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Current Status, Challenges, Policies, and Bioethics of Biobanks
Current Status, Challenges, Policies, and Bioethics of Biobanks
Name
Institution
Current Status, Challenges, Policies, and Bioethics of Biobanks
The article focuses on biobanks and bioethics in countries with established repositories for the storage of biomaterials. The United States, United Kingdom, France, Sweden, Italy, the Netherlands, and Korea are the major countries in the world with the largest biobanks. Biobanks act a storage and collection point of biospecimens used in medical research for the identification of risk factors of certain diseases, drug therapies, and diagnosis of chronic illnesses (Kang et al., 2013).
The paper also looks into bioethics and safety in biobanks. The ethics involved include a patient’s consent to conduct research or provide information to doctors or researchers. The researcher should provide adequate information to the patient prior to conducting any procedure and the implications and consequences of the processes. Institutions should have an Institutional Review Board (IRB), a body that oversees bioethics and biosafety in biotechnology and scientific research (Kang et al., 2013). Biobanks also have policies that guide the distribution of data and biospecimens in institutions. Biobanks have increased to meet the demand for qualified biospecimens globally.
The biodata and specimens are essential tools of research in various fields such as metabolomics, nanotechnology, proteomics, molecular imaging, and genomics. Thus, biobanks play a crucial role in foreseeing the success of research conducted by the afore-mentioned groups while studying certain diseases such as genetic disorders and cancer. Having state-of-the art biobanks and repositories around the globe is a sure way of meeting the global demand for quality biospecimens necessary for biotechnology research. Countries such as Korea have set up a National Biobank to ensure safe and harmonized collection and distribution of biospecimens.
Bioethics and safety are of the essence in research while dealing with biospecimens in biobanks. It is ethical to protect the interest of the patients involved in the research by providing all the necessary information and treating their data with confidentiality. Biospecimens are essential tools for research on diseases such as cancer and they should be stored appropriately under the set guidelines and policies (Kang et al., 2013).
Reference
Kang, B., Park, J., Cho, S., Lee, M., Kim, N., Min, H., Lee, S., Park, O., & Han, B. (2013). Current status, challenges, policies, and bioethics of biobanks. Genomics & Informatics, 11 (4): 211-217. http://dx.doi.org/10.5808/GI.2013.11.4.211
Current State Organizational Strategy
Strategic Plan
Name of Institution
Name of Student Chapter III
Current State Organizational Strategy
This section is about the current state strategy, which has contributed to the good position of the Orlando Health currently. The chapter also describes the major flows and processes and environmental impacts that have resulted to the current shape of the organization. First, the organization has a core objective and a system of goals to guide its operations. The current and former human resources are accountable for the development of the health Orlando Health has united specialists who are dedicated to improve the quality of life and health of people within the communities serviced by the healthcare. The non-for profit healthcare organization serves the health care need of people from and beyond Central Florida. The health care organization is currently serving more than 1.6 million individuals from Central Florida and serves thousands of international patients on annual basis. It has developed to a point of treating a significant number of indigent patients a factor that has made the health benefit from special funding. It is special to a point of being the only healthcare organization with qualifications of participating in the region’s Safety Net Hospital Alliance of Florida, commonly known as SNHAF. SNHAF is made up of fourteen hospital systems. Hospitals making up the SNHAF consist of about 10 per cent of hospitals in Florida but they offer more than 50 per cent of health care in the region.
The main campus of the healthcare organization is located in the south of Orlando. This main campus is the Orlando Medical Center, which is a tertiary hospital with a capacity of eight hundred and eight beds and part of the Orlando system. Another major centers include the Arnold Palmer Hospital for Children, which is a pediatric hospital having at least 158 beds. This medical facility is located Orlando, Florida as part of the Orlando Health. It gains support from Arnold Palmer Medical Center Foundation and it is one of the top Pediatric hospitals dealing with heart care as well as heart surgery. This health care facility operates under a specialized strategy that aims at improving health care services in a specialized way. This kind of specialization has made it acquire a top ten position among the top pediatric hospitals in the United States (Health Central Hospital, 2012). It has an added advantage of being the only hospital in central part of Florida emergency services to pediatric patients with trauma problems.
