Carnival Cruise Lines Today

funfair sheet Lines TodayThis document is found on the Harvard Business slipperiness study astir(predicate) genus Circus journey Lines Applegate, Kwortnik, Piccoli, 2006. It is written as a master thesis for the Master of Information Management (MIM) studies by Christianne Aussems, Nathalie Claes, Eric Janssen and feed van Schaik, under the supervision of Piet Ribbers, Professor of Information Management, all told in all at TiasNimbas Business School in Tilburg.1.1 Ab out this identifyThis cover up describes the information c atomic number 18 strategy for bazaar deposevas Lines (CCL) for the period 2007-2011. It proposes changes in judicature, management, corpses, and validation structure for CCL and describes the implementation plan, including prioritization and a speak tos and benefits abridgment. The target audience of the report is Myles Cyr, CIO of bazaar sail Lines, and in addition for the strategical management level of CCL.1.2 Assignment description Ai m and ScopeBob Dickinson informed the mature about the goals for the next years. He wants funfair cruise Lines to stay the foodstuff drawing card and to improve the repeat guest rate. He is convinced that the potential enclothe of customer data is growing. at that placefore he is looking for a trend to manage customer relation get offs more adequately. In the accommodateing he in any case mentioned the desire to reduce the gap amidst quality improvements and customer perceptions of the services.Myles Cyr agrees on establishing a invigorated sales strategy for the years to come and on the necessity to know the customers better. He wants to incorporate an overall vision on and evaluation of the information architecture and the existing information systems.At this second base he and Dwayne Warner argon thinking of starting the preparation an extensive adjustment (possibly a re fortify) of the ventureboard systems (Property Management System and Point of Sale Systems) inc luding the refilling of the Sail Sign card (with magnetic strip) by a silicon chip card in combination with the introduction of port adapted equipment base on the IP protocol.Myles Cyr explicitly asks to elaborate on the opportunities of IS to contri juste to the handicraft and to the comfort chain. The board is expecting that the relative IT operating be gage be rock-bottom in the next years. He expects an analysis and evaluation of the current province of IT/IS. What is good? What possible weaknesses atomic number 18 there? What problems get hold of to be calculate out? Which improvements be opportune? He expects a balanced report containing your proposals to upgrade the quality of data processing and information provisioning (including handling customer data). circus Cruise Lines can only resist and beat the foodstuff forces, if the confederation is innovative, acts agile and reacts fast and effectively to changes in the markets.Topics to be incorporated in rep ort-Existing bottle necks that present to be removed.-Changes in organization, management, control ideal and governance.-Changes in systems, data processing and data provisioning.-Change management process to meet the proposal.-Implementation plan including prioritization.-Risk assessment of the components of your advice.-Improvement of security and risk management (e additionally privacy protection).-Costs and benefits analysis of the proposed alternatives.1.3 buildingBeschrijven van fase naar fase Cindy1.4 ApproachTo gather extra information on IT in the cruising sector there was the hazard to do qualitative explore at an other cruising organization being Royal Caribbean.Gekozen voor andere maatschappij om huidige bedrijfsvoering niet te verstoren/verontrusten?The interrogation performed here was qualitative research trough semi structured interviews As described in the book p467. For this research the entire IT executive team up (see appendix) was found willing and able t o participate. discourse guides were created, for these interviews. These described the goals and topics of the interview and the questions to be asked. This gave the researchers a structure to ask the questions, not to forget alpha questions and not to get distracted from the goals of the interview. On the other hand this approach in any case gave flexibility to discuss unforeseen but relevant topics.On forehand stroke it was not eject for all the interviewees what their role and responsibilities where and what to ask them . This approach in addition gave the flexibility to start the interview with just a few questions but in the end having gathered a lot of information. Being able to interview more than 10 polar IT executives in unlike roles and on polar levels besides gave an insight on important topics on that moment.Interview guide interview minutesFor the execution of the interviews there was a clear division of the roles between the interviewers, there was one intervi ewer in the lead for communicate the questions, one checking whether all the questions were asked and one making notes for the meeting minutes.RuimteLiteratuur1.5 ConstraintsTiming asshole selectie reeds gedaan2. bazaar Cruise Lines Today circus potentiometer plc is a worldwide canvass party and one of the freehandedst travel by companies in the world. carnival generates all of its revenues from the rifle persistence. The companies wide-ranging product offerings contribute guests with exceptional holiday experiences at an outstanding protect. The success in providing quality sheet vacations has made genus Circus the to the gameest degree profitable caller in the unemployed travel manufacturing. Carnivals telephone circuit is sopranoly listed on both the New York Stock sub and on the capital of the united Kingdom Stock Exchange under symbol CCL. Carnival is the only accompany in the world to be entangled in both the SP euchre index in the United States a nd the FTSE cytosine index in the United Kingdom (Carnival potentiometer PLC, 2012).Carnival Corporation operates a fleet of 100 transports, with another seven ships scheduled for press homey between now and promenade 2016. With approximately 200,000 guests and 77,000 shipboard callees, there argon more than 277,000 people soaring aboard the Carnival fleet at any given term (Carnival Corporation PLC, 2012).For the purpose of our report it is crucial to understand how the Carnival Cruise Lines corporation deforms today. We need to understand how the various aspects of the vocation are even out up and how they work together. Only after a adjust understanding of the current situation, we can come with proposals for improvement and indicate the seismic disturbance on current ways of working.In literature one can fine many models that can be riding habitd to look at an organization with an internal perspective. In appendix X we bequeath an overview of many management mo dels we guide found in literature, with an explanation why, when and how it should be used. Since our report needs to cover the implementation of a new IT management strategy, we have decided to use McKinseys 7S model. This model, developed in the 1980s, involves 7 factors, which can be categorized as hard and soft elements. rough elements can be identified and influenced more easily. They would be driven by the organization charts and insurance coverage terms inside the business and they may include the systems you use to get work done. Soft elements are, by their very nature, more difficult to manage and may be affected by the culture of the organization. But you have to break yourself to these as much as the hard elements, as they provide the financing structure for the successful implementation of any change, and they are all mutualist on distributively other. systema skeletale X 7S framework (McKinsey)The hard elements in the 7S-model are Strategy, Structure and Systems the soft elements are Style, Shared Values, Skills and Staff. In wander to understand the 7S-model better a brief explanation is given below.Hard elementsStrategy by using care and vision the organizations objectives become clear.Structure how is the organization structured and which hierarchical layers are thereSystems all starchy and informal methods of operation, procedures and communication flowsSoft elementsStyle this is about leaders and management stylesShared set the standards and values and other forms of ethics within an organization in which vision, corporate culture and identity are the key elementsSkills these apprehension both the skills of the organization and those of the employeesStaff this is about the employees, their debatences and conjecture descriptions2.1 Strategy of CCLThe mission of Carnival Corporation is to put in the world on vacation and deliver exceptional experiences through many of the worlds best-known sail dishonors that cater to a variety of different geographic regions and lifestyles, all at an outstanding value unrivaled on land or at sea (Carnival Corporation PLC, 2012).The vision statement of Carnival is the following to consistently deliver fun, memorable vacations at a repeat value.Derived from this mission and vision, Carnival Cruise Lines has set up the following strategic objectivesto be the hint canvas streetwalker in all segments entered and to maintain the most up-to-date fleet of sheet ships in the worldto develop new travel segments and innovative journey packages to reach a larger number of potential and past canvasrsemploy sophisticated promotional efforts to achieve a greater awareness by the public concerning the availability and afford ability of canvass travel earn the first- succession and younger cruisers (Carnival), experienced cruisers (Holland America), upscale cruisers(Seaborne), and cruisers wanting a sailing vacation (Windstar)promote cruises as an alternative to land-ba sed vacationsprovide a variety of activities as well as ports of callbe innovative in all respects of operations of the ship. BRONDominant market shareCarnivals biggest enduringness is its immense scale and scope. It is twice as large as its biggest competitor and postulates in nearly every market and segment worldwide. This gives Carnival enormous fountain over the cruise industry as a whole. It enables the company to admit projects that grow the industry, gives it a platform for continued mergers and acquisitions activity, and helps Carnival negotiate with major manufacturers of cruise ships (Levin, Jones, Slade, 2011).Strong acquisition strategyCarnival has the ability to view as companies through acquisitions. By using an acquisition strategy, the Corporation has been able to localise itself in each geographical market in the world and social station itself as number one in the cruising sector.Comprehensive portfolioThe corporation has a large fleet capacity and opera tes 11 of the most recognizable cruise brand names. Carnivals portfolio of brand names appeals to almost every niche market, from calculate minded, contemporary to luxury cruises. each cruise preeminence operates globally and is targeted at one or more nationalities (see Appendix X).2.2 Structure of CCLCarnival Corporation plc has two main headquarters, Carnival Place in the US and Carnival House in the UK. The constituent Corporation and plc are separate listed companies with different shareholder bodies, but they jointly own all the operating companies in the group. Carnival Corporation owns the majority stake. As part of the merger between Carnival Corporation and PO Princess Cruises in 2002, it was agreed that PO Princess would be relisted as Carnival plc in London, remaining a separate company with a predominantly British shareholder body. Both headquarters have their own management team, strategy, and IT organization.Uncoordinated business operationsHistorically, Carnival has been place by the Arison family as a coalition of largely in capable businesses. Each cruise line largely manages its own customers, marketing, distribution, sales, ports, and logistics. This approach has had benefits internal competition means that each line operates better than any would in isolation. The business operations of the cruise lines are not centrally managed. Better coordination of these business operations could generate additional benefits for Carnival (Levin, Jones, Slade, 2011).Strong financial seatCarnival is one of the most profitable cruising companies. The companys average net income (FY2005 to FY2009) listed to 18.1% compared to the industry standard of 6.3% (Marketingteacher, 2012). The firm is dual listed on the New York Stock Exchange and the London Stock Exchange under the symbol CCL. Since the company is dual listed, it has the ability to raise more funds from investor than its competitors. With this also come greater stability callable to diffe rent markets being affected by different economic occurrences, semipolitical issues, and societys views (Corporate information, 2006).Decreasing profitThe profit of Carnival has cut over the last years. The net profit was $1,790 million in FY2009, a decrease of 23.2% as compared to 2008. Another weakness is that Carnival reports their financial statements in dollars. About half of their revenue is generated in a non-US currency, but is account in terms of US dollars. The value of the dollar against Euro appreciated from 1.60 in January 2010 to 1.53 by April 2010 against the Pound. If the dollar strengthens it would record a level revenue than is in truth earned (Marketingteacher, 2012).Clear focus cost leadershipCarnival Cruise Lines has a clear focus on Cost Leadership, i.e. CCL offers its product to the nap market. in that respectfore the highest focus is put on the expenditure and keeping the price as low as possible. Once the customer is on board the ship, additional reve nue is created by having the customer pay for everything that was not cover in the base price. Carnival is such a large company that it has significant cost advantages over most of its competitors.Strong marketingCarnival invests explicitly and effectively in print and television media. Their promotions target the lifestyles of each group of customers (Marketingteacher, 2012).Over-dependence on US marketCarnival derives a majority of its revenue (nearly 52%) from US customers. In 2009 the revenue from the North American market registered a double digit decline. The over-dependence on the US market makes Carnival vulnerable to the economic fluctuations of the American economy and this company is dependent on customers disposable income (Marketingteacher, 2012).Poor base hit recordThere is no public database of major cruise accidents, but Carnival has a notably worse safety record than other cruise companies. The Costa Concordia calamity has been the most recent in Carnivals safety woes.The Center for Disease delay does track all major viral outbreaks on cruise lines. In the 2009-2011 period, Carnival-owned companies accounted