firms with the pre-emptive power of making decisions that would be able to exploit the forecasts. Thus, the need for companies to use forecasting techniques for business decision areas is imperative. Businesses are able to function more effectively and efficiently on the basis of data gathered from forecasting techniques and estimations.

In analyzing the concept of religion in Europe, one aspect that seems prevalent is the dominant Christian memory. The question that often arises queries the extent to which religion is still intact in modern Europe. Gracie Davie poses the dilemma that arises which she postulates to be individual definition of the term intact (Davie 176). It therefore follows that there could only be two faces to the resulting scenario. One way is to look at the intactness of religion as the existence of the memory while at the same time  analyzing it in a manner that acknowledges a majority of Europeans to share the ideologies engendered in Christianity and go on to embrace this ideologies and practices. Another facet that arises while dealing with religion in modern Europe is the prevalent diversification that it exhibits. In this regard, Europes model of European religion has been portrayed more or less as the de facto religion of Europe in the modern era. The balance between personal integration of religion and the diversity of the concept of religion in Europe is the major factor that defines approaches of interpreting it under various levels including society and its various facets that range from politics, gender, secularism, government, economy as well as morality. Under one perspective, it is rendered totally impractical to sustain the historical dimension of religion without appearing biased and superficial to the taste and preference of other religions as well as an array of secular traditions.
A concept that is core in Modern European religion is the vicarious memory. In modern Europe only a few members of society take on the mantle of preserving religious memory signifying that religion is no longer taking the central place in peoples lives (Davie 177). There is no doubt about the fact that Christianity still exists in modern Europe but alongside this existence is a diminished number of individuals who can preserve it by articulating its fundamental tenets. Earlier, religious preservation was the province of men, in modern Europe there has been a shift with women exceeding men, with older generations taking more responsibility than the younger generation. In Western Europe, the literate are more responsible for religious preservation as opposed to peasantry in the pre-modern times. The liturgy has also seen women come to the front to preserve the ancient practice. In order to preserve the mannerisms engendered in the liturgy, religion has redefined the ancient practice which has seen it make amendments as to who is permitted to conduct liturgies.  This has seen ordination of female priests. In a significant number of protestant churches that are spread across Europe, women have been widely accepted and they are able to  The problem of sub-prime mortgage melt down caught many individuals unawares although some speculations were made. It occurred in 2007 a time of stock collapse in the United States and other western countries. As a problem challenging the economic growth of a super power nation, many policies were incorporated by financial institutions and government to handle this situation. The essay paper is a discussion of the failures that occurred in banks as a result of sub prime mortgage melt down and the measures taken by the government to correct this problem.
     A sub-prime mortgage is a form of mortgage that is given to a customer with poor credit background such that the possibility of repaying the mortgage is very low. A sub-prime mortgage has been used in the United States as a way of promoting the growth of housing sector. It has grown dramatically because lenders charge different borrowers prices that are different basing on the credit worthiness of the borrower. This form of mortgage attracts high interest rates than conventional loans and most mortgages have adjustable mortgage rates. In addition, some types of sub prime mortgage loans such as stated income and documentation are made at higher interest rates. Most sub-prime mortgages are branches of Adjustable Rate Mortgage (A.R.M) and they contain adjustable and fixed rates. Sub-prime mortgage have different options for payment which each customer has to make choice (Barrell, Davis, 2008). Payment of interest for this form of mortgage is made within a given period of time.
    In the United States, there has been a rise in mortgage foreclosures that has resulted to sub prime mortgage meltdown that has resulted from a crisis in real estate investment. Banks and financial institutions have been adversely affected by sub prime mortgage in most parts of the world. The current financial crisis of 2007 in the United States has been apparent had has threatened investment in real estate. The value of houses and other real investments in the United States and other global countries is very low compared to past years due to this meltdown. The decline of house prices during this period has made it very difficult for borrowers to refinance their mortgage and this has been a threat in sub-prime mortgages and other financial institutions. Since most of sub-prime mortgages are adjustable rate mortgages, resulted to securities loosing its value. Most stocks that were linked to sub prime mortgage that were held by banks declined in value resulting to capital decline in many financial institution of the United States. Other entities that were sponsored by government were forced to tighten credit terms globally.
