Total Return Swaps (TRS)

Total Return Swaps (TRS), sometimes known as a total rate of return swaps or TR swaps,  are an on off-balance sheet transaction for the party who pays total returns composed of capital gains or losses plus the ordinary coupon or dividend, and receives LIBOR plus spread related to the counterparty’s credit riskiness on a given notional principal. The bank paying total returns is effectively warehousing, renting out its balance sheet while transferring economic value and risk to preferably an uncorrelated counterparty to the referenced assets.  A TRS is similar to a plain vanilla swap except the deal is structured  such that the total  return (cash flows plus capital appreciation/depreciation) is exchanged, rather than just the cash flows.  It is  one of the principal instruments used by banks and other financial instruments to manage their credit risk exposure, and as such is a credit derivative. They are used as credit risk Continue reading

Advantages and Disadvantages of Strategic Alliances

A global perspective is necessary for businesses since it assists in the process of identifying the prevailing threats and opportunities in the contemporary marketing arena. In spite of the fact that it is necessary to safeguard a business against global competition, it is vital to note that firms should seek ways and means of penetrating into international marketplace. For example, Barnes and Nobles bookstore entered into strategic alliance with Starbucks way back in 1993. The rationale behind the partnership was to put in place in-house coffee shops, an alliance that would benefit both parties. As a matter of fact, there are myriad of opportunities that are usually created when businesses penetrate into the global market. At this point, it is often of great importance for a firm to choose the most appropriate entry mode. While there are a host of entry modes that can be chosen by a business organization, it is Continue reading

Occupational Health and Safety Leadership Qualities

Occupation Health and Safety (OHS) can be termed as the rules, legislation, policies, procedures and activities intended to care for the health, safety and welfare of the workers and all the individuals in an organization. It involves looking at the social, mental and physical well-being of workers. Moreover, Occupational Health and Safety in an organization help uphold and sustain a high threshold of physical, mental and social well being of all the workers and their employer; protect worker from adverse health effects emanating from poor working conditions; shelter worker when carrying out their activities from risks emanating from factors unfavorable to their health and finally assist workers adopt physically and mentally to the working environment. In the current world, many organizations tend to put more emphasis on occupational health issues than occupational safety issues as occupational health issues are trickier to tackle. However, when occupational health issues are addressed, safety Continue reading

Importance of Marketing in an Organization

Marketing has many definitions. Definitions that focus on customer needs and that are customer-oriented can be used to explain the success of an organization much more clearly. Marketing can be defined as the process through which potential clients and customers who are willing and able to buy are enticed to buy your products or services.  According to American Marketing Association, marketing is defined as “the process, the activity, and set of institutions for communicating, creating, exchanging and delivering offerings that have value for clients, customers, partners, and society at large.”  According to the Chartered Institute of Marketing, marketing is defined as “The process of management used to identify, anticipate and satisfy customer requirements with the aim of making profits.”  Importance of Marketing in an Organization An organization can only succeed when proper marketing strategies are put in place. Marketing determines the nature of an organization’s production and distribution channels for Continue reading

Leadership vs. Management: Understanding the Differences

The difference between leader and manager can be summarized this way: “When you are a leader, you work from the heart. As a manager, you work from the head.” Although it is probably more complex than that, the point to remember is the difference between what you do as a leader and what you do as a manager-and the constant need to be able to do both. Furthermore, the head and heart need to be partners, not independent operators. A manager focuses attention on efficiency, effectiveness, and making sure the right things happen at the right time. For instance: You are in a manager role when you set performance objectives with staff, prepare budgets, review cash flow projections, develop action plans, and evaluate programs or fund raising strategies or any other aspect of the company. Managing may also include doing hundreds of other tasks that require focused and logical attention Continue reading

Difference Between Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI)

Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) are the two most important terms of the market. The major difference between the two could be explained as one takes the form of investment and other financing. They are usually adopted by most developing countries. The measurement criteria for both the terms lie in the capital contribution made in the particular company or market. The most advantageous thing is the ignorance of debt creation. This is why these terms are preferred than External Commercial Borrowings which creates a debt trap for most of the countries. Foreign Direct Investment (FDI) could be defined as an investment by non-residents mostly the business entities to establish business operations in a country with the proper management of equipment’s, machineries, marketing, personnel etc. In the established company the non-resident entity takes over a considerable stake to get the ownership rights and enjoys the management control Continue reading