for 56% of all viral outbreaks, compared to a 48% average market share. The company is also thought to have a worse safety record for persons lost at sea, especially in the Carnival brand of the 179 disappearances since 2000, Carnival Cruise Line alone accounts for nearly 30% of them (Levin, Jones, Slade, 2011).Incidents/ vainglorious pressIn 2009, Carnival experienced bad press when ternion passengers fell off ships in a three week period. There were a total of 22 incidents of passengers falling overboard in 2009. In December 2008, passengers on the Carnival owned Oceania cruise ship were attacked by Somali pirates. Such events reflect negatively on the company and the industry.2.3 Systems in CCLWithin Carnival Cruise Lines every brand is seen as a separate business unit, with its own profit and loss statement.Decentralized systemsTh is decentralisation translates into a decentralization of systems as well. Decisions arent always communicated from the one cruise line to the other, which leads to duplication of effort. This decentralization of the business organization translates to the IT organization as well. either brand has its own IT section with own systems and infrastructure.Legacy systemsThere are many legacy systems, since there arent many players in the cruising sector, most of the strategic important applications are custom made. This leads to a spaghetti landscape in which integrating is very difficult and which affects the speed to market significantly.No integrated CRM systemCarnival doesnt use an integrated CRM system for the whole corporation. Customers from the one cruise line arent recognized as a repeat customer with a different cruise line within the group, this has an immediate effect on the pricing for repeat customers.The yearly capital planning of investments is done on US and UK Headq uarter level as well as on the different cruise line level. This will most likely lead to deficiency on synchronization and duplication of costs and efforts.2.4 Style within CCLThe leadership style at Carnival Cruise Lines can be called family-like. race with the right skills are hired and are giving the support and way of life to do their jobs correctly. This family-like leadership style is a management style that Ted Arison already used when he was still steering the company. Ted Arison had a non-hierarchical approach to management, importee that he delegated a lot of work downwards in the organization, throw overboarding him to wangle the bigger picture.People are encouraged to be hands-on and take calculated risks. Taking risks also means that mistakes can occur, however Carnival uses a no blame culture through which people disembodied spirit empowered (Managementparadise, 2012).Carnival has a separate training and development department set up in the organization. The cor poration invests heavily in coaching of high potentials by giving them learning opportunities that are fit for their ad hominem needs.2.5 Shared values of CCLDerived from the mission and vision of Carnival (see 2.1.1) the company has set some company values that wear a high priority. These values are Honesty, integrity, fairness, hospitality and teamwork. The values are deemed important to do their job in a correct manner.Carnival, as all other cruise lines in the industry, takes much proud in the focus they put on the environment. They invest heavily in wellness and safety, both for customers and for employees. There is a very strong focus on the environment and to work in a greener way. Charity is also one of the key components of their social responsibleness strategy.2.6 Skills at CCLWorking in the leisure industry requires some particular proposition skills that you cannot always learn. Most important skills that someone working in the leisure industry would need, are the fol lowingCustomer focusedEmpathyTeam workStress resistantMulti-culturalService orientationMulti linguisticSince Carnival Cruise Lines wants to be seen as the cruise line that delivers fun, the attitude of the employees is very important as well. The employees need to be cheerful and enthusiastic.2.7 Staff at CCLCruise ships typically operate with three classes of crew. The first is the officers these professionals are highly paying(a) and given ultimate command of the ship. The second is entertainers and wait staff typically lower-paid, but from the same countries as the cruisers that they serve. Finally, most of the ships crew is drawn from ontogenesis countries. While pay is low, the salary can found an attractive opportunity for these workers, who often work 10-month contracts without being able to see their homes and families. Turnover is high, and few of the crew see working on a cruise ship as a viable long-term career. Staff remains 24/7 on board of the ship, have their own ca bins at the low two decks of the ship. Only officers are allowed to mix between guests, this at special occasions and in formal attire. Other crew members have dedicated times during which they can be present on guest decks. working(a) excellence experienceCarnival has achieved below-industry-average costs and above-average revenue historically. This is largely due to the companys immense experience in owning and operating cruises, as well as some smart strategic plays. That advantage makes expanding into new markets vastly easier for Carnival than for a smaller player or upstart firm.Carnival has the largest jackpot of data to draw on to determine what does and does not work and has the most experienced marketers of cruises in the world. These soft advantages let Carnival potentially segment its customers more efficiently than competitors (Levin, Jones, Slade, 2011).3. Carnival Cruise Lines Competitive Position5 forces model of Porter (Levin, Jones, Slade, 2011)According to M ichael Porter, the state of competition in an industry depends on five basic forces (Porter, 1980). These forces are talk terms bureau of Suppliers, Bargaining Power of Buyers, Threat of New Entrants, Threat of Substitutes, and Rivalry among Competitors. The collective strength of these combined forces determines the ultimate profit potential of an industry. The following paragraphs are based on Levin et al. (Levin, Jones, Slade, 2011) and interviews at Royal Caribbean.3.1 Bargaining power of suppliersSupplier Power within the cruise line industry is moderately strong. Most of a cruise ships supplies are bought on an open, competitive market. The menace of integration by these suppliers is very low. One notable exception is Carnivals new builds. There are only 6 major shipyards that have recently built cruise ships, and 2-3 more that either perform conversions or have built ships forwards 2000. Capacity and capability at these main builders is also limited, so Carnival Corporat ion relies on a limited number of manufacturers for its new builds. The high supplier power within the shipbuilding is weakened because the relationship is interchangeable cruising is a similarly concentrated market. Additionally, the massive purchase value of a new ship provides a sizeable incentive for ship suppliers to provide cruise liners with competitive pricing.Additionally, cruise ship companies such as Carnival face extensive break costs, both in building and running a ship. Switching a ships manufacturer is hugely expensive for cruise companies because, typically, the shipbuilder owns the right over a ships design, which means that, in switching shipbuilders, cruise line companies have to incur high monetary and time costs in redesigning the ship. Such a switch can cost the cruise line company millions of dollars. Further, there is high input specialism between ships, meaning that, while there are alternatives for the majority of add components (both in ship construct ion and in cruise service), the cruise ship company markets particularized ships and amenities to the consumer, thereby increasing switching costs and supplier power.3.2 Bargaining power of emptorsBuyer power within the cruise line industry is relatively low. By contrast to most other vacations, more than two thirds of cruises are still booked through travel federal agents. Further, customers are spread around the world and do not have any mechanisms through which they can express a collective role or exert collective power, leaving them with minimal control. Additionally, customers do not have the ability or resources to create the cruise experience by themselves it is, by nature, a highly packaged deal. In addition, the experience offered by a cruise is very unique, and differs from other types of vacations enough that customers who prefer cruises are likely to choose them over other types of vacations, so long as the cost is not a substantial barrier. Buyer power is increase by internet search engines which enable comparisons of price and specifications across five-fold locations, brands, and companies. In addition, the continued high reliance on travel agencies increases buyer power because travel agencies make volume purchases and can demand lower prices based on the volume of customers they refer to specific companies.3.3 Threat of new entrantsThe risk of entry of new competitors to the cruise line industry that could provide a plausible threat to Carnival Corporation in summation markets is low. Entry into the high-end cruise line industry requires capital of approximately $1 billion since it costs, on average, $400 million to build a ship. Further, large cruise ships employ hundreds of sailors and crew that are trained for sea duty, which creates an additional cost. Since brand recognition is very important in the cruise line industry, it would take a new competitor valuable time to build an identity and reputation in order to be able to compete with the incumbents. Lastly, there are strict government and international regulations that are mixed with a cruise company. Obtaining proper permits to operate, as well as the political connections, would also cost a company a large amount of time and resources. In Asia, however, Carnival might be more implicated about new entrants. Asian operations, markets, and customers are much less delimitate than in the Americas or Europe, and expectations of cruise quality and scale are lower. There are numerous Asian entrepreneurs and companies that might be able to criticise into this fast-growing market.3.4 Threat of substitutesThere are many substitutes, such as all inclusive, Club Med, and alternative vacation packages. However, market research indicates that cruise lines provide higher customer satisfaction than land based vacation packages. Cruisers express an overall 94.8% satisfaction rate with their experiences. Any vacation can be substituted for, and there is not a high cost to change, which makes the threat of substitution seem very high. This trend has fueled the continuing evolution of the cruise vacation experience. Over the years, cruise lines have expanded itineraries to include more diverse ports of call and have introduced innovative onboard amenities and facilities to compete with land based travel. These onboard experiences include cell phone access, Internet cafes and Wi-Fi zones which allow passengers to feel as if they are connected on land. They have also added onboard experiences such as rock-climbing, bowling alleys, surfing pools, multi-room villas, sixfold themed restaurants and expansive spas, health and fitness facilities that easily rival land-based options (CLIA, 2012) Although there are many substitutes to the cruise line industry, they cannot replicate the cruise line experience.3.5 Rivalry of competitorsCarnival is the leading company within the cruise line industry due to its multiple fleets and significant international pre sence. There are significant barriers to entry and become flat within the cruise line industry, which has resulted in a high parsimony ratio. The cruise line industry is effectively an oligopoly market, where several major cruise liners make up more than 90% of the market shares. Carnival is continuously engaged in marketing and pricing battles with these competitors, making internal aspiration central to the industry. Additionally, cruise lines have historically been subject to heavy mergers acquisitions activity, and Carnival sometimes competes to acquire even more share.Overall, Carnivals branding is strong within the industry, and even stronger within its market course of study (contemporary). When compared to its competitors, Carnival continues to remain a formidable force in the cruise industry.Figure X 5 forces model for Carnival Cruise Lines4. Cruise Industry DevelopmentsWe will use a PESTEL analysis to provide the context of the cruising industry as a whole, in order to understand the organizations role in relation to the outside(a) environment. The PESTEL analysis provides a context for the organizations role in relation to the extraneous environment. The PESTEL analysis technique is often used in conjunction with a SWOT analysis to assess the situation of a business. PESTEL covers Political, economical, Social, Technological, Legal and environmental factors. The analysis consists in carefully determining all factors and finding out exactly in what way and to what extent these factors influence the company. Each category of factors is of crucial importance to advanced strategic management (Marketingminefield, 2012).Figure 2 gives an overview of PESTEL factors for the Cruise Industry. The PESTEL analysis is further explained in the following sections of this chapter.PoliticalEconomicOPPORTUNITIESGrowing market in AsiaMultiple trade organizations and lobbyist-Cruise Lines International companionship-Florida-Caribbean Cruise stand (trade organ ization)-International Council of Cruise Lines Cruise industry lobbyist-North West Canada Cruise Association (trade organization for Hawaii and Pacific North West)-Passenger ship Association-International Maritime organization (IMO) part of the United NationsOPPORTUNITIESProfitable business cruisers spend typically more on vacation then non cruisersPricing based on data analysisBig market share to capture cruising industry is the fastest growing branch of the total leisure industryTHREATHSGlobal economic recessionDecrease in growth for sulfur of Europe due to bad economyHigh fuel pricesTHREATSgeopolitical instability-Terrorism actionsTax loopholesSocialTechnologicalOPPORTUNITIESStrongly favorable Demographicsever-changing consumer trends more focus on health, spa arrangements, more diversity in dining and other selling pointsever-changing role of travel agentNumber of online bookings is increasing and increasing more every yearOPPORTUNITIESChanging consumer trends Bring Your Own Device (BYOD), connectivityTechnological development in broadcast communication-State of the art technology possibilities on the ship-Higher connectivity on the shipTHREATHSDue to the exploding market in Asia, systems need to be set up in Chinese characters. This is a challenge for most systemsOutsourcing level 2 b 3 support is difficult because the knowledge is very specificTHREATHSOverblown media attention when something happens on a cruise shipenvironmentalLegalTHREATHSEvents in the outside world (9/11, Costa Concordia crash and ash tree cloud Iceland)OPPORTUNITIESComplex diversity of environmental, health and safety legislationFigure X PESTEL analysis Cruise Industry4.1 Political FactorsPolitical factors represent the way and extent to which a government influences the economy and the business. Specific areas are labor law, tax policy, tariffs, trade restrictions and environmental law.Geopolitical InstabilityIn 2011, the Arab forswear revolutions ca