    Sub-prime mortgage meltdown can be traced back on 2006 when housing bubble in United States collapsed as a result of high rates of mortgage default. The time before the crisis happened was a boom in economic terms and the banks made loans to be available at very low interest rates. The availability of loans and mortgages attracted many individuals who had higher expectations of return that was never to be (Marks, 2008). The interest rates began to rise and the prices of real estate went down making it difficult for the borrowers to default the loans and mortgages. The initial terms of accessing loan or mortgage had expired and the adjustable rate mortgage interests were very high. Foreclosures resulted in many mortgage firms like the sub-prime mortgage crisis which was a result of poor mortgage payment.
Failures in major banks and industries
    Banks and other form of industries were adversely affected by giving loans and mortgages to uncredit worthiness customers who were unable to refinance. The government had enforced policies that led to banks make bad loans. The government policy is called Community Reinvestment Act which enforces banking laws that leads to banks giving unworthy customers loans or mortgages. Low income earners are encouraged to take mortgages which they could not have afforded. This has led to failure of banks and other financial institutions through bad loans or sub prime mortgages. The banks and mortgage firms that have been exposed to these failures have come up with technique of charging high interest rates to riskier loans or mortgages like sub prime mortgages (Barrell, Davis, 2008). This strategy has led to creation of a crisis in the banking industry and financial institutions.
     The common failure of banks in sub prime mortgage meltdown is the position of banks to be in a position of not recovering fully the loaned amount. This has led to disruption in the way banks work and many financial institutions have collapsed from this crisis. The expectations of many investors were not met and this resulted to investors turning away from the United States to other developing nations. The stock market or securities was adversely affected due to low prices of securities and those who had invested in these markets made unpredicted losses. The mortgages were made for real estate investment like houses however, the prices of these investments were very low such that nobody wanted to invest in real estate.
Corrective actions taken by U.S government
     The government is a key player in safeguarding the welfare of mortgage firms and especially the sub-prime mortgage melt down. First, the government should abolish laws that are misleading as on how to give mortgages and loans. Community Reinvestment Act is one of the policies that government should do away with. This will lead to banks and financial institutions give loans and mortgages to customers who are credit worth. The second action that should be taken by government is to give central bank money that will repay mortgage firms money that had not been refinanced. Thirdly, the government should put good governing rules and regulations about the capacity of some financial institutions to grand customers loans. The government should incorporate measures that will protect the welfare of financial institutions and customers.

Risk is defined the result of unreliability on objectives, both positive and negative. It is a chance or possibility of danger, venturing on something new that involves determination to succeed or accepting the chances of something.  However, Management, is the ability to have control of a workforce, administration of business organization or public undertakings
Risk Management and Development
Barrese (2006) the assessment, identification and prioritization of risks along with economical application and coordination of resources reduce control and monitor the possibility and or impact of unforeseen events or to capitalize on realization of opportunities. Goals, definition and method vary basing on whether the method of risk management is in the context of management of projects, industrial process, engineering, financial portfolios, security, actuarial assessment or public health and safety.   
Challenges to risk management strategies
If ricks are inaccurately prioritized and assessed, time can be used to for purpose especially when dealing with loses of risks that may not happen. Utilizing much time in managing unlikely risks and its assessment can deflect resources that could be capitalized on.
Unforeseen events do happen but if the risk is improbable to happen, it may be better to retain it and deal with the outcome- that is if the loses has occurred. Qualitative assessment of risk is not impartial and has no consistency. The main justification for a formal risk assessment process is the bureaucratic and legal nature. Putting the most important risk management process in a higher position can keep companies from starting a project or getting it accomplished. This is possible if other projects are temporary put on hold until the process of risk management is regarded to be complete. 
Development and Trend
The factors involving development and trend include
Planning the number of processes left.
Identification of the risk in the chosen area.
Information security through mitigation of risk using the organizational, technological and human resource available.
Developing an analysis of risk involving in the process.