The main stakeholder of this facility is Miami Children’s Hospital, which formed partnership with hospital to create a Congenital Heart Institute developed to offer quality pediatric cardiovascular services. This stakeholder has generated an impact in the kind of services offered in Orlando Health. In this branch of the Orlando Health System, contribution to its development and advancement in specialized medical services in cardiovascular services. The human capital employed assist in offering high quality services in specialized medical services. The kind of specialization also assists the management in developing greater services in medical health. The key skilled personnel include a group of cardiologists, cardiovascular surgeons, cardiac anesthesiologists, physicians, as well as nurses and intensivists. The hospital also employs a team of technicians who offer diagnosis and treat infants or children suffering from various hear diseases and congenital disorders of the heart. This hospital facility incorporates a combination of technologies to assist it pediatric activities and offer quality services. It has increasingly kept a top position in technology and by the year 2012, the hospital was the only hospital offering surgical out data that is web-based (Health Central Hospital, 2012).
Another major facility of the Orlando Health is the Winnie Palmer Hospital for Women and Babies. This branch opened in 2006 after breaking from the formally known as Arnold Palmer Hospital for Children and Women. It currently has a two hundred and eighty-five-bed capacity, still located in Orlando in Florida. It deals in specialized services to serve the health needs of women and babies. Common services include women delivery health problems related to newborn babies. This hospital is grouped together with the M.D. Anderson Center Orlando to form the main campus of Orlando Health. Other centers of the Orlando Health include Orlando Medical Regional Center with a bed capacity of 808, located in Orlando, the Lake Nona Medical City, Dr. P. Philips Hospital, M.D. Anderson Cancer Center, Florida Hospital East, Florida Hospital Orlando, and Naval Hospital Orlando. The hospitals form the Orlando Health. Each hospital is designed to offer specialized medical treatment as part of market product differentiation. The structure of Orlando Health is designed in a way that would enable a patient suffering from a certain disease know which hospital to attend in order to get access to specialized medical treatment (Orlando Health Physician Group, 2011).
Each of the Orlando Health hospitals facilities incorporate an array of laboratory services and pathology services that assist in finding out medical problems facing patients. The laboratory services and programs are varied depending on the kind of specialization in each hospital making up the Orlando Health. Laboratory services are offered under a number of lab testing and treatments programs. The central Processing Department receives specimens from all centers and specifically from their wards. This happens through the incorporation of Orlando Health network system. This system of networks not only has all hospitals and departments interconnected but the entire health enterprise’s laboratories (Orlando Health, 2012). The health care enterprise has a system of partnership that offers assistance in analyzing lab specimens from various centers.
Orlando Health is committed in offering a variety of laboratory services. These services are comprehensive to ensure that all patients’ problems are identified for the necessary health care service to be provided. Highly skilled technologists and technicians provide laboratory and medical services by being dedicated to provide their best services possible to patients. The technical capabilities of the certified pathologists in medical laboratory services include Coagulation, Anatomy Pathology, Cytology, Flow Cytometry, Electron Microscopy, General Chemistry, Immunology, Hematology, Microbiology, Mycology, Paracitology, Therapeutic Drugs, Toxicology, and Virology (Orlando Health, 2012). These services are done with the use of the latest available technologies especially through computerized laboratory systems. Orlando has a number of primary testing sites and these sites are open twenty-four hours a day. The laboratory services are to advance in technology and specifically unique such that no other competitors in the region offer the same services. This uniqueness is also a source of Orlando Health’s victory in health and medical services. The medical laboratory services include on-site test capabilities, historical record tracking, web-based technology for retrieving results, and availability of online order entry. Patients also have the option of calling pathologist at any given time of the day. Each outpatient’s laboratory location has at least one or more experienced phlebotomists. The lab locations are made convenient to all patients for easy access. The laboratory services are incorporated with other services like home health agency, nursing home care, laboratory customer support, and customer support department (Orlando Health, 2012). The customer care department also includes a team of professionals in various medical fields, who can respond to various health care service needs of customers. Such service can include testing of results, fixing lab results, addition of tests to the existing specimens, responding to patients’ concerns, billing information, and supplying requests. The laboratory services make one of the key services tuning the shape of Orlando Health and making it has a promising future in medical services and market.