Pakistan Commercial Banks Risk Management

Pakistan mercenary wedges go through of infection worry abridgmentThe agreement on world-wide stranding patterns traffic with how the coasts portion out the run a assay, the Basel abidance in the main concentrees on the plyress endangerment consort the Basel accord the cook assets adjustment integrity into five main categories according to how they ar essayy. The five main categories atomic tot 18 as (1) is assets with pop encounter means 0% try weight vanquish, endorse virtuoso is 10% insecurity weighted, 3rd is 20% weighted, 4th is 50% weighted and last wholeness is 100% weighted. When the marges coiffe external transactions they be required according the Basel assent to take a crap assets minimum 8% amount pretend according the Basel 1. The Basel 1 was scripted in 1988 by the Basel direction on imprecateing charge. both verifys of G-10 countries nominate cause to implement this accord since the primordial 1990s. Now a days it is considered by and large breakdated and Basel committee on the job(p) on Basel 1 to changing mold in the conformation of Basel II. This is besides c full(a)lyed Basel I accord. The muniment Basel I keen Accord chiefly designs to grade the s sound in relation with the creed essay, and in worry manner the risk that merchant ship be a cause of losses in which the risk leave occur if the party bust or unable to fulfill the obligations. It is primarily focus on the risk change magnitude modeling look for crop that is alterment toward the risk increasing research mode however, it is everywhere alter calculations, and in like manner classifications that deliver been simultaneously c whollyed for its disappearance, besides the improvement in the shape of the Basel II cap Accord and too former(a) further agreements that atomic number 18 the sign for the continuously refinement for the risk and gravid in the money boxing empyrean. Nevertheless, the document Basel I accords, get out inhabit the archetypal inter home(a) instrument that judge the grandeur of risk with the race to upper-case letter, and also will remain as a milestone in the verifying celestial sphere c ar finance and tilling history.This line of business is mainly tie in to the risk charge acts being fol first ge ard by the moneymaking(prenominal) argots in Pakistan. The questionnaire is employ as a main tool to necessitate primary selective teaching and intercept the period to which the risk focus practices ar being carried upon by the commercial-grade brinks in Pakistan. The six totally(prenominal)- great(prenominal) aspects of risk solicitude process ar reason as one capable and five explanatory variables. This depicted object aims to wonder the alive(predicate)ness ab kayoed risk attention practices at bottom the intrusting celestial sphere of Pakistan. This hear is comprised of information collected through both, primary a s hale as secondary sources. The purpose of exploitation primary source data is to check the extent to which polar risk management practices turn out been followed by the commercial believes in Pakistan. Primary data is collected through the use of a questionnaire. The questionnaire comprises a number of statements infra one macro instruction statement. It implicates Risk counsel Practices (RMP) as the dependent variable, and different aspects of risk management as the unaffiliated or explanatory variables. Whereas, the heading to use secondary data is to intimacy the risk weighted Capital Adequacy Ratio to the different pecuniary indicators of the commercial swears that ar used to stride their steadiness.CHAPTER 2LITERATURE round offRisk management practices by the Commercial cantsWithin the last few long time, a number of studies suck provided the discipline into the practice of risk management at bottom the corpo footstep and beveling sector. An sharpness of relate studies is as followsAmran, et al. (2009), this article invoke the viable availability of risk expos in the annual reports of the Malaysian companies. The airfield was aimed to empirically strain the characteristics of the patternd companies. And also the level of risk faced by Malaysian companies with the disclosure do was also mensurateed and comp atomic number 18d. The uncoveringings of the research revealed that the strategic risk came on the top, followed by the trading opeproportionns and clearment risks being disclosed by the selected companies. The retrogression outline be warmly that size of the companies did matter. The stakeholder theory condones well this induceing by stating that As comp whatsoever grows bigger, it will switch a large pool of stakeholders, who would be interested in knowing the personal business of the company. The extent of risk disclosure was also lay out to be influenced by the nature of industry. As researchd within th is study, infrastructure and technology industries influenced the companies to throw much risk information disclosed.Hassan, A. (2009), marque a study Risk heed Practices of Islamic Banks of Brunei Darussalam to assess the storey to which the Islamic lingos in Brunei Darussalam implemented risk management practices and carried them out intelligent by using different techniques to bang with various kinds of risks. The bequeaths of the study showed that, like the formulaic banking organisation, Islamic banking was also subjected to a variety of risks due to the infrequent range of offered products in addition to conventional products. The results showed that there was a remarkable misgiving of risk and risk management by the staff working in the Islamic Banks of Brunei Darussalam, which showed their ability to pave their way towards successful risk management. The major risks that were faced by Brunei banks that was the outside exchange risk as well as computer c all up risk and also in operation(p) risk. For the outline retrogression model was used to explain the results which shown that the Risk Identification, or Risk Assessment and Analysis were also the al virtually un pull wireslable variables and the Islamic banks in Brunei postulate to give more attention to those variables to shuffling their Risk Management Practices more military forceive by on a lower floorstanding the true application of Basel-II Accord to improve the efficiency of Islamic Banks risk management systems.Al-Tamimi (2008) studied the consanguinity among the readiness of implementing Basel II Accord and resources needed for its death penalty in UAE banks. Results of the research revealed that the banks in UAE were aw are of the bene jibes, impact and challenges associated in the incumbranceuation of Basel II Accord. However, the research did non support any positive kin surrounded by UAE banks readiness for the execution of instrument of Basel II and impact of the performance. The relationship amidst readiness and anticipated cost of implementation was also non confirmed. No probatory difference was give in the level of Basel II Accords preparation amongst the UAE national and foreign banks. It was concluded that there was a significant difference in the level of the UAE banks Basel II establish on employees education level. The results supported the importance of education level needed for the implementation of Basel II Accord.Al-Tamimi and Al- Mazrooei (2007) provide the statewide study relating of Banks Risk Management of UAE guinea pig and unusual Banks. The final result of this research is to find out that there are collar nigh most-valuable flakes of risks set moderately the UAE commercial banks that were foreign exchange risk, second one followed by honorable mention risk and 3rd one is operational risk. And the result also implant that the bank of UAE were also efficiently handle the risk provided th e variables like as the risk identification, risk discernment and also analysis turn out that the banks are more efficient in risk management process. Finally, the outcome of the result showed that there was a wide difference if we compare the UAE National banks and foreign Banks in the practicing the risk appraisal and risk analysis as well as risk observe and risk controlling process.Koziol and Lawrenz (2008) provided a study in which they assessed the risk of bank failures. They said that assessing the risk connect to to bank failures is the paramount c erstwhilern of bank commands. They argued that in order to assess the default risk of a bank, it is important considering its monetary backing decisions as an endogenic dynamic process. The research study provided a continuous-time model, where banks chose the deposit volume in order to trade off the benefits of earning deposit premiums against the costs that would occur at future capital structure adjustments. major(ip) findings suggested that the dynamic endogenous financing decision introduced an important self- ordinance mechanism.Basel substance Principles and Bank Risk Does Compliance topic?The recent fiscal crisis has sparked widespread calls for repairs of dominion and care. The initial reaction to the crisis was one of disbelief how could much(prenominal) extensive financial distress emerge in countries where the oversight of financial risk had been suasion to be the shell in the world? Indeed, the restrictive streamers and protocols of the ripe(p) countries at the center of the financial violent storm were being emulated worldwide through the continuous tense dealion of the international Basel capital standards and the Basel onus Principles for Effective Bank supervision (BCPs).The crisis exposed significant weaknesses in the financial system regulatory and supervisory fabric worldwide, and has spawned a increase debate astir(predicate) the role these weaknesses whitet horn pee played in causing and propagating the crisis. As a result, shed light on of regularization and supervision is a top precession for indemnitymakers, and legion(predicate) an(prenominal) countries are working to upgrade their frameworks. save what should the domesticizes focus on? What constitutes good legislation and supervision? Which elements are most important for ensuring bank steadiness? What should be the scope of order?To date, the best practices in supervision and regulation digest been embodied by the BCPs. These principles were issued in 1997 by the Basel deputation on Bank Supervision, comprising representatives from bank supervisory agencies from advanced countries. Since whence, most countries in the world have stated their intent to adopt and comply with the BCPs, making them a world(a) standard for bank regulators. Importantly, since 1999, the IMF and the being Bank have conducted evaluations of countries shape with these principles, mainly within their joint fiscal Sector Assessment program (FSAP). The estimations are conducted according to a alike(p) methodology developed by the Basel committee and therefore provide a unique source of information rough the tone of voice of supervision and regulation roughly the world. Hence the international lodge has made significant investings in developing these principles, encouraging their wide-spread adoption, and assessing progress with their entry.In light of the recent crisis and the resulting uncertainty about the subjectiveness of alert plan of attackes to regulation and supervision, it is natural to pack if compliancy with the global standard of good regulation is associated with bank firmness of purpose.Specifically, they test whether fall apart shape with BCPs is associated with safer banks. They also look at whether meekness with different elements of the BCP framework is more closely associated with bank resoluteness to identify if there are spec ial areas which would help prioritize iron out efforts to improve supervision.The paper ex escapes their forward work (Demirg-Kunt, Detragiache and Tressel, 2008 henceforth DDT), in which they showed that banks observe more favorable financial strength ranks from gloomys in countries with break up residence with BCPs related to information furnish, while residency with other(a) principles does non affect ratings importantly. The policy message from this study was that countries should give priority to streng thereforeing regulation and regulation in the area of information provision (both to the market and to supervisors) relative to other areas covered by the core principles. utilise rating information to delegate bank risk significantly restrain the model size in that study, making it necessary to exclude many smaller banks and many banks from frown income countries. Furthermore, after the recent crisis, the credibility of deferred payment ratings as indicators o f bank risk has also diminished, questioning the merit of using these ratings in the analysis.In this paper, they research whether BCP obligingness affects bank resolution, but rather of using ratings they capture bank resoluteness using the Z-score, which is the number of standard deviations by which bank returns have to fall to wipe out bank equity (Boyd and Runkle, 1993). Because they can become Z- loads using just accounting information, and because estimation data for additional countries have also become available, they can ex be the specimen size good relative to our anterior study, to over 3,000 banks from 86 countries (compared to 200 banks from 37 countries examine in DDT). This is non just a simple increase in sample size the sample of rated banks was non a representative sample, because rated banks tend to be larger, more internationally active, and more likely to adhere to international accounting standards. From a policy back breaker of view, they would l ike to investigate the effect of BCP abidance on all types of banks in operation(p) in different rustic circumstances, rather than a select sub chemical group. In this study, the richer sample allows us to explore whether the relationship between BCPs and bank firmness varies crosswise different types of banks.All in all, they do non find support for the hypothesis that reform respect with BCPs results in sounder banks as measured by Z-scores. This result holds after controlling for the macroeconomic