Mngt 5000 Term Paper

MNGT 5000 May 14, 2010 Term Paper There are many issues that companies face every day that could potentially be managed in a different way. The issue that I would like to review is an issue that is in the forefront of the news these days. It is hard to say when there might be some sort of resolution to this issue, based on the size and impact to the environment and economy. The most recent issue occurred on April 20, 2010. This was when the Deepwater Horizon oil rig exploded and sunk into the Gulf of Mexico 2 days later. Along with this explosion, there were 11 people reported missing and are assumed dead.The larger problem that British Petroleum has experienced since this explosion is a blow out preventer (BOP) that failed. This failed BOP has caused a horrible oil leak that is gushing from the ocean floor. The initial estimates were that the leak would be around 1,000 barrels or 42,000 gallons per day. This number has since skyrocketed from the initial estimates. As of May 13, this number is now thought to be as high as 70,000 barrels per day, or 2,940,000 gallons. With the amount of oil that is leaking into the Gulf of Mexico from this incident give it the potential to be the worst oil spill in US history.The previous largest oil spill in US history was the Exxon Valdez Oil Spill that occurred on March 24, 1989. As a comparison, the Valdez spill lost 250,000 barrels of oil, or 10,500,000 gallons. It was not until 1992 that the clean up from this spill was completed. From the estimated numbers, the current spill will eclipse the Valdez spill in only a matter of days. Given the fact that the Valdez spill took 3 years to clean up, we can only speculate as to how long it might take to clean up the effects of the Deepwater Horizon. The main problem that BP is immediately faced with is how to control and stop the Deepwater Horizon leak.There have been many suggestions as to what approach they should take. British Petroleum has had to utilize the planning process a nd try to implement several different strategies since April 22, 2010. While the typical planning process might take several weeks or months, BP had to speed this process up. Their goal is to try and minimize the impact to the Gulf of Mexico and the surrounding environment. Planning is necessary to help drive a structured process for making decisions about the goal they are trying to reach. There are 6 main steps involved in a formal planning process.The first step in the planning process is situational analysis. This first step most likely started for BP on April 20th after the explosion happened. This is when all relevant information about the plan is gathered, interpreted and summarized. For this situation, it most likely included studying past events, the current conditions and trying to forecast future events. The next step in the planning process is to review alternative goals and plans that might have been identified through the situational analysis. A goal is a certain targe t that is set by a manager that they hope to reach.The alternative goal that BP needs to try to achieve as quickly as possible is to stop the leak that is gushing from the ocean floor. The book Management: Leading & Collaborating in the Competitive World outlines a very helpful acronym to ensure you gather certain qualities in the goals you set. The acronym identified is SMART. This stands for Specific, Measureable, Attainable, Relevant and Time-bound. There are parts of this acronym that are a little more sensitive for BP than some of the other pieces. The time bound is the part that sticks out in my mind.The longer it takes to contain the leak from the ocean floor, the larger the impact to the environment and to BP financially. As of May 13, the oil has been leaking from the Deepwater Horizon site for 24 days. It appears that BP has come up with many alternative plans to try and address and contain the oil leak that the failed BOP has created. Next we will review the different pla ns that BP has established and how some of them have been working so far. A plan is defined as how the management staff plans to achieve the outlined goals. BP has presented several plans that they will use to try and achieve their goal.The first plan that they will try to implement is to lower a containment box over the leak that will then funnel the oil to the surface and into an oil tanker. This will be the quickest option that they can try to put in place to stop the leak. Another option that they will try to implement at the same time is to drill a relief well, but this could take up to 3 months to complete. Once the alternatives have been reviewed, we move to step three which is to evaluate the goals and plan. All of this planning has to be completed in a very tight time frame for BP, because as the time passes, the oil continues to leak.During this step, management will review the advantages and disadvantages of the alternative goals and plan from step 2. The drilling of a re lief well has a huge disadvantage due to the time frame. This step also includes prioritizing and potentially eliminating some of the goals. Step 4 is the Goal and Plan Selection. After having reviewed and prioritized the goals in the last step, this is where the decision will actually be made on which goal and plan is most feasible. After the selection has been made, the following step is to implement plans to achieve the goals that have been outlined.As of May 7, British Petroleum has started to implement their plan of lowering a container over the leaking well. Once everything is implemented, the final step is to monitor and control the work that is being done. The container was successfully lowered into place, however