The human resource facilitating the growth and development of the Orlando Health as a multi-hospital institution are also specialized and are incorporated in the Orlando Health Physician Group Model. This model consists of employed physicians who are clinically integrated. This Group of clinically integrated physicians forms one of the models used by Orlando Health to develop its medical operations and services (Elswick, O’Donnell, Dinon, Stachnik, & Rippe, 2011). This model is based on an advanced technology that aids communication among all the facilities and departments making the Orlando Health. The other model used by Orlando Health is the Orlando Health Physician Partners. This model consists of private medical partners, which can collaborate with the Healthcare organization or contract with the organization in exchange for services that would meet defined quality metrics. The model is also initiated to assist in participating in market pools with managed healthcare pricing (Elswick, O’Donnell, Dinon, Stachnik, & Rippe, 2011). The two models brings confidence to health care patients and provide them with an assurance that the organization has physicians who are ready to offer the highest quality in healthcare services in central Florida.
All hospitals making Orlando Health are organized systematically to offer integrated medical services and healthcare one of its critical strengths. The healthcare management understands the daily trends in actions and habits that profoundly influence the short-term shape and long-term health as well as quality of life (Elswick, O’Donnell, Dinon, Stachnik, & Rippe, 2011). The increasing demand of improved health care in Central Florida and from all over, the world forms an important opportunistic ground for Orlando Health. One of the key organization’s aspirations is to help individuals in making more and positive informed choices in health care and medical services. Orlando Health is a health care system that incorporates lifestyle medicine and various concepts into its main medical operations and health care services meet its objectives and aspirations. This system and model of operation has seen the organization have a system of development and achievements in healthcare despite it challenges in health care sector as part of its aspired results since its establishment. The business trend within the enterprise has turned to be an inspiration to other health care organization throughout the United States and beyond. One of the major inspirations is the incorporation of lifestyle medicine into the organization’s culture and its operating principles (Elswick, O’Donnell, Dinon, Stachnik, & Rippe, 2011).
While the organization has been working to achieve such good results under the prevailing opportunities and strengths, there are various factors influencing its success positively and negatively. The external factors include high competition from other top hospitals in Florida and specifically Central Florida. The organization is ranked among the top best health care organizations in the states in specialized healthcare, which means that the top most health care organization provide a great challenge to Orlando Health. Location of Orlando is at the central position of Florida, an implication that the organization will ever maintain a top position in healthcare since patients find it very accessible. Other factor like technology affects the organization in two ways. The organization faces pressure to maintain high technology in order to maintain its competitive position throughout its service life. This increases its cost of operation (Jameson & Sentinel, 2013). Technology has also enabled the organization to maintain a top position in health care in Central Florida and in the US in general. These factors together with internal factors like a good system of management, high skilled employees, and good patient relations have shaped the organization to what it is today.
The management system in the Orlando Health is a centralized system of management consisting of President, a Senior Vice President, and Vice presidents in the various sectors of the organization. Other lower ranks include the Chief Administrative Officer, Corporate Director of Access, Chief Quality Officer, and Chief Financial Officer (Orlando Health Physician Group, 2011). Currently, the Orlando Health Physician Enterprise President serves by overseeing the integration of physicians. The Health Enterprise has more than four hundred integrated physicians, who represent more than 40 specialties while focusing on deliverance of best quality in health care within the region. The president ensures that the integration is up-to-date and that all hospitals within his enterprise are in good operation condition. The Senior Vice President to the Health Enterprise is also a member of the organization’s Executive Committee (Orlando Health Physician Group, 2011). The Key role of the Senior Vice President is to have an oversight of Orlando Health Physician Group. The enterprise has more than 500 employed physicians. He oversees the physicians as well as a number of residents of the organizations. He is also obligated to lead an executive team that directs the organization’s clinical integration and that creates an Accountable Care Organization for Orlando Health (Orlando Health Physician Group, 2011). The Senior Vice President is also a member of the Organization’s board strategy and a committee that investigates on quality of Orlando Health Care Services.