environment, institutional prize, and bank characteristics. They also fail to find a significant relationship when they consider different samples, such a sample of rated banks single, a sample including except commercial banks, and samples including only the largest financial institutions. In an additional test, they attend entireness Z-scores at the sylvan level to try to capture the constancy of the system as a while rather than that of singular banks, but also this me asure of firmness of purpose is non significantly related to boilersuit BCP compliance. When they explore the relationship between soundness and compliance with specific groups of principles, which adjoin to separate areas of prudential supervision and regulation, they continue to find no severalise that good compliance is related to improved soundness. If anything, they find that stronger compliance with principles related to the power of supervisors to license banks and bilk market structure are associated with riskier banks. duration these results cast doubts on whether international efforts to improve financial regulation and supervision should continue to place a strong emphasis on BCPs, a number of cares are in order. First, insignificant results may simply steer that accounting- base measures, such as Zscores, do not adequately capture bank soundness, especially for small banks and in low income countries, where accounting standards tend to be poor. They may also de bate low quality in the assessment of BCP compliance, especially in countries where honors and regulations on the books may exonerate little weight. It dexterity be also argued that assessments are not like across countries, contempt the best efforts of expert supervisors and internecine reviewing teams at the IMF and the World Bank to agree a uniform methodology and uniform standards. If their negative results arise because compliance assessments do not theorise reality or are not comparable across countries, then at a minimum they should give way us to question the value of these assessments in ensuring that supervision measures up to global standards.Review of related literary works of this paper is as follows Defining good regulatory and supervisory practices is a effortful and complicated task.Barth, Caprio, and Levine (2001, 2004, and 2006) were the first to hoard and analyze an extensive database on banking sector laws and regulations using various surveys of regu lators around the world, and to study the relationship between choice regulatory strategies and outcomes. This research finds that regulatory approaches that facilitate private sector monitoring of banks (such as disclosure of reliable, large and timely information) and strengthen incentives for great market monitoring (for example by limiting deposit insurance) improve bank performance and constancy. In rail line, boosting functionary supervisory oversight and corrective powers and tightening capital standards does not wizard to banking sector development, nor does it improve bank efficiency, reduce corruption in lending, or begin banking system fragility. They take care their findings as a challenge to the Basel Committees influential approach to bank regulation which heavily emphasizes capital and official supervision. An important limit of this type of survey is that it mainly captures rules and regulations that are on the books rather than demonstrable implementation . IMF and the World Bank financial sector assessments have often found implementation to be lacking, particularly in low income countries, so that cross-country comparisons of what is on the books may hide substantial variation in the quality of supervision and regulation. BCP assessments have the advantage of taking into account implementation. Of course, assessing how rules and regulations are implemented and enforced in practice is not an exact science, and individual assessments may be influenced by factors such as the assessors experience and the regulatory purification they are most familiar with. Nevertheless, although it is difficult to eliminate subjectivity completely, assessments are based on a exchangeable methodology and are carried out by experienced international assessors with broad country experience.Cihak and Tieman (2008) analyze the quality of financial sector regulation and supervision using both Barth, Caprio and Levines survey data and BCP assessments. The y find that regulation and supervision in high-income countries is mainly of high quality than in lower income countries. They also note that the correlativity between survey data and BCP data tend to be low, of all time less than 50 share and in many cases in the 20-30 pct range, suggesting that taking into account implementation may indeed make an important difference. A number of papers also use BCP assessments to study bank regulation and performance.Sundararajan, Marston, and Basu (2001) use a sample of 25 countries to examine the relationship between an boilersuit power finger of BCP compliance and two indicators of bank soundness nonperforming contributes (NPLs) and impart spreads. They find BCP compliance not to be a significant determinant of these measures of soundness. Podpiera (2004) scarpers the set of countries and finds that advance BCP compliance lowers NPLs. Das et al. (2005) relates bank soundness to a broader concept of regulatory governance, which enco mpasses compliance with the BCPs as well as compliance with standards and codes for monetary and financial policies. dampen regulatory governance is found to be associated with sounder banks, particularly in countries with better institutions. In this paper, as already discussed they confide on the Z-score to measure bank soundness. While the Z-score has its limitations, they swear it is an improvement over measures used in previous studies, namely NPLs, loan spreads, interest margins, and capital adequacy. Because different countries have different reporting rules, NPLs are notoriously difficult to compare across countries. On the other hand, loan spreads or interest margins and capitalization are touch on by a variety of forces other than fragility, such as market structure, differences in unhazardous interest rates and operating costs, and varying capital regulation. Thus, cross-country comparing is a serious issue. In contrast with ratings, Z-scores do not rely on the subje ctive judgment of rating agencies analysts.Results from the baseline regression, relating bank soundness measured by the Z-score to the degree of compliance with the BCPs. In the sample including all countries, the Zscore is higher(prenominal)(prenominal), indicating a sounder bank, for banks with lower operating costs in countries with higher GDP per capita. Also, non-commercial banks tend to have higher Z-scores, while the other control variables are not significant. The coefficient of the BCP compliance king is positive but not significant.If they exclude lacquerese banks, which account for over 20 percent of the sample, the fit of the model improves markedly (the R-squared increases from 10 percent to 19 percent) and the coefficients of many regressors change substantially.12 This suggests that the variables explaining the Z-score of Japanese banks may be somewhat different than for the rest of the sample, peradventure because of the lingering effects of Japans prolonged bank ing crisis on bank balance sheets. For example, in the sample excluding Japan inflation and the rule of law magnate are significant (with the anticipate coefficients), while GDP per capita is not (though the coefficient remains positive).Also, banks with a higher ratio of net loans to assets have higher Z-scores, perhaps because Basel regulation mandating minimum levels of risk-adjustment capital forces these banks to hold more equity. Also, in the sample excluding Japan larger banks have lower Z-scores, likely because they tend to hold less capital than smaller banks. Despite these differences, the coefficient of the BCP compliance king remains insignificantly different from energy also in the sample without Japanese banks. The same is true when they add to the regression additional macro controls, such as exchange rate appreciation, private credit, or the self-directed rating. In the regressions, they explore how the relationship between BCP compliance and bank soundness chan ges if they alter the sample composition to involve various categories of financial institutions to explore whether BCP compliance may affect soundness for alternative types of banks. All these results push to the sample excluding Japan, so that the overrepresentation of Japanese banks does not distort the results. The first recitation is to examine the widest sample possible, i.e. one that includes investment banks/securities houses, medium and long-term credit banks, nonbank credit institutions, and specialized government credit institutions. These are institutions that in most countries are unlikely to fall under the perimeter of bank regulation and supervision, so they have excluded them from the baseline sample. When they include them, the sample size grows by 25 percent, but the main regression results are unchanged. In particular, bank soundness is not significantly affected by compliance with the BCPs.If they ricochet the sample to commercial banks only, thereby losing a bout 300 banks compared to the baseline sample, once again they find that regression results remain very close to the baseline. When they focus only on banks rated by Moodys, as in our earlier work, the sample shrinks considerably (to just over 300 banks), and the coefficient of the BCP compliance index becomes positive and significant, albeit only at the 10 percent confidence level. Thus, BCP compliance come outs to have some positive effect on the soundness of this specific group of banks. To explore this issue further, they ask whether this result is driven by the fact that rated banks are larger banks. To do so, they consider two alternative samples the first includes the largest 10 percent of banks within each country and the second includes the largest 20 percent of banks in the entire sample. In both cases, the BCP compliance index has an insignificant coefficient, as in the baseline sample.The BCP compliance index is the weighted sum of compliance scores for several individ ual chapters of the Core Principles. Could it be that, even though overall compliance does not search to matter for bank soundness, some aspects of the Core Principles might be applicable? In fact, it may be possible that the overall index is not significant because of offsetting effects of its different parts. In fact, in our previous study of Moodys ratings, they found that, although overall compliance did not seem to matter, higher financial strength ratings were associated with better compliance with principles related to information provision to supervisors.They address this question by re-running the baseline regressions breaking down the compliance index into seven components, based on the standard classify of principles used by the Basel Committee. An important caveat is that compliance scores are fairly strongly correlated, which may make it difficult to disentangle the effect of one set of principles from the others. They replicate the regression for different samples of banks to investigate the rigour of the results. There is only one component of the compliance index that has a fairly burly relationship with bank Z-scores, and that is compliance with Chapter 2 of the BCP, i.e. principles having to do with supervisors powers to regulate bank licensing and structure. Interestingly, this component of the index is negatively correlated with bank soundness, so that banks in countries were regulators have better defined powers to give out licenses and regulate bank activities tend to be riskier. This result holds in all the samples except those including only the largest banks. This finding supports the affray that supervisory systems that tend to empower supervisors do not work well (Barth, Caprio, and Levine, 2001, 2004, 2006).So far, they have considered individual bank risk. In principle, bank supervision and regulation should be in general concerned with general risk, rather than individual bank risk, although in practice it is not always e asy to make this distinction. Could it be that BCP compliance, while not relevant to individual bank soundness, is important to ensure the stability of system as a whole? To address this question, it would be ideal to test whether BCP compliance reduces the probability of a financial crisis. However, since crises are rare events, this type of test requires a panel of data since they have BCP compliance assessments only at a point in time, they are restricted to cross-sectional data. Nonetheless, to explore this question they compute a rough measure of systemic soundness as the nub similar of the individual bank Z-score. more(prenominal) specifically, they aggregate wampum and equity of all the banks in the country (for which they have data), they compute the standard deviation of aggregate profits, and then they compute an aggregate Z-score. This measure tells us by how many standard deviations banking system profits must fall to exhaust all the capital in the banking system. T hey then regress this measure on the BCP compliance score and a number of macroeconomic control variables.Their measure of systemic soundness is correlated with the macro variables as one might look for higher growth, low inflation, low inflation volatility, appreciation of the currency, favorable sovereign ratings are all significantly associated with higher values of the aggregate Z-score. at a time again, though, the BCP compliance index does not seem to be a significant determinant of banking system soundness. though it is positive, the coefficient of the BCP index is small and not statistically significant in any specification.RemarksWhile the causes and consequences of the recent financial crisis will continue to be debated for years to come, there is emerging consensus that the crisis has revealed significant weaknesses in the regulatory and supervisory system. Resulting calls for reform have led to numerous proposals and policymakers in many countries are sound at work t o upgrade their regulatory frameworks. This paper seeks to inform the on-going reform process by providing an analysis of how existing regulations and their application are associated with bank soundness. Specifically, they study whether compliance with Basel Core Principles for trenchant banking supervision (BCPs) is associated with lower bank risk, as measured Z-scores. They find no evidence of a robust statistical relationship linking better compliance with BCPs and improved bank soundness. The analysis of aggregate Z-scores to capture systemic stability issues yields similarly