ice crystals started to form and blocked the pipe that would deliver the oil to the surface. BP has now had to resort to some of their back up or alternative plans. Some other ideas that have been presented in this process include using a smaller containment dome, shooting junk into the well to clog the hole, and siphoning the oil into a tanker at the surface.With these different plans in place, BP will have to ensure that they have a good strategy if another alternate fails. The definition of strategy is a pattern of actions and resource allocations designed to achieve the organization’s goals. Planning and strategy go hand in hand. BP will need to use some strategic management in dealing with this situation. Strategic management is basically a strategic planning process that has six major steps. The first step is to establish a mission, vision and goals. The mission is short statement that describes the purpose of the organization.The vision is what the organization hopes to accomplish in the future. BP has their company mission and vision statement listed on their site as their values. The sites states â€Å"BP wants to be recognized as a great company – competitively successful and a force for progress. We have a fundamenta l belief that we can make a difference in the world. We help the world meet its growing need for heat, light and mobility. We strive to do that by producing energy that is affordable, secure and doesn’t damage the environment.BP is progressive, responsible, innovative and performance driven. † The second step in this process is to do an analysis of external opportunities and threats. This includes understanding the different forces that might affect the company’s mission and vision. This is a unique situation for BP, due to the fact that they are trying to live up to their values, while trying to prevent an environmental disaster that could potentially tarnish their name for quite some time. After reviewing external factors, step 3 is to complete an analysis of internal strengths and weaknesses.There are many aspects to an organization that can be reviewed a couple of key parts to be reviewed would be resources available and core competencies. Resources can fall into two categories, tangible and intangible. Steps 2 and 3 provide a good foundation of information for step 4, which is SWOT Analysis and Strategy Formulation. Once the SWOT analysis is complete, there are several different strategies to consider based on the type of business that is in operation. For BP and this situation, I would think that they would need to implement a functional strategy.Once the type of strategy has been decided upon, step 5 is strategy implementation. During this step, BP would need to ensure that the strategy is being implemented efficiently and effectively. Once implemented, this takes us to the final step, which is strategic control. I believe this control will not be in place until the leak has been contained. In this final step, typically there is a system to help support management in evaluating how the organization is doing with the strategy. Overall, BP has an enormous task that they are faced with. It will take good planning and strategy to resolve the issue as quickly as possible.They are faced with having to contain one of the largest oil spills in US history. It is hard to accurately measure the true amount of oil that is leaking from the well; however there are several estimates of how much oil is leaking per day, ranging from 1000 to 70,000 barrels. As of May 13, 2010, BP has had to resort to alternate plans due to their initial attempt failing. It will be interesting to watch the news and see how BP continues to manage the situation. It is almost guaranteed that the government will intervene at some point, possibly by implementing new laws around off shore drilling.We can only hope that the impact to the environment is not too great, but there have already been reports of dead animals and tar balls washing ashore. It is hard to think that there would be no impact with so much oil leaking into the ocean. I still remember the images from the Exxon Valdez oil spill in 1989. I can only imagine we will start to see some of t he same images in the future from the Deepwater Horizon spill. Let’s hope that BP’s management staff has all the tools necessary to have a strong plan in place to rectify this problem. Bibliography Robertson, C & Lipton, E (2010, April 30). BP Is Criticized Over Oil Spill, but U.S. Missed Chances to Act. New York Times. Retrieved May 11, 2010, from http://www. nytimes. com/2010/05/01/us/01gulf. html The Valdez Oil Spill. (n. d. ). Retrieved May 11, 2010, from http://www. exxonmobil. com/corporate/about_issues_valdez. aspx Deepwater Horizon Oil Spill. (n. d. ). Retrieved May 11, 2010, from http://en. wikipedia. org/wiki/Deepwater_Horizon_oil_spill Gulf Oil Spill Layers. (n. d. ). Retrieved May 13, 2010, from http://maps. google. com/maps/mpl? moduleurl=http://mw1. google. com/mw-earth-vectordb/disaster/gulf_oil_spill/gulf_oil_mapplet. xml&mapclient=google&hl=en Weber, H. amp; Burdeau, C (2010, May 6). Expedition to contain oil leak begins in Gulf. Associated Press. Retr ieved May 11, 2010, from http://www. google. com/hostednews/ap/article/ALeqM5gIXWYBTpLtSayJtg41LKXpxSxVPAD9FH9GN80 Resnick-Ault, J. & Polson, C (2010, May 11). BP to Try Again to Control Oil Leak as Hearings Start (Update3). Bloomberg Businessweek. Retrieved May 13, 2010, from http://www. businessweek. com/news/2010-05-11/bp-to-try-again-to-control-oil-leak-as-hearings-start-update3-. html What we stand for. (n. d. ). Retrieved May 13, 2010, from http://www. bp. com/sectiongenericarticle. do? categoryId=9002630&contentId=7005204