Other leadership offices overseeing the general operation of Orlando Health from a central management level include the Vice President for the organization’s clinical integration. The personnel in this position are responsible for the organization’s operations as well as business development of the health enterprise. Again, the person in the Chief Administration position is responsible for overseeing the business and market operations of the entire enterprise. The Chief Financial Officer is responsible for the financial position and control of the organization. Other general position includes the Human Resource Manager whose work is to ensure that the team of employees employed to serve in Orlando Heath have the right qualifications. The collaboration of the Human Resource Officer and the Chief Quality Officer ensure quality with the Orlando Health (Orlando Health Physician Group, 2011). The Chief Quality Officer ensures that all hospitals and various facilities are within the prevailing technology and that all professionals provide quality services. The Corporate Director of Access serves to improve access to health care by patients and is in charge of extending this role to all hospitals making the Orlando Health. The officer in this position has a general role in both the hospital system and the enterprise (Orlando Health Physician Group, 2011).
Centralized management in Orlando Health
Chapter IV
The current model incorporates a Patient Center Medical Home, which opens to the future success of Orlando Health as a growing enterprise. This model incorporated technologies and healthcare facilities, as well as services that would increasingly patients think of Orlando Health as the best place to acquire all medical need. The model is designed with a goal of making it easy and comfortable to all patients (John, 2012). The model also encourages partnership between the patients and the health care team as a way of incorporating a healthy patient to physician relationship. The incorporated model that would help in improving quality of services and assist in the advancement of Orlando Health competitive position in healthcare is as provided below.
From the model, health care safety is given the highest priority in which patients would be provided with health care and medical services that are highly monitored and observed to evade any cases of risks, and any kind of hazardous environment. Health care is also developed to be coordinated and integrated. Integrated health care ensures easy communication between departments and medical practitioners in various health departments (John, 2012). This comes as an advantage for Orlando Health to develop into a larger enterprise as more patients are attracted into the various hospitals making up the Orlando Health Enterprise. In essence, there is an increased access to healthcare within Orlando Heath through the organizations department of Corporate Direct Access headed by the Corporate Director access. This director governs the accessibility into all Orlando Health facilities and hospital branches by all patients. The aim in this case is to see an increasing trend in health care accessibility in Orlando Health and become the leader not only in the quality of services provided but also in the number of patients attending the facilities.
The future trends of organization seem to be better than the current services available. The number of patients are increasing not from the fact that more individuals are getting ill but because patients are increasingly finding better health care and medical services in Orlando Health. The enterprise is also offering personal physician services while ensuring whole person orientation. Most of the services provide are more valuable than the amount of money paid by patients as compensations. The enterprise has developed to allow payment for added value (John, 2012). Orlando has all these opportunities from which it has worked through a well-guided management to achieve much currently, increasing its competitive advantage over other health organizations. While it offers quality services, the definition of quality could differ from one person to another. This aspect brings a controversy whenever it comes to stakeholder. The key stakeholders to Orlando are providers, patients, employers, and payers. The conflict in this case is expected to arise between patients and employer as well as providers and payers. These conflicts have an impact to the operations or the success of Orlando Health and its future trends.
Patients may expect the employer in Orlando Health to ensure a wider variety of options in health care and customize then options into the specific need of the patients. Given a situation whereby Orlando Health can hardly supply the required variety in Health care, and customize the services into specific need of patients, these patients are likely find solutions to their health problems elsewhere. Most of the patients look for Orlando Health to provide relatively cheap health services while ensuring quality. These requirements are available with Orlando Health. The enterprise maintains a lead in healthcare technology, good system of management, and quality services from a wide variety. Health services are customized to meet the increasingly varying need of consumers of health services (Calhoun, Wrobel, & Finnegan, 2011). The conflict between the patients and employer or management would happen if the costs of operation were being reduced for the organization to increase its profit margins. This problem hardly happens to Orlando and it is not likely to happen in future since the healthcare enterprise is not-for profit organization. The stakeholders providing the hospitals with health care operating requirements want to offer the best to Orlando Health with the use of the most appropriate but payers want to acquire all services at the minimum cost possible and acquire the best services possible.
Shareholders constitute part of the enterprise ownership although they have no major influence on the operation of the organization. Shareholders can mainly affect the heath care enterprise if they demand compensation or the sale of shares goes down freezing the price of each share. The government is also part of the stakeholders who can have a negative impact on the Orlando Health as an enterprise. The government observes the enterprise through business regulations as well as regulations within the Healthcare sector. The power of the government can render the health enterprise less successful by increasing health and business regulations to limit its operations. The Enterprise should be observed from the perspective of shareholders impact in order to work towards the accomplishment of its strategic goals and objective (Elswick, O’Donnell, Dinon, Stachnik, & Rippe, 2011). The market trend is welcoming good fortunes for Orlando Health as technology and innovativeness with the health sector places the enterprise in greater heights than its competitors are. The newly adopted and emerging technologies are landmarks for future success and increased competitiveness of Orlando Health. The Orlando Health Enterprise can come up with a strategic map focusing on its future success by minimizing any negative impact from stakeholders as well as increasing trust from the local communities.