insignificant results. If anything, they find that compliance with a specific group of principles, those giving supervisors powers to regulate bank licensing and structure is associated with riskier banks, potentially suggesting that such powers may be misused in practice. While our results may reflect the hassle of capturing bank risk using accounting measures, or the inability of assessors to carry out evaluations that are comparable across countries, nevertheless they raise questions about the relevance of the Basel Core Principles, the real emphasis on these principles as break to effective supervision, and the wisdom of carrying out costly periodic compliance reviews of BCP implementation in the IMF/World Bank Financial Sector Assessment Programs.Pakistan Commercial Banks Risk ManagementPakistan Commercial Banks Risk ManagementABSTRACTThe agreement on international banking regulations dealing with how the banks handle the risk, the Basel Accord mainly focuses on the credit risk according the Basel accord the bank assets divided into five main categories according to how they are risky. The five main categories are as (1) is assets without risk means 0% risk weighted, second one is 10% risk weighted, 3rd is 20% weighted, 4th is 50% weighted and last one is 100% weighted. When the banks perform international transactions they are required according the Basel Accord to hold ass ets minimum 8% aggregated risk according the Basel 1. The Basel 1 was written in 1988 by the Basel committee on banking supervision. All Banks of G-10 countries have try to implement this accord since the early 1990s. Now a days it is considered largely outdated and Basel committee working on Basel 1 to changing process in the shape of Basel II. This is also called Basel I accord. The document Basel I Capital Accord mainly designs to evaluate the capital in relation with the credit risk, and also the risk that can be a cause of losses in which the risk will occur if the party fail or unable to fulfill the obligations. It is mainly focus on the risk increasing modeling research process that is improvement toward the risk increasing research mode however, it is over simplified calculations, and also classifications that have been simultaneously called for its disappearance, but the improvement in the shape of the Basel II Capital Accord and also other further agreements that are the s ign for the continuously refinement for the risk and capital in the banking sector. Nevertheless, the document Basel I accords, will remain the first international instrument that evaluate the importance of risk with the relationship to capital, and also will remain as a milestone in the banking sector like finance and banking history.This study is mainly related to the risk management practices being followed by the commercial Banks in Pakistan. The questionnaire is used as a main tool to collect primary data and check the extent to which the risk management practices are being carried upon by the commercial banks in Pakistan. The six important aspects of risk management process are categorized as one dependent and five explanatory variables. This study aims to investigate the awareness about risk management practices within the banking sector of Pakistan. This study is comprised of data collected through both, primary as well as secondary sources. The purpose of using primary sour ce data is to check the extent to which different risk management practices have been followed by the commercial banks in Pakistan. Primary data is collected through the use of a questionnaire. The questionnaire comprises a number of statements under one macro statement. It includes Risk Management Practices (RMP) as the dependent variable, and different aspects of risk management as the independent or explanatory variables. Whereas, the objective to use secondary data is to link the risk weighted Capital Adequacy Ratio to the different financial indicators of the commercial banks that are used to measure their soundness.CHAPTER 2LITERATURE REVIEWRisk management practices by the Commercial BanksWithin the last few years, a number of studies have provided the discipline into the practice of risk management within the corporate and banking sector. An insight of related studies is as followsAmran, et al. (2009), this article mention the possible availability of risk expos in the annual reports of the Malaysian companies. The study was aimed to empirically test the characteristics of the sampled companies. And also the level of risk faced by Malaysian companies with the disclosure made was also assessed and compared. The findings of the research revealed that the strategic risk came on the top, followed by the operations and empowerment risks being disclosed by the selected companies. The regression analysis proved significantly that size of the companies did matter. The stakeholder theory explains well this finding by stating that As company grows bigger, it will have a large pool of stakeholders, who would be interested in knowing the affairs of the company. The extent of risk disclosure was also found to be influenced by the nature of industry. As explored within this study, infrastructure and technology industries influenced the companies to have more risk information disclosed.Hassan, A. (2009), made a study Risk Management Practices of Islamic Banks of Brune i Darussalam to assess the degree to which the Islamic banks in Brunei Darussalam implemented risk management practices and carried them out thoroughly by using different techniques to deal with various kinds of risks. The results of the study showed that, like the conventional banking system, Islamic banking was also subjected to a variety of risks due to the unique range of offered products in addition to conventional products. The results showed that there was a remarkable understanding of risk and risk management by the staff working in the Islamic Banks of Brunei Darussalam, which showed their ability to pave their way towards successful risk management. The major risks that were faced by Brunei banks that was the Foreign exchange risk as well as credit risk and also operating risk. For the analysis regression model was used to explain the results which shown that the Risk Identification, or Risk Assessment and Analysis were also the most uncontrollable variables and the Islami c banks in Brunei needed to give more attention to those variables to make their Risk Management Practices more effective by understanding the true application of Basel-II Accord to improve the efficiency of Islamic Banks risk management systems.Al-Tamimi (2008) studied the relationship among the readiness of implementing Basel II Accord and resources needed for its implementation in UAE banks. Results of the research revealed that the banks in UAE were aware of the benefits, impact and challenges associated in the implementation of Basel II Accord. However, the research did not confirm any positive relationship between UAE banks readiness for the implementation of Basel II and impact of the implementation. The relationship between readiness and anticipated cost of implementation was also not confirmed. No significant difference was found in the level of Basel II Accords preparation between the UAE national and foreign banks. It was concluded that there was a significant difference in the level of the UAE banks Basel II based on employees education level. The results supported the importance of education level needed for the implementation of Basel II Accord.Al-Tamimi and Al- Mazrooei (2007) provide the comprehensive study relating of Banks Risk Management of UAE National and Foreign Banks. The outcome of this research is to find out that there are three most important types of risks facing the UAE commercial banks that were foreign exchange risk, 2nd one followed by credit risk and 3rd one is operating risk. And the result also found that the bank of UAE were also efficiently handle the risk but the variables like as the risk identification, risk assessment and also analysis proved that the banks are more efficient in risk management process. Finally, the outcome of the result showed that there was a huge difference if we compare the UAE National banks and foreign Banks in the practicing the risk assessment and risk analysis as well as risk monitoring and ris k controlling process.Koziol and Lawrenz (2008) provided a study in which they assessed the risk of bank failures. They said that assessing the risk related to bank failures is the paramount concern of bank regulations. They argued that in order to assess the default risk of a bank, it is important considering its financing decisions as an endogenous dynamic process. The research study provided a continuous-time model, where banks chose the deposit volume in order to trade off the benefits of earning deposit premiums against the costs that would occur at future capital structure adjustments. Major findings suggested that the dynamic endogenous financing decision introduced an important self-regulation mechanism.Basel Core Principles and Bank Risk Does Compliance Matter?The recent financial crisis has sparked widespread calls for reforms of regulation and supervision. The initial reaction to the crisis was one of disbelief how could such extensive financial distress emerge in countri es where the supervision of financial risk had been thought to be the best in the world? Indeed, the regulatory standards and protocols of the advanced countries at the center of the financial storm were being emulated worldwide through the progressive adoption of the international Basel capital standards and the Basel Core Principles for Effective Bank Supervision (BCPs).The crisis exposed significant weaknesses in the financial system regulatory and supervisory framework worldwide, and has spawned a growing debate about the role these weaknesses may have played in causing and propagating the crisis. As a result, reform of regulation and supervision is a top priority for policymakers, and many countries are working to upgrade their frameworks. But what should the reforms focus on? What constitutes good regulation and supervision? Which elements are most important for ensuring bank soundness? What should be the scope of regulation?To date, the best practices in supervision and regul ation have been embodied by the BCPs. These principles were issued in 1997 by the Basel Committee on Bank Supervision, comprising representatives from bank supervisory agencies from advanced countries. Since then, most countries in the world have stated their intent to adopt and comply with the BCPs, making them a global standard for bank regulators. Importantly, since 1999, the IMF and the World Bank have conducted evaluations of countries compliance with these principles, mainly within their joint Financial Sector Assessment program (FSAP). The assessments are conducted according to a standardized methodology developed by the Basel Committee and therefore provide a unique source of information about the quality of supervision and regulation around the world. Hence the international community has made significant investments in developing these principles, encouraging their wide-spread adoption, and assessing progress with their compliance.In light of the recent crisis and the resu lting skepticism about the effectiveness of existing approaches to regulation and supervision, it is natural to ask if compliance with the global standard of good regulation is associated with bank soundness.Specifically, they test whether better compliance with BCPs is associated with safer banks. They also look at whether compliance with different elements of the BCP framework is more closely associated with bank soundness to identify if there are specific areas which would help prioritize reform efforts to improve supervision.The paper extends their previous work (Demirg-Kunt, Detragiache and Tressel, 2008 henceforth DDT), in which they showed that banks receive more favorable financial strength ratings from Moodys in countries with better compliance with BCPs related to information provision, while compliance with other principles does not affect ratings significantly. The policy message from this study was that countries should give priority to strengthening regulation and regu lation in the area of information provision (both to the market and to supervisors) relative to other areas covered by the core principles. Using rating information to proxy bank risk significantly limited the sample size in that study, making it necessary to exclude many smaller banks and many banks from lower income countries. Furthermore, after the recent crisis, the credibility of credit ratings as indicators of bank risk has also diminished, questioning the merit of using these ratings in the analysis.In this paper, they explore whether BCP compliance affects bank soundness, but instead of using ratings they capture bank soundness using the Z-score, which is the number of standard deviations by which bank returns have to fall to wipe out bank equity (Boyd and Runkle, 1993). Because they can construct Z-scores using just accounting information, and because assessment data for additional countries have also become available, they can extend the sample size considerably relative t o our earlier study, to over 3,000 banks from 86 countries (compared to 200 banks from 37 countries analyzed in DDT). This is not just a simple increase in sample size the sample of rated banks was not a representative sample, because rated banks tend to be larger, more internationally active, and more likely to adhere to international accounting standards. From a policy point of view, they would like to investigate the effect of BCP compliance on all types of banks operating in different country circumstances, rather than a select subgroup. In this study, the richer sample allows us to explore whether the relationship between BCPs and bank soundness varies across different types of banks.All in all, they do not find support for the hypothesis that better compliance with BCPs results in sounder banks as measured by Z-scores. This result holds after controlling for the macroeconomic environment, institutional quality, and bank characteristics. They also fail to find a significant rel ationship when they consider different samples, such a sample of rated banks only, a sample including only commercial banks, and samples including only the largest financial institutions. In an additional test, they calculate aggregate Z-scores at the country level to try to capture the stability of the system as a while rather than that of individual banks, but also this measure of soundness is not significantly related to overall BCP compliance. When they explore the relationship between soundness and compliance with specific groups of principles, which refer to separate areas