Oversea Study Agent in China Essay

1.0 Introduction As China’s refrom and opening up, foreign exchange increasing day by day. Studying abroad craze after another. More and more people chose to accept foreign advanced education. This report is small scale survey on experiences with the services of oversea study agencies, which in order to inform readers some informations about oversea study agencies, let them have a more comprehensive understanding of these agents. First, some basic overviews of oversea study agent such as what is the oversea study agent, the history and development of these agencies, the role and characteristics of oversea study agencies, will be described in this report. Then it also show some main problems of oversea study agencies, which include some illegal phoenomenons, professionalism of employee is low and regulatory mechanism is not perfect. Legal system is not perfect and the lack of high-quality personnel as the causes of problems followed by. At last the recommendation and conclusion will be illustrated. 2.0 Procedures This paper is after a group discussion and arrangements. Five education agents are investigated through telephone consultation, internet search, etc. They are Golden Oriental, Jin Gillette, Mei Grabrel, CIEC World Famous Studio to study vertical and horizontal, Zhong Rui in Shanghai. There are also some views reference by authority report. 3.0 Findings 3.1 Some basic overview of oversea study agent 3.1.1 What is oversea studying agencies Oversea study agent is a intermediary for students to studying abroad to other countries that provide school students application and visa application assistance and services. Everywhere in the world exist this industry. In China the first countries to ratify the legal service agencies to study abroad is very high, the first practitioners of the business background needed to be engaged in education institutions, so the first batch of approved institutions most comprehensive university with some formal or large state government departments, only two company are private institutions, Jin Gillette in Beijing and Zhong Rui in Shanghai . And the choice of this two institutions are engaged in their education both at the same time quite strong behind the enterprise groups as the background. Second and subsequent access to qualified institutional conditions in the application than the first batch of great relaxation, an increase of more institutions, but are required to be registered within the legal institutions. 3.1.2 The role of oversea study agent First, providing professional guidance to reduce the personal trouble. This is the most important role of education agents. The current situation is that most people and institutions of education abroad do not quite understand the situation, the role of intermediaries is to use the relationship with foreign educational institutions, combined with national policies to individuals and schools to study the national situation, to apply for admission, handle Visa and other relevant information and advice. Procedures for many students, if they apply the words of ordinary people, not only spend more time, and error-prone, with the help of an intermediary, you can greatly reduce such problems. Second, providing legally qualified schools. It is understood that there are two types of foreign registered schools, one is teaching institutions, although another category called the school, but in fact is the company, and such registration requirements of the company’s relatively loose, the more difficult for teachers and teaching quality assurance. Chinese government prohibited foreign institutions and educational service agencies engaged in recruiting activities on their own in, requiring direct intermediary service organizations and educational institutions with foreign universities signed a cooperation agreement and submit the location of the relevant provincial education administrative departments for the record, but also requires foreign school to provide the Embassy of China in the internationally renowned certification other than the institutions. The goal is to prevent a number of international universities and the poor quality of some multinational companies fraud in China. Therefore, the study intermediary agreements with foreign institutions of higher learning in schools is actually a constraint, so as to ensure the quality of teaching in schools and individual rights. Then, to help design individual study plans. Study abroad is a new way of learning in China, so most Chinese people find it difficult to design their own study plan. There arise a phenomenon that many people have chosen wrong counties, wrong school or wrong professional. The losses are difficult to be measured by money. Study intermediary with resources, according to consumer expertise, interests and financial ability to provide consumers with a most appropriate and most effective way to study. In addition, there is a balance the function of oversea study agencies for market supply and demand. As with other products in the market, study abroad market also has a supply and demand balance. The difference is that, as the case involves foreign students, consumers are poorly understood, the role of intermediaries is that the students grasp the situation told the consumer market, and guide consumers in different countries and schools to filter, so that the education market and a balanced supply and demand. 3.2 Problems of oversea study agencies It is report that â€Å"Golden Oriental† has the trap of going abroad, 15 students trapped in Germany. A parents said the â€Å"Golden Oriental† is a German training center in Qingdao, the main business is to recruit students to learn German. Enrollment in the center, forward to introduce registration of students and parents â€Å"to learn the language here, must we go through the exit of the relevant procedures.