Strategically, Orlando would fight through any forthcoming barriers by creating a strategic map that would bring more light to the enterprise’s health and business operations. It should increase its focus on early efforts ever identified such as community connectedness, diversification of its operations, and offering strength to families and children. It can develop a spectrum for providing training opportunities specifically for community trustees and increase the number of stakeholders from the community. These stakeholders have to be committed to the Healthy Community movement. The strategic map should also include facilitation of development in information resources. In this case, the organization would ensure that there is ensured centralization as well as accessibility to the local community (Health Central Hospital, 2012). This would also be incorporated with integration of the latest technology in healthcare and advertisement as way of informing people about the availability of specialized health care in the organization. Finally, Orlando Health should provide various programs such as celebration, revitalization, and recognition programs for the community trustees. This would place the enterprise in a better position since the possibility of facing a negative impact from stakeholders would be minimized greatly but the cycle should continue in a way that the organization keeps on reviewing its earlier efforts to make updates or to provide basis for changing its strategy.
References
Calhoun, J. G., Wrobel, C. A., & Finnegan, J. R. (2011). Current State in U.S. Public Health Competency-Based Graduate Education. Public Health Reviews 33(1) , 148-167.
Elswick, S., O’Donnell, L., Dinon, N., Stachnik, A., & Rippe, J. (2011). Incorporating Lifestyle Medicine Into a Large Health Care System: The Orlando Health Experience. American Journal of Lifestyle Medicine , 192-200.
Health Central Hospital. (2012, April 03). Orlando Health completes acquistion of Health Central. New Board of Directors announced. Retrieved May 03, 2013, from healthcentral.org: HYPERLINK “http://www.healthcentral.org/about-us/news/2012/apr/03/orlando-” http://www.healthcentral.org/about-us/news/2012/apr/03/orlando-health-completes-acquistion-health-central/
Jameson, M., & Sentinel, O. (2013, January 2). Physician Associates officially sold to Orlando Health. Retrieved May 3, 2013, from HYPERLINK “http://articles.orlandosentinel.com/2013-01-” http://articles.orlandosentinel.com/2013-01-02/news/os-physician-associates-sold-20130101_1_orlando-health-physician-associates-hospital-system
John. (2012, December 6). New Model of Care: Patient Centered Medical Home. Retrieved May 3, 2013, from orlandohealthdocs.com: HYPERLINK “http://www.orlandohealthdocs.com/orlandointernalmedicinegroup/2012/12/06/new-” http://www.orlandohealthdocs.com/orlandointernalmedicinegroup/2012/12/06/new-model-of-care-patient-centered-medical-home/
Orlando Health Physician Group. (2011). Leadership. Retrieved May 3, 2013, from orlandohealthdocs.com: http://www.orlandohealthdocs.com/leadership/
Orlando Health. (2012). Orlando Health Clinical and Outpatient Laboratory Services. Retrieved May 5, 2013, from HYPERLINK “http://www.orlandohealth.com/orlandohealth/OrlandoHealthClinicalandOutpatientLabora” http://www.orlandohealth.com/orlandohealth/OrlandoHealthClinicalandOutpatientLaboratoryServices/OrlandoHealthClinicalandOutpatientLaboratoryServices.aspx?pid=6322
Current Market Trends Risk Management
Current Market Trends: Risk Management
Critically assess the most important trends in global financial crisis that have affected financial markets, institutions and the economy from 2007 to 2009
Important lessons that can be learnt from the recent global economic crisis are purely based on risk prepared and management practices capable of averting any financial challenge. A general reluctance to handle risk with caution can be translated by all facts to have been the cause of economic downturns observed from 2007. According to Hubbard (2009, p6) reluctance to employ the best risk assessment techniques prevents the management from realizing how potent and hazardous a risk would be. The author therefore attributes failure to mitigate risk to wrong technique for measuring the risk and its gravity. To illustrate this position, the author finds fault with the manner in which top risk management firms and federal agencies conducted their risk assessment resulting in wrong approach to mitigate the risks. A cascade of ill-informed interventions could only worsen the case for the economic crisis that hit the financial markets for the better part of 2008 through 2009 and whose impact is still being felt to date. It is clear that the most important trend in the modern economic world entails risk assessment, which must be done right at all cases to avoid miscalculations resulting into multiplier disasters.