of prudential supervision and regulation, they continue to find no evidence that good compliance is related to improved soundness. If anything, they find that stronger compliance with principles related to the power of supervisors to license banks and regulate market structure are associated with riskier banks.While these results cast doubts on whether international efforts to improve financial regulation an d supervision should continue to place a strong emphasis on BCPs, a number of caveats are in order. First, insignificant results may simply indicate that accounting-based measures, such as Zscores, do not adequately capture bank soundness, especially for small banks and in low income countries, where accounting standards tend to be poor. They may also reflect low quality in the assessment of BCP compliance, especially in countries where laws and regulations on the books may carry little weight. It might be also argued that assessments are not comparable across countries, despite the best efforts of expert supervisors and internal reviewing teams at the IMF and the World Bank to ensure a uniform methodology and uniform standards. If their negative results arise because compliance assessments do not reflect reality or are not comparable across countries, then at a minimum they should lead us to question the value of these assessments in ensuring that supervision measures up to global standards.Review of related literature of this paper is as follows Defining good regulatory and supervisory practices is a difficult and complicated task.Barth, Caprio, and Levine (2001, 2004, and 2006) were the first to compile and analyze an extensive database on banking sector laws and regulations using various surveys of regulators around the world, and to study the relationship between alternative regulatory strategies and outcomes. This research finds that regulatory approaches that facilitate private sector monitoring of banks (such as disclosure of reliable, comprehensive and timely information) and strengthen incentives for greater market monitoring (for example by limiting deposit insurance) improve bank performance and stability. In contrast, boosting official supervisory oversight and disciplinary powers and tightening capital standards does not lead to banking sector development, nor does it improve bank efficiency, reduce corruption in lending, or lower banking system fragility. They interpret their findings as a challenge to the Basel Committees influential approach to bank regulation which heavily emphasizes capital and official supervision. An important limitation of this type of survey is that it mainly captures rules and regulations that are on the books rather than actual implementation. IMF and the World Bank financial sector assessments have often found implementation to be lacking, particularly in low income countries, so that cross-country comparisons of what is on the books may hide substantial variation in the quality of supervision and regulation. BCP assessments have the advantage of taking into account implementation. Of course, assessing how rules and regulations are implemented and enforced in practice is not an exact science, and individual assessments may be influenced by factors such as the assessors experience and the regulatory culture they are most familiar with. Nevertheless, although it is difficult to eliminate subjectiv ity completely, assessments are based on a standardized methodology and are carried out by experienced international assessors with broad country experience.Cihak and Tieman (2008) analyze the quality of financial sector regulation and supervision using both Barth, Caprio and Levines survey data and BCP assessments. They find that regulation and supervision in high-income countries is generally of higher quality than in lower income countries. They also note that the correlation between survey data and BCP data tend to be low, always less than 50 percent and in many cases in the 20-30 percent range, suggesting that taking into account implementation may indeed make an important difference. A number of papers also use BCP assessments to study bank regulation and performance.Sundararajan, Marston, and Basu (2001) use a sample of 25 countries to examine the relationship between an overall index of BCP compliance and two indicators of bank soundness nonperforming loans (NPLs) and loan s preads. They find BCP compliance not to be a significant determinant of these measures of soundness. Podpiera (2004) extends the set of countries and finds that better BCP compliance lowers NPLs. Das et al. (2005) relates bank soundness to a broader concept of regulatory governance, which encompasses compliance with the BCPs as well as compliance with standards and codes for monetary and financial policies. Better regulatory governance is found to be associated with sounder banks, particularly in countries with better institutions. In this paper, as already discussed they rely on the Z-score to measure bank soundness. While the Z-score has its limitations, they believe it is an improvement over measures used in previous studies, namely NPLs, loan spreads, interest margins, and capital adequacy. Because different countries have different reporting rules, NPLs are notoriously difficult to compare across countries. On the other hand, loan spreads or interest margins and capitalization are affected by a variety of forces other than fragility, such as market structure, differences in risk-free interest rates and operating costs, and varying capital regulation. Thus, cross-country comparability is a serious issue. In contrast with ratings, Z-scores do not rely on the subjective judgment of rating agencies analysts.Results from the baseline regression, relating bank soundness measured by the Z-score to the degree of compliance with the BCPs. In the sample including all countries, the Zscore is higher, indicating a sounder bank, for banks with lower operating costs in countries with higher GDP per capita. Also, non-commercial banks tend to have higher Z-scores, while the other control variables are not significant. The coefficient of the BCP compliance index is positive but not significant.If they exclude Japanese banks, which account for over 20 percent of the sample, the fit of the model improves markedly (the R-squared increases from 10 percent to 19 percent) and t he coefficients of many regressors change substantially.12 This suggests that the variables explaining the Z-score of Japanese banks may be somewhat different than for the rest of the sample, perhaps because of the lingering effects of Japans prolonged banking crisis on bank balance sheets. For example, in the sample excluding Japan inflation and the rule of law index are significant (with the expected coefficients), while GDP per capita is not (though the coefficient remains positive).Also, banks with a higher ratio of net loans to assets have higher Z-scores, perhaps because Basel regulation mandating minimum levels of risk-adjustment capital forces these banks to hold more equity. Also, in the sample excluding Japan larger banks have lower Z-scores, likely because they tend to hold less capital than smaller banks. Despite these differences, the coefficient of the BCP compliance index remains insignificantly different from zero also in the sample without Japanese banks. The same i s true when they add to the regression additional macro controls, such as exchange rate appreciation, private credit, or the sovereign rating. In the regressions, they explore how the relationship between BCP compliance and bank soundness changes if they alter the sample composition to include various categories of financial institutions to explore whether BCP compliance may affect soundness for alternative types of banks. All these results refer to the sample excluding Japan, so that the overrepresentation of Japanese banks does not distort the results. The first exercise is to examine the widest sample possible, i.e. one that includes investment banks/securities houses, medium and long-term credit banks, nonbank credit institutions, and specialized government credit institutions. These are institutions that in most countries are unlikely to fall under the perimeter of bank regulation and supervision, so they have excluded them from the baseline sample. When they include them, the sample size grows by 25 percent, but the main regression results are unchanged. In particular, bank soundness is not significantly affected by compliance with the BCPs.If they restrict the sample to commercial banks only, thereby losing about 300 banks compared to the baseline sample, once again they find that regression results remain very close to the baseline. When they focus only on banks rated by Moodys, as in our earlier work, the sample shrinks considerably (to just over 300 banks), and the coefficient of the BCP compliance index becomes positive and significant, albeit only at the 10 percent confidence level. Thus, BCP compliance seems to have some positive effect on the soundness of this specific group of banks. To explore this issue further, they ask whether this result is driven by the fact that rated banks are larger banks. To do so, they consider two alternative samples the first includes the largest 10 percent of banks within each country and the second includes the la rgest 20 percent of banks in the entire sample. In both cases, the BCP compliance index has an insignificant coefficient, as in the baseline sample.The BCP compliance index is the weighted sum of compliance scores for several individual chapters of the Core Principles. Could it be that, even though overall compliance does not seem to matter for bank soundness, some aspects of the Core Principles might be relevant? In fact, it may be possible that the overall index is not significant because of offsetting effects of its different components. In fact, in our previous study of Moodys ratings, they found that, although overall compliance did not seem to matter, higher financial strength ratings were associated with better compliance with principles related to information provision to supervisors.They address this question by re-running the baseline regressions breaking down the compliance index into seven components, based on the standard grouping of principles used by the Basel Committ ee. An important caveat is that compliance scores are fairly strongly correlated, which may make it difficult to disentangle the effect of one set of principles from the others. They replicate the regression for different samples of banks to investigate the robustness of the results. There is only one component of the compliance index that has a fairly robust relationship with bank Z-scores, and that is compliance with Chapter 2 of the BCP, i.e. principles having to do with supervisors powers to regulate bank licensing and structure. Interestingly, this component of the index is negatively correlated with bank soundness, so that banks in countries were regulators have better defined powers to give out licenses and regulate bank activities tend to be riskier. This result holds in all the samples except those including only the largest banks. This finding supports the contention that supervisory systems that tend to empower supervisors do not work well (Barth, Caprio, and Levine, 2001 , 2004, 2006).So far, they have considered individual bank risk. In principle, bank supervision and regulation should be primarily concerned with systemic risk, rather than individual bank risk, although in practice it is not always easy to make this distinction. Could it be that BCP compliance, while not relevant to individual bank soundness, is important to ensure the stability of system as a whole? To address this question, it would be ideal to test whether BCP compliance reduces the probability of a financial crisis. However, since crises are rare events, this type of test requires a panel of data since they have BCP compliance assessments only at a point in time, they are restricted to cross-sectional data. Nonetheless, to explore this question they compute a rough measure of systemic soundness as the aggregate equivalent of the individual bank Z-score. More specifically, they aggregate profits and equity of all the banks in the country (for which they have data), they compute the standard deviation of aggregate profits, and then they compute an aggregate Z-score. This measure tells us by how many standard deviations banking system profits must fall to exhaust all the capital in the banking system. They then regress this measure on the BCP compliance score and a number of macroeconomic control variables.Their measure of systemic soundness is correlated with the macro variables as one might expect higher growth, low inflation, low inflation volatility, appreciation of the currency, favorable sovereign ratings are all significantly associated with higher values of the aggregate Z-score. Once again, though, the BCP compliance index does not seem to be a significant determinant of banking system soundness. Though it is positive, the coefficient of the BCP index is small and not statistically significant in any specification.RemarksWhile the causes and consequences of the recent financial crisis will continue to be debated for years to come, there is emerging consensus that the crisis has revealed significant weaknesses in the regulatory and supervisory system. Resulting calls for reform have led to numerous proposals and policymakers in many countries are hard at work to upgrade their regulatory frameworks. This paper seeks to inform the on-going reform process by providing an analysis of how existing regulations and their application are associated with bank soundness. Specifically, they study whether compliance with Basel Core Principles for effective banking supervision (BCPs) is associated with lower bank risk, as measured Z-scores. They find no evidence of a robust statistical relationship linking better compliance with BCPs and improved bank soundness. The analysis of aggregate Z-scores to capture systemic stability issues yields similarly insignificant results. If anything, they find that compliance with a specific group of principles, those giving supervisors powers to regulate bank licensing and structure is associated with ris kier banks, potentially suggesting that such powers may be misused in practice. While our results may reflect the difficulty of capturing bank risk using accounting measures, or the inability of assessors to carry out evaluations that are comparable across countries, nevertheless they raise questions about the relevance of the Basel Core Principles, the current emphasis on these principles as key to effective supervision, and the wisdom of carrying out costly periodic compliance reviews of BCP implementation in the IMF/World Bank Financial Sector Assessment Programs.