Defining the technological  framework for the an agenda and the activity of identification
Mapping out the scope of social risk management, principle upon which risk will be constraints, the objectives and identity of stakeholders.
Planning
Choose the suitable controls to measure risks. It requires to be accepted by the suitable level of management. Risk management plan should suggest effective and applicable security regulation for managing the risks. An efficient risk management plan should involve a schedule for implementation control and the person responsible for those actions.   
Identification
Billions of people connect with each other everyday thus making identity to take a new focus and considering the increase in the particular cases of identity fraud and theft, without instituting the best practices, policies and practice, trust can be uncertain. Risk are the events that when set off can cause problems. It can start with the cause of problem or the problem itself and this include
Source analysis
Problem analysis
Source analysis is when risk sources may be either external or internal to the system which is the aim of risk management while problem analysis are risks that are identified as undesirable threat. When either of the two is known, investigation can be done on the events that a source or problem was triggered.
Information Security
There should be a reformed focus on the tool of privacy management with the ability to mask information specifically in a non production environment. This can strengthen the need for solving ciphers and subsequent request to make complexity simple. Information on statistics is not obtainable on the gone occurrence. Assessing the severity of the results is sometimes complicated for incorporeal assets. Asset worth estimation is another issue that requires to be addressed. The best academic view and reliable statistic are the basic source of information. Such information should be provided for the management of the company that the basic risk is not complex to understand and that the risk management resolution may be prioritized.
Technology
Technology is a complex resource field that is dynamic. In order for an organization to stay competitive in the business environment, it has to use modern technology to meet its targets, speed up operations and produce standard outputs. Though technology has positive impact to the organizational productivity, it can also be used for fraud and illegal dealing. Unfortunately besides its merits, it is expensive change with technology, repair and maintain the machines. It requires a lot of money to buy technological ideas, system and procedures. Spending a lot of time managing and assessing, unlike risks can deflect the direction of resources that could be capitalized.
         Significance
Appropriate countermeasures or controls are significant in measuring each risk. The appropriate level of management need to approve the risk mitigation, for instance the risk involving the reputation of an organization has to have top management approval as the information technology department would have the authority to decide on the risks of computer virus.
The management plan for risk should suggest effective and applicable security regulations for managing the risks. For instance an observed high computer viruses risk should be mitigated by implementing and acquiring antivirus software. A good plan for risk management should include a schedule for responsible persons and control implementation for those actions.
Risk mitigation often means selecting security control which should be recorded in applicability statement that identifies which controls from the standard and particular control objectives, have been used and why.
                Implications
Neil (1986) says that, an organization needs to understand all the mitigation methods for the effect of the risks. Insurance policies have to be purchased for the risks that have been decided to be handed over to an insurer, refrain from all risks that can be evaded without sacrificing the entitys targets, minimize others and continue to have the rest.  
    Initial management plan for risk will never be perfect. Experience, practice and actual loss outcome will necessitate transition in the plan and give information to allow different decision to be made in dealing with the risk at hand. The results of risk analysis and management plan should be up to date periodically in order to assess whether the previous chosen security controls are still effective and applicable to assess the possible level of risk in the business environment. Risk management is the system of controlling, measuring and monitoring risk that organization encounter. Its effect can be on products and services, financial and human resources and external effect on the market, society and environment. Risk management is all about the following activities
Initiating a plan on how risks will be dealt with.
Live projects of risk database should be maintained.
Delegating authority to risk officer with the responsibility of anticipating potential risks.
Anonymous channel for reporting risk should be created.
Mitigation plans for risk that are selected to be mitigated are supposed to be prepared. These plans describe how specific risk is supposed to be dealt with.
Management of risk is a performance of systematically choosing cost effective ways for reducing the impact of the realization of threat to a firm. All risks can be mitigated or avoided fully simply because of practical and financial limitations. Thus all firms have to acknowledge some level of residual risks. Once risks have been found and assessed, the methods used to manage them include
Reduction which is the practice of mitigation.
Avoidance which is the practice of elimination.
Retention which is all about accepting and budgeting.
Sharing which deals with insuring and outsourcing.