† This fully demonstrates the agency of studying abroad at this stage still exit some problems. 1. Some illegal phenomenon First, unauthorized business in the studying intermediary. Without the Ministry of Education, Ministry of Public Security issued a â€Å"permit to study intermediary services,† without the approval of the administrative department for industry and commerce registration, engaging in business activities of education agents. In Beijing there are still some people who employ by the â€Å"three no company† (no license, no office, no charge certificate) to the embassy in front of students engaged in activities of intermediary services around by some foreign embassies. These illegal intermediary agencies in profits, driven by the illicit in intermediary services. Second, there is a linked management phenomenon. Linked management is some of the illegal gain qualification in legal education agents affiliated companies access to the following qualification to the legitimate operations of those features. There are some study intermediaries authorized by the parent company of illegally engaging in a branch or branches of intermediary business, the umbrella agency to act as illegal. Finally, some foreign companies do illegally business in China. State expressly that foreign investment institutions in the country engaged in the study can not be mediated. But there are still some companies as the representative of the foreign school or under the banner of the Office of foreign schools in China to enroll students. 3.2.2 Professionalism of employee is low It is understood that practitioners who have the correlated educational background in the study abroad agency are less than 50ï ¼â€¦. Management has not issued specific standards for employees in certificates, but no appraisal system. Most of the intermediary’s employees are recruited from the community, by the agency after a simple training to induction, a considerable number of other employees in the state organs or institutions of workers retire, there officers aging. Therefore, the variation in levels of professional and reduce the agency’s service quality and effectiveness of the service extensively restricted. 3.2.3 Regulatory mechanism is not perfect At current situation, it has not specifical laws and regulations on the study abroad agency to regulate behaviours they have. At the same time, the management of policies from different departments, regulatory agencies is not clear. It is a more complex work to supervision and management the intermediary services for studying abroad. Too few managers, industry and commerce, are also responsible for public security, there is busy. Three units of the joint action, they often stay in the rectification movement style, and they can not do more frequent, thorough and meticulous work, so that the management is difficult to place. 3.3Causes of the problems 3.3.1Legal system is not perfect Currently, the state has not the development of social intermediary organizations and the general considerations of unified planning, there is no national authority in charge of social intermediary organizations and coordination of departments, to study abroad agency management and macro-control weaknesses still exist. Government lack of studying abroad Pan strictly regulate intermediary management, law degree is not high. Market economy is the legal economy, study abroad agency to rely on laws and regulations to locate and act. However the legal management of oversea study agencies has a far way from the establishment of socialist market economy. 3.3.2The lack of high-quality personnel Oversea study agency is a strong professional service, foreign language level requirements high. Thus, requiring that their employees must have a high quality of cultural knowledge, good professional service and knowledge of international practice. However, there are talents in this area obviously can not keep up the situation and development needs: the quality of personnel is not high, the shortage of professionals. 4.0 Recommendation At present, more and more people choose to go abroad, the oversea study agent play an important role in China. However, there are still exit the problems which mentioned above. So some measures must be taken such as effectively strengthen the supervision and management of education agents’waste, further improve the advertising review and investigation, to increase the intensity modulation of employees’ education and training, improve relevant laws and regulations to standardize and restrain intermediary acts. 5.0 Conclusion Whit the boom of study abroad set off, oversea study agency has become an indispensable institution to student. It provide professional guidance, provide legally qualified schools, help design individual study plans and so on. However, there are still some problems that can damages the interests of consumers. When people choosing the oversea study agencies, both advantages and disadvantages should be considered. Whit the sound of legal system and the development of market economy in China, problems in the intermediary agencies of study abroad will be solved. Their business will be more and more standardized. 6. Reference Gousheng Li, 2006-10-29, Study abroad at one’s own expenses intermediaraes’problems and countermeasures. Junrong Yan, 2001-12-4, Education agents, you play what role http://baike.baidu.com/view/864680.htm http://www.runsky.com/homepage/study/abroad/news/userobject1ai413028.html