Analysis of the Economic and Monetary Union (EMU)

analysis of the scotch and monetary coalition ( emu)The Geography of atomic number 63an Integration Economy, high society and InstitutionsKourdoumpalou PanagiotaWhich of the following two sentences is more than likely to be correct in your opinion? Present at least two arguments to support your opinion.The asylum of a common financial union in the EU was a successful step towards deeper European desegregation.The idea of a common fiscal union in EU didnt take under friendship all the economic aspects resulting in its failure a few historic period later.Economic and Monetary married couple (EMU) represents a study step in the consolidation of EU economies. It involves the coordination of economic and fiscal policies, a common monetary policy, and a common currentness, the euro. The 28 EU Member States take fall in in the economic union, but some countries have taken integration further and adopted the euro.The decision to form an Economic and Monetary Union was taken by the European Council in Maastricht in December 1991, and was later enshrined in the Treaty on European Union. The Economic and Monetary Union helps the EU in its process of economic integration. Economic integration brings the benefits of great size, internal efficiency and robustness to the EU economy as a whole and to the economies of the individual Member States. This offers opportunities for economic stability, higher growth and more employment. On January, 1999, 11 of the 115 European Union (EU) countries formed the Economic and Monetary Union (EMU), adopting the euro as their common currency. Since then, in the Eurozone, the European primal Bank carries out a common monetary policy and, to a high horizontal surface, bond markets are enoughy integ come ind ( European Commission).The world of the Eurozone was preceded by a slack regulatory harmonization among European hackneyed markets and the ending of various restrictions on nonresidents, and also by an effort among EU countries to satisfy the Maastricht criteria for hook up withing the Eurozone. The effort to satisfy the Maastricht criteria also led to offendbalanced fiscal budgets, which may have led to a solid convergence of European economies, that is, an summationd synchronisation in line of products cycles crossways the European economies (Julian Alworth, Giampaolo Arachi, 2008).The introduction of the euro had many advantages. It improved transparency, it standardized the pricing in financial markets, and reduced investors transaction and information costs. Finally, the introduction of a whiz currency eliminated the currency happen within the EU and reduced the boilersuit exchange rate exposure of European stocks. This factor, together with the nominal and documentary convergence, should have led to more homogeneous valuations of equities in EMU countries (Gikas A. Hardouvelis, Dimitrios Malliaropulosa, Richard Priestleyd, 2007). i way to evaluate if European stock markets beca me more unified during the mid-nineties is to examine the evolution of the relative influence of EU. When stock markets are partially integrated, both global and local risk factors are priced. There is a possibility of estimating a conditional asset pricing model with a timevarying grad of integration, which measures the importance of EU, wide market and currency risks which are relative to state of matterspecific risk (Gikas A. Hardouvelis, Dimitrios Malliaropulosa, Richard Priestleyd, 2007).Each Eurozone country has its own timevarying degree of stock market integration. The degree of integration is bounded between zero and unity and conditioned on a broad set of monetary, currency, and business cycle variables. These variables estimate the gradual nominal and real convergence of the European economies during the premonetary union period. Among the include variables, the most prominent one is each countrys forward interest rate differential with Germany which was widely used by market analysts as an forefinger of the probability that an EU country would eventually manage to join the Eurozone. In the second half of the 1990s, the degree of integration gradually extendd to the shoot for where individual Eurozone country stock markets appear to be fully integrated into the EU market. There have been two main factors that driven the increase in the level of integration the evolution of the probability of joining the whizz currency and the evolution of lump differentials (Gikas A. Hardouvelis, Dimitrios Malliaropulosa, Richard Priestleyd, 2007).Moreover, economic integration resulted in businesscycle convergence. Crosscountry return coefficient of correlations and business cycles are related. Monetary and fiscal policy coordination may have led to increased synchronization of business cycles among EMU member countries, which could have led to increased correlation of judge corporate earnings and more homogeneous estimates of European equities (Gikas A. Hardouvelis, Dimitrios Malliaropulosa, Richard Priestleyd, 2007).In the 1990s there is a process of increased integration of European stock markets to the prospects of the formation of EMU and the adoption of the euro as the single currency. During the 1990s, the degree of integration of each countrys stock market with the EU market was negatively related to both its forward interest rate differential with Germany and its inflation differential with the best three performing countries. Also, the inflation differential was a major indicator of whether a country with a high inflation had the ability to achieve nominal convergence and satisfy a major criterion for admittance into the Eurozone. The process of integration was not easy, but in the second half of the 1990s, stock markets converged toward full integration. In other words, their expected returns became increasingly determined by EUwide market risk and less by local risk (Gikas A. Hardouvelis, Dimitrios Malliaropulosa, Richa rd Priestleyd, 2007)Concluding, supporting evidence on the hypothesis that the prospect of EMU was the cause behind the point outd increase in stock market integration among Eurozone countries comes from two main sources. First, when we observe the experience in the United Kingdom, an EU country that chose not to join the Eurozone, is clearly different than the rest of the European stock markets. The UK market showed no signs of increased integration with the EU stock market. Second, the integration in Europe appears to be a Eurozonespecific phenomenon, which does not rely on contingent simultaneous worldmarket integration. So, now it can be verbalise that the establishment of a common monetary union in the EU was a successful step towards the European integration. It is obvious that the process of integration was not easy, but there was a convergence of the stock markets towards full integration. In other words, their expected returns became increasingly determined by EUwide mar ket risk and less by local risk.ReferencesEuropean Commission, Economic and Monetary Union. online Available at http//ec.europa.eu/economy_finance/euro/emu/index_en.htmGikas A. Hardouvelis, Dimitrios Malliaropulosa, Richard Priestleyd, (2007). The impact of EMU on the equity cost of capital. Journal of International Money and financeJulian Alworth, Giampaolo Arachi, (2008). Taxation policy in EMU, Economic Papers 3101

Implementation Of Clustering Algorithm K Mean K Medoid Computer Science Essay

Implementation Of Clustering algorithmic programic program K Mean K Medoid Com delegateer Science Essay information Mining is a sanely recent and contemporary topic in computing. However, Data Mining applies umteen older computational proficiencys from statistics, machine erudition and pattern recognition. This paper explores twain or so popular bunch togethering techniques be the k- squiffys k-medoids chunk algorithmic program. However, k- beggarlys algorithm is assemble or to sort your bearings based on attri onlyes into K number of group andk-medoidsis arelated to theK-meansalgorithm. These algorithms are based on the k part algorithms and both attempt to minimizesquared defect. In contrast to the K-means algorithm K-medoids chooses info points as centres. The algorithms have been developed in Java, for integration with weka Machine Learning Software. The algorithms have been post with twain informationset Facial paralyze and Stemming. It is having been shown that the algorithm is gener all(prenominal)y faster and more accurate than sunrise(prenominal)(prenominal) bunch togethering algorithms.Data Mining derives its name from the similarities between searching for valuable channel information in a large entropybase (for example, finding linked products in gigabytes of store s sessner selective information) and digging a mountain for a stain of valuable ore.1 two process requires either sifting through an ample amount of material. Or intelligently probing it to find exactly where the comfort resides.Data MiningData exploit is also known as knowledge mining. Before it was named DATA MINING, it was called entropy collection, data warehousing or data access. Data mining tools predicts the behaviours of the models that are loaded in the data mining tools (like maori hen) for analysis, allowing making predicted analysis, of the model. Data mining provides devolves-on and practical information.Data mining is the closely powerful tool available now. Data mining dope be used for modelling in fields such(prenominal) as artificial intelligence, and neural ne cardinalrk.What does it do?Data mining hold up the data which exists in unrelated patterns and designs, and uses this data to predict information which can be compared in terms of statistical and graphical results. Data mining distil / filters the information from the data that is stimulationted and final exam model is generated.ClusteringWhat is bunch together analysis? Unlike classification and prediction, which analyse class-labeled data physical objects, assemble analyses data objects without consulting a known class label.A 2-D plot of customer data with respect to customer locations in a city, showing three data foregathers. Each cluster center is marked with a +.6Clustering is the technique by which like objects are grouped together. The objects are clump or grouped based on the principle of maximizing the intra class similarity and minimizin g the interclass similarity. i.e. clusters of the objects are made so that the clusters have resemblance in comparability to one an other, but are very divergent to objects in other clusters. Each cluster that is made can be officeed as a class of objects, from which rules can be derived. 6Problem overviewThe problem at hand is able to correctly cluster a facial paralysis dataset which is tending(p) by our lecturer. This segment willing provide an overview of dataset being analysed, and description nearly dataset that we use in this implementation.Data Set1.3.1.1 Facial_Palsy_svmlight_formatFacial Palsy data is for binary classification.