House ownership was at the centre of interest for the financial markets, having been established in the USA to such low risk levels that the major global financial players willingly ventured in it. As Fraser and Simkins (2010, p272) observe, a high demand for housing attracted high prices and supply was fast catching up to share in the benefits. The Federal Reserve was allowing the lowest interest rates for the first time in the history of the market.
Modern operations of the financial market must have mechanisms of interest-rate regulation and mitigation (Crouhy, Galai and Mark, 2006, p184). According to the author, volatility of the market should dictate the amount of caution that the management takes to mitigate the associated risks. For instance, the lending institutions should be aware of interpreting the balance sheet indicators of a possible risk. This should assist in determining when to conduct a review of the risk assessment technique and its timing. Effects of interest rate on the balance sheet assets, regarding their movements, are manifested in liabilities and should be used to translate the changes in a risky environment. Mitigation of possible risk should be approached from the perspective that emphasizes on the level of volatility of the market using such indicators. Interest rate volatility should be used by the management to set the limit that an institution can accommodate comfortably regarding the targeted earnings in the volatile market. Volatile market limits are set regarding the capacity of the institution, usually done on worst-case scenarios (Lo, 2010, p34). Interest rate and liquidity risks are calculated in volatile scenarios to such an extent that the management can shield the institution from unprecedented flux in the market. Using the above explained worst-case scenario mitigation technique, net interest income (NII) and net worth (NW) figures of the institution become very important (Hubbard, 2009, p183). Using the projections of the volatility of the financial market, the management can set worst-case scenarios of for instance Maximum Negative Impact (MNI) of about 2 billion US dollars from the NW or about 300 billion US dollars from NII of the institution. To assist risk assessment and mitigation procedures, computer packages that apply simulations using the institutions’ NII or NW are now available.
According to Das (2005, p400), liquidity is very important in determination and mitigation of financial market risk in the modern age. Possibilities that the recent economic crisis was influenced by liquidity values lie in the premise that market risk and liquidity have a strong link that can be used in advance to avert looming danger.
According to Ryan (2008, p1), the American financial market is founded on mechanisms of credit and its control, which can be used to create unlimited opportunities out of derivative assets. The financial market was fast adopting the trend of creation of new forms of credit which made the financial market a challenge to control. The new lines of revenue that the financial market initially had were then to decline fast, exposing the market to lack of sustainability. Mortgage lending opened up a series of other lending instruments which opened up loopholes in the initial mortgage lending causing a dramatic fall in interests. Cheap credit was fast to appear in the market and the uptake exposed the market to risks that the market could not respond to within the short time available. The trend in the market at the time was characterised by the presence of only one type of commodity; housing. The demand for housing increased to overwhelm the supply and effectively induce a bad form of inflation.
Poulou (2010, p1) cites the bailout pattern adopted by governments to rescue the financial system as one of irresponsible reactions that the financial crisis requires. With the high levels of unemployment in the population, the author expects that more stringent steps ought to have been put in place. It is clear that the category of players to whom the blame for swollen risk can be attributed have not been indicted. According to the author, the Wall Street and investment banks ought to be answerable to the financial crimes that they perpetrated to the world economy by tampering with the core of the global financial system. Comment on the role, application and failures of credit defaults swaps in risk management practice in financial institutions or corporations
The most infamous application of credit default swaps (CDS) and its failure in the context of 2008/9 economic crisis is perhaps the one observed at American Insurance Group (AIG). According to Hubbard (2009, p58), CDS is a market instrument whose application by mortgage banks is aimed at reducing possible risk of mortgage customers from defaulting. In simpler language, the author relates CDS as an insurance cover that mortgage lending banks take to protect themselves in case the borrowers fail to obey their repayment obligation. Regulations for a standard insurance cover are however fundamentally different from those of CDS. This implies that the risks involved for the two instruments are also fundamentally different. Failure to account for the risk involved by insurance companies, such as the giant AIG, proved to be a bitter pill to swallow for its actuaries. The assumption that the mortgage business as a risk stood the same chance of probability as ordinary insurance risk is a major inaccuracy that anybody would have spotted from afar.