The Tectonic Revolution in Architecture Essay Example | Topics and Well Written Essays - 1750 words

The Tectonic Revolution in Architecture - Essay Example This paper discusses the views and evaluates how the new ideas were received by different architects of the period, including Adolf Loos, Le Corbusier, Frederic Keisler and Gottfried Semper. Le Corbusier was quite critical about the advent of new materials in the field of architecture, is very supportive of changes. He talks about how it is necessary to accept changes in architecture and how architecture has died with the tendency to rot with the old practices, ideas, and design. He advocates the idea, arguing that all changes are inevitably for the better. He compares them to the use of tools, stating that older tools require more energy and time and that when we come up with new tools, we undoubtedly throw the old ones. He talks about how it is foolishness to hold on to something that is old, takes up more energy, time and how it will be an idea that will rot with the emergence of new ones. Corbusier talks about how the exterior world has changed with the lapse of time and with the introduction of technology and machines. He said of the changes that were being brought into architecture, â€Å"We have a new vision and a new social life, but we have not adopted the hous e accordingly.† Corbusier talks of how the lack in the evolution in architecture was causing people to feel the gloom of living in a house that has no magnificence or beauty that appeals to the heart anymore and that the roof that has been so dear, has crumbled, succumbed to the lack of beauty that reaches the heart. Frederic Keisler began with the tearing down of buildings that were influenced by the basic architectural styles that existed before the tectonic revolution. He was also very enthusiastic about the changes that the field of architecture was facing, understanding that the new forms, methods, structures, and designs were more functional and elastic to life. He talks about how he tore down a building, replacing the architectural structure itself.