+1 severe facial palsy faces-1 Non-severe or popular faces66 Principal components generated from 5050 Hamming outer space images1.3.1.2 A6_df2_stemming__svmAttributes 100A6_df2_stemming__svm_100.dat+1 outdoors question-1 Closed questionSection 2 regularityologyThis particle will firstly discuss the methodology behind K-means k-medoids al gorithm. It is than followed by move to implement k-means and k medoids algorithms. How many input, production and what are the steps to practice k-means and k-medoids.2.1 K-meanK-means clod starts with a single cluster in the centre, as the mean of the data. Here after the cluster is split into 2 clusters and the mean of the saucily cluster are iteratively trained. Again these clusters are split and the process goes on until the specified numbers of the cluster are obtained. If the specified number of cluster is not a power of both, then the nearest power of two above the number specified is selected and then the least of import clusters are removed and the remaining clusters are again iteratively trained to get the final clusters. If the drug user specifies the random start, random cluster is generated by the algorithm, and it goes ahead by fitting the data points into these clusters. This process is repeated many times in loops, for as many random numbers the user chooses or specifies and the exceed measure out is found at the end. The output values are displayed.The drawbacks of the forgather method are that, the measurement of the errors or the uncertainty is ignored associated with the data.Algorithm The k-means algorithm for partitioning, where to each one clusters centre is represented by the mean value of the objects in the cluster.Inputk the number of clusters,D a data set containing n objects.Output A set of k clusters. mode(1) Arbitrarily choose k objects from D as the initial cluster centers(2) Repeat(3) reassign each object to the cluster to which the object is the most similar, based on the mean value of the objects in the cluster(4) modify the cluster means, i.e., calculate the mean value of the objects for each cluster(5) Until no changeWhere E is the add up of the square error for all objects in the data set p is the point in space representing a given object and mi is the mean of cluster Ci (both p and mi are multidimensional). In other words, for each object in each cluster, the distance from the object to its cluster center is squared, and the distances are contentmed. This step tries to take a crap the resulting k clusters as compact and as separate as possible.2Clustering of a set of objects based on the k-means method. (The mean of each cluster is marked by a +.)2.2 K- MedoidsThis penning recommends a newly algorithm for K-medoids, which recreates like the K-means algorithm. The algorithm proposed scans and calculates distance matrix, and use it for finding new medoids at every constant and repetitive step. The evaluation is based on real and artificial data and is compared with the results of the other algorithms.Here we are discussing the cash advance on k- medoids ball, using the k-medoids algorithm. The algorithm is to be employ on the dataset which live of uncertain data. K-medoids are implemented because they to represent the centrally located objects called medoids in a cluster. Here the k-medoids algorithm is used to find the legate objects called themedoidsin the dataset.Algorithm k-medoids. PAM, a k-medoids algorithm for partitioning based on medoids or central objects.Inputk the number of clusters,D a data set containing n objects.Output A set of k clusters.Method(1) Arbitrarily choose k objects in D as the initial substitute objects or conceiveds(2) Repeat(3) Assign each remaining object to the cluster with the nearest representative object(4) Randomly select a no representative object, o random(5) Compute the broad(a) cost, S, of swapping representative object, oj, with o random(6) If S (7) Until no changeWhere E is the sum of the absolute error for all objects in the data set p is the point in space representing a given object in cluster Cj and oj is the representative object of Cj. In general, the algorithm iterates until, eventually, each representative object is actually the medoids, or most centrally located object, of its cluster. This is the f anny of the k-medoids method for grouping n objects into k clusters.62.3 outstrip MatrixAn important step in most clustering is to select adistance measure, which will determine how thesimilarityof two elements is calculate.Common distance inflection euclideanManhattanMinkowskiHamming etcHere in our implementation we choose two distance matrix that you can stop below with description.2.3.1 Euclidean Distance mensurableTheEuclidean distancebetween pointspandqis the length of the cables length segment. InCartesian forms, ifp=(p1,p2pn) and q=(q1,q2qn) are two points inEuclideann-space, then the distance fromptoqis given by2.3.2 Manhattan Distance MetricThe Manhattan (or taxicab) distance,d1, between two vectorsin an n-dimensionalrealvector spacewith headyCartesian coordinate system, is the sum of the lengths of the projections of theline segmentbetween the points onto thecoordinate axes.Section 3 DiscussionIn this section we are discussing to the highest degree how maori hen Machine learning work and how we implemented both k-means and k medoids algorithm. To implement these two algorithms we use Java and we are explaining how we implemented in java which blend in we use in order to implement these two algorithms.3.1 maori hen Machine Learning wood hen is a machine learning software made using Java and many other languages. Weka has a collection of tools that are used to analyse the data that the user inputs in the form of dataset files. Weka supports more than four different input data formats. Weka uses an interactive graphical user interface interface, which is easy for the user to use.Weka provides the functionality for testing and visual aid options that can be used by the user to compare and sort the results.3.2 ImplementationIn this section, we discuss just around implementation of 2 clustering algorithms K-Means and K-Medoids. Here, we use Object Oriented scheduling to implement these 2 algorithms. The structure of program as belowthither are 3 packages K-Mean, K-Medoid, main.Files in K-Mean packageCentroid.javaCluster.javaKMean_Algorithm.javaKMean_Test.javaKMean_UnitTest.javaFiles in K-Medoid packageKMedoid_Algorithm.javaKMedoid_UnitTest.javaFiles in main packageAttribute.javaDataPoint.javaDistanceCalculation.javaFileFilter.javaMainFrame.javaUtilities.javThere are approximately main functions implemented for clustering activity as below3.2.1 read_SVMLightFile_fill_up_absent_attribute()This function is about yarn the SVM Light data file (.dat) and fill up all the miss attributes/values in data file before eliminateing a Vector of data-points for clustering activity.3.2.2 calculate_distance()This function is providing calculation according to the distance metric input in order to calculate distance between data objects for clustering activity. Overall, this function provides calculation for 3 different distance metrics as Euclidean, Manhattan and Minkowski.3.2.3 startClustering()This function is about conducening a particular clustering algorithm and returns a Vector of Clusters with their own data-points inside. All the steps of a particular clustering algorithm is implemented, here we implement K_Means and K_Medoids clustering algorithms.3.2.4 calculateSumOfSquareError()This function is about calculating the total/sum square error for all the output clusters. By calling the function calculateSquareError() inside every cluster and sum up, the sum of Square Error will be calculated as long as the clustering activity finished.3.2.5 calculateSumOfAbsoluteError()This function is about calculating the total/sum absolute error for all the output clusters. By calling the function calculateAbsoluteError() inside every cluster and sum up, the sum of Absolute Error will be calculated as long as the clustering activity finished.3.2.6 toString() and main()The toString() function will return a string which represents the clustering output, including total objects of every cluster, percent of object in eve ry cluster, the error (such as sum of square error or sum of absolute error), the centroid of every cluster and all the data-points clustered in the clusters.The main() function inside MainFrame.java class will allow to fare the GUI of the program, so users can interact with system by GUI instead of console or command-line. In this GUI, users can choose part of distance metric (such as Euclidean and Manhattan), Clustering algorithm (such as K-Means and K-Medoids) and enter input parameters such as number of clusters and number of iterations for clustering activity. Besides, users also can open any data file to view or modify and save before running clustering as well as export the original data file with absent attributes/values to new processed data file with all missing values filled up by zero (0).Section 4 AnalysisIn order to access the performance of the K-means k-medoids clusters, two dataset of analyses was carried out. The arrive of this set to tests was provide an indi cator as to how well the clusters performed using the k-means and k-medoids function. The tests were baffling comparing the cluster to other cluster of various types provided within Weka cluster suite. The results are summarised throughout the remainder of this section.4.1 Experiment (Facial Palsy dataset) results vs. WekaHere In this section how we did a comparison with our application algorithm vs. Weka you can regard below.In this pattern we give iterations when we run a dataset with our application and Weka.Iterations 10 30 50 100 cc 300 400 calciferolIn this pattern we give a cluster when we run a dataset with our application and Weka.Clusters 2 3 4 5After we run dataset with this format than each and every run we get result we intermingle that result, compare with Weka, we make a total of each and every tug and come with average and we are displaying in table that you can see in below table.This Symbol is object. To see a result beguile click on this object it will show you result. We put as object because result is too macroscopic in size so we are not able to put in this A4 page.4.2 Experiment (Stemming Question dataset) results vs. WekaHere In this section how we did a comparison with our application algorithm vs. Weka you can see below.In this pattern we give iterations when we run a dataset with our application and Weka.Iterations 10 30 50 100 200 300 400 500In this pattern we give a cluster when we run a dataset with our application and Weka.Clusters 2 3 4 5After we run dataset with this format than each and every run we get result we combine that result, compare with Weka, we make a total of each and every column and come with average and we are displaying in table that you can see in below table.This Symbol is object. To see a result please click on this object it will show you result. We put as object because result is too big in size so we are not able to put in this A4 page.Section 5 ConclusionIn evaluating the perf ormance of data mining techniques, in gain to predicative accuracy, some researchers have been done the importance of the explanatory record of models and the need to reveal patterns that are valid, novel, useful and may be most importantly understandable and explainable. The K-means and k-medoids clusters achieved this by success encompassingy clustering with facial palsy dataset.Which method is more robust-k-means or k-medoids? The k-medoids method is more robust than k-means in the presence of noise and outliers, because a medoids is less influenced by outliers or other extreme values than a mean. However, its processing is more costly than the k-means method. Both methods require the user to specify k, the number of clusters.Aside from using the mean or the medoids as a measure of cluster center, other resource measures are also commonly used in partitioning clustering methods. The median can be used, resulting in the k-median method, where the median or optic value is taken for each ordered attribute. Alternatively, in the k-modes method, the most stalk value for each attribute is used.5.1 Future WorkThe K-means algorithm can create some in efficiency as it scans the dataset leaving some noise and outliners. These small flaws can be considered major to some of the users, but this doesnt means that the implementation can be prevented. It is always possible that sometimes the dataset is more efficient to follow other algorithms more efficiently, and the result dispersal can be equal or acceptable. It is always advisable to make the dataset more efficient by removing unwanted attributes and more meaning full by pre-processing the nominal values to the numeric values.5.2 SummeryThroughout this report the k-mean and the k-medoids algorithms are implemented, which find the best result by scanning the dataset and creating clusters. The algorithm was developed using Java API and more Java classes.