According to Hampton (2009, p60) the banks immediately started to venture into dangerous ground by offering virtually new form of mortgages that nobody thought would be risky. Adjustable interest rate mortgages (ARMs) were on offer in the market, with assurances to borrowers that any mortgage out of a customer’s financial ability could now be approved, for the first time in the history of the mortgage market. Initial package was irresistible since the interest rates were very low for the initial couple of years. The lucrative part came on the mechanism of the clearance of the debt when it became necessary to raise the interest rates later on in the program. The owner would sell the house if the occupant defaulted, selling it at a profit.
Capital available to the banks with regard to regulation of the limits of lending that banks have, it became apparent that there was no boundary Hampton (2009, p61). Unregulated financial players in the nature of financial banks started to enter into the mortgage business having realized that the mortgage industry was entering a lucrative era in the USA. Further developments were in the offing when these unregulated global players of the financial market bought numerous mortgages and issued them as packages referred to as collateralized debt obligations (CDOs). The operation of the mortgage market changed since banks could now venture elsewhere with the arrival of investment banks. Stated income loans became the next line of business.
Subprime credit was the other alternative that the financial institutions were dealing with in large scale prior to the collapse of the system (Haslet, 2010, p437). The Treasury allowed borrowing to such risky levels that when the system collapsed, nothing could have been used to stop it. Bankruptcy was looming due to the heavy lending, coupled to the unbalanced mortgage lending that had dramatically changed attracting lucrative securities earnings. Huge financial players from across the globe had made their entry into the US mortgage business and their misfortune was to be transferred back to their mother companies. According to Haslet (2010, p439) securitization of instruments led to the unbalanced lending patterns whose risks rose to unprecedented all time high. It is therefore in this mix-up that credit defaults swaps (CDS) and other securities got caught up in a risk related puzzle that no one was in the capacity to solve.
With all the uncertainty of the cascade transactions outcome, tension then began to grow form where the mortgage market revealed the cracks that analysts refused to appreciate. It was too late to initiate measures to salvage the situation and secure economic fortunes at the global arena.
References
Crouhy, M., Galai, D. & Mark, R. (2006) The essentials of risk management. New York, NY: McGraw Hill Professional
Das, S. (2005) Risk management: the swaps & financial derivatives library. Clementi Loop, Singapore: John Wiley and Sons
Figlewski, S. & Levich, R. M. (2002) Risk management: the state of the art. Norwell, MA: Kluwer Academic Publishers
Fraser, J. & Simkins, B. (2010) Enterprise risk management: today’s leading research and best practices for tomorrow’s executives. Hoboken, NJ: John Wiley and Sons
Hampton, J. J. (2009) Fundamentals of enterprise risk management: how top companies assess risk, manage exposures and seize opportunities. New York, NY: AMACOM Div American Management Association
HYPERLINK “http://books.google.co.ke/books?id=gMshgNePRzUC&printsec=frontcover&dq=risk+management&hl=en&ei=_zaJTaQ9iLJxgLKYsQw&sa=X&oi=book_result&ct=result&resnum=6&ved=0CFUQ6AEwBQ#v=onepage&q=crisis&f=false” Haslet, W. V. (2010) Risk management: foundations for a changing financial world. Hoboken, NJ: John Wiley and Sons
Hubbard, D. W. (2009) The failure of risk management: why it’s broken and how to fix it. Hoboken, NJ: John Wiley and Sons
Lo, A. W. (2010) Hedge funds: an analytic perspective. Princeton, NJ: Princeton University Press
Poulou, P. (2010) Documentary Explores Roots of Financial Crisis. [online] Available from: <http://sofiaecho.com/2010/12/19/1013934_documentary-explores-roots-of-financial-crisis> [accessed 24 March 2011]
Ryan, G. (2008) The 2008-9 Financial Crisis- Causes and Effects. [online] Available from: < http://cashmoneylife.com/economic-financial-crisis-2008-causes/ > [accessed 24 March 2011]