Environmental Studies - Air Pollution Essay Example | Topics and Well Written Essays - 750 words

Environmental Studies - Air Pollution - Essay Example Air pollution also affects the environment in that it causes visibility impairment, damages soil property and structure and most unfortunately, it harms the ozone which in turn changes the structure of the ecosystem Schenelle, Benedict and Alfred say (25), reduces the amount and rate of CO2 by plants .Ozone damage may also cause reduction in biodiversity. Vallero (54) mentioned that biologically, the effects of the air pollution are easily evident among animals who primarily feed on plants that have been affected by the effects of air pollution. The exact direct effect of air pollution on human beings has been hard to measure due to the exposure to other numerous pollution and early medical treatment. Since air pollution is usually in gaseous form it tends to move around easily and globally. Abiotic factors are usually non living things that exist in the environment that affect how living organisms live. Minerals, temperature, salinity, wind, air, light, soil conditions, cloud cover and water availability are some of the examples of the abiotic factors in an ecosystem. Air pollution inevitably affects the cloud cover which in turn regulates the intensity of light penetration to the atmosphere. This affects plants in that they are not able to make food and it also predisposes human beings to rickets. Contaminants in the air specifically carbon dioxide, nitrogen oxides and sulfur dioxide sometimes mix with molecules of water or rain to form acid rain. Acid rain is corrosive in nature, because of this it burns the plants sometimes to complete wither and death. â€Å"This rain also causes corrosion of infrastructure through rust, and weakening them which causes accidents that usually not anticipated†, says Holgate (13). Air pollution also affects the rainfall timing and sequence. Biotic factors are living organisms in the ecosystem. Fungus, bacteria, mammals, plants are some of the examples of ecosystem biotic factors. Air pollution determines which vegetati on grows properly and where. Most animals survive under specific weather conditions, but, air pollution has completely altered the temperature of specific places. Light penetration in aquatic bodies has affected the manner in which aquatic animals thrive in their environment. Human beings are known to release dangerous substances into the air which in turn affects them, animals and plant. Air pollution is becoming a great problem to the human race, especially the elderly and children who have slightly weaker respiratory systems compared to the entire demographic sects. Depletion of the ozone layer, smog presence in the environment and global warming are some of the major human facilitated air pollution as mentioned by Schnelle et al. (63). These adverse effects are known to cause numerous and sometimes rare diseases to human beings. Quite often these diseases are respiratory infections or skin diseases as mentioned by Holgate (35).Human beings are also involved in forums to design n ew rule and technology to reduce air pollution. The current environmental and conservation problems caused by air pollution include: Fossil fuel emission has led to depletion of the ozone layer. Excessive release of poisonous gases has led to destruction of wildlife Death of animals from fluoride toxicity. Respiratory and skin diseases on human beings Chlorosis in plants cause by overexposure to acid rain. Global warming. Deforestation. Some of the measure or steps to be taken to prevent or at least reduce the amount of air

Banking Globalization and Global Imbalances Essay

Banking Globalization and Global Imbalances - Essay Example As such, in order for a bank to operate profitably in the foreign market, it must be able to gain or realize gains that are not available to local competitors. These gains to be realized when a bank is operating in foreign financial sector usually stem from; geographical risk diversification, competitive and comparative advantage factors and efficiencies that are not attained when operating exclusively in the local markets. On comparative advantages, better intermediation technologies, superior management quality, and innovative products are among the factors frequently cited by both the internalization theory and the electric theory of multinational corporations (De Haas & Lelyveld 2010). However, these factors are not permanent in the case of banks diversifying internationally based on the assumption that financial firms usually have intangible assets that cannot be imitated and management quality is easily transferable. Information is a crucial comparative advantage for a bank to operate in abroad markets. Organizations prefer doing business with a less number of banks to ensure that their sensitive financial information is not revealed to too many financial firms. As such, once a bank establishes a relationship with an organization, it has a competitive advantage in serving the firm’s operations in the foreign markets. The increased importance of information in the banking sector has resulted to the shift from cross-border borrowing and lending towards the foreign banks’ local operations in the emerging countries (Mariotti & Piscitello, 2010). One of the best ways of exploiting comparative advantages arising from the private information in foreign markets is following the client. This means that banks usually expand in the countries where their client choose to invest so that they can be able to offer them services that they need.  

POL 102 POLICY PAPER Essay Example | Topics and Well Written Essays - 250 words

POL 102 POLICY PAPER - Essay Example The policy on Africa and all African related matters is a policy that has been indoctrinated in the modus operandi of many developed nations. This is because Africa is a strategically significant country to the western world. The well-endowed governments all over the world having realized this and have been actively engaged in Africa’s affairs (Bender 15). This includes the social, political, economic and to some extent the cultural affairs. Many African countries have been assisted by the developed nations to revive their leadership, boost their economies, and solve internal wrangles. This policy was created with honorable intentions. However, its misuse is particularly evident in many African states all over the world. The policy has been manipulated to act as a bargaining chip for the western nations (Bender 47). It is necessary for the government to intervene in African states without expecting them to give something back. This aid has plunged many African countries into more darkness. The policy should be used to assist the African continent and the many problems it encounters. It should not be used as a bargaining block. Many historical injustices in Africa would have been avoided had the national policy on African related matters been applied to those countries. It is likely that the government is bound to accept the strengthening of this policy. This is because nations are demanding accountability and transparency from the government when exercising the policy in African states (Bender 51). Bender, G. J., Coleman, J. S., and Sklar, R. L. African Crisis and the US Foreign Policy. California: University of California Press, 2008. Web.

Should the government intervene in the OTC markets, pros and cons and Research Paper

Should the government intervene in the OTC markets, pros and cons and US versus Canada - Research Paper Example Securities traded in this market are not listed on the organized stock exchanges such as the Nasdaq Stock market. Some securities that are traded in the over the counter markets include common stocks, bonds, and derivatives such as forward contracts and interest rate swaps. OTC market is conducted through brokers and dealers thus is a negotiated market where trading is carried out through computer systems and telephone conversations (Poitras 61). The securities traded on OTC market are usually small since the issuers have not met the listing requirements. Though Nasdaq trades through a network of dealers, it is not an OTC market but an organized stock exchange market where trading is carried out on the floor (Poitras 73). Each year, billions of dollars are exchanged in the OTC market. OTC market mainly consists of derivative financial assets such as the forward contracts, interest rate swaps and options. The derivative market has experienced a phenomenal growth since 2000. Derivative instruments were designed for the agricultural industry to hedge the farmers against crop failure, or expected price movements. Derivative contracts have been extended to the main sectors of the economy including oil industry, gold markets and financial sector. Derivatives have the potential of hedging against unforeseen risks and price moments but are subject to abuse by greedy investors (Wood 67). The Commodity Future Trading commission has the mandate of regulating the derivatives market including derivatives traded in the stock exchanges. The derivatives traded in the exchange markets account for $ 334 trillion each year meaning the value of the underlying assets involved is also $ 334 trillion. The main derivatives in the exchange markets are options and future contracts. However, most of the derivative instruments do not trade on the exchange markets, but are transacted in the OTC market. Each year, $ 684 trillion of underlying assets are traded in the OTC market where most of the derivative assets traded include the interest rate swaps, currency swaps, credit default swaps, commodity indexes and exchange rate swaps (Madura 90). Derivative contracts have one similar feature since their value depends on the price movements of the underlying asset (Wood 87). The underlying asset may be a physical commodity or a stock market index or the rate of interest prevailing in the mar ket. Derivative instruments such as options, swaps and future or forward contracts lose or gain value as the underlying asset changes in value even though the holder of the derivative may not be the owner of the underlying asset (Madura 117). Millions of business firms use the derivative instruments to manage foreign exchange risks. Firms protect their profitability against the raw material price increase by entering in to a derivative contract that automatically increases in value when price of the raw material increase. For instance, Southwest Airlines managed to purchase jet fuel at lower prices in 2008 when the energy prices were soaring since it had entered in to a derivative position (Madura 198). Generally, there are two categories of derivative contracts. The first is the option contract that providers the option holder the choice of buying or selling the underlying asset over a certain period of time. The other is the future contract, this contract obligates the holder to b uy or sell the underlying asset on the expiry of the contract period. All other derivatives such as options and swaps have evolved from the above two derivative contrac