4685395 Small Business Manual

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Developing Countries

Small Business Manual

1st EDITION

Sam Vaknin, Ph.D.

Editing and Design:

Lidija Rangelovska

Lidija Rangelovska

A Narcissus Publications Imprint, Skopje 2003

irst publis!ed b" #nited Press International $ #PI

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C O N T E N T S

I. Sma%% <*siness - <ig O(sta+%es

II. =aking >o*! ?o!ke!s >o*! Pa!tne!s

III. oing <ank!*pt in the ?o!%d

IV. The In)e!no o) the @inan+ia% Di!e+to!

V. De+ision S*ppo!t Sstems

VI. Va%*ing Sto+ks

VII. The P!o+ess o) D*e Di%igen+e

VIII. @inan+ia% In&esto!, St!ategi+ In&esto!

IX. =o!tgage <a+ked Const!*+tionX. <*%% at ?o!k - Inte!&ie ith Tim @ie%d

XI. Is = =one Sa)eA

XII. '%i+e in C!edit Ca!d "and

XIII. ?o!kaho%ism, "eis*!e and P%eas*!e

XIV. $e&o%t o) the Poo! - Inte%%e+t*a% P!ope!t $ights

XV. The '*tho!

XVI.

'(o*t /')te! the $ain/

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The a!e o!iented to )i%% the needs o) a ma!ket ni+he 5asma%% g!o*p o) se%e+t +ons*me!s o! +*stome!s6, o! to p!o&ide an inno&ati&e so%*tion to a p!o(%em hi+h (othe!sman, o! to +!eate a ma!ket )o! a tota%% ne p!od*+t o!se!&i+e, o! to p!o&ide a (ette! so%*tion to a p!o(%em hi+his so%&ed in a %ess e))i+ient manne!.

't this stage hat the ent!ep!ene*!s need most iseFpe!tise. The need a ma!keting eFpe!t to te%% them i)thei! idea is ma!keta(%e and &ia(%e. The need a )inan+ia%eFpe!t to te%% them i) the +an get )*nds in ea+h phase o)

the (*siness ++%e and he!e)!om and a%so i) the p!od*+to! se!&i+e +an p!od*+e eno*gh in+ome to s*ppo!t the (*siness, pa (a+k de(ts and ie%d a p!o)it to thein&esto!s. The need te+hni+a% eFpe!ts to te%% them i) theidea +an o! +annot (e !ea%ied and hat it !eG*i!es ( ao) te+hno%og t!ans)e!s, enginee!ing ski%%s, knoho, et+.

On+e the idea has (een shaped to its )ina% )o!m ( theteam o) ent!ep!ene*!s and eFpe!ts the p!ope! %ega% entitsho*%d (e )o!med. ' (ei%de!ing a!!a o) possi(i%itiesa!ises:

' pa!tne!shipA ' +o!po!ation and i) so, a sto+k o! a nonsto+k +ompanA ' !esea!+h and de&e%opment 5$ND6entitA ' )o!eign +ompan o! a %o+a% entitA 'nd so on.

This de+ision is o) +a!dina% impo!tan+e. It has eno!mo*staF imp%i+ations and in the nea! )*t*!e o) the )i!m itg!eat% in)%*en+es the )i!m3s a(i%it to !aise )*nds in)o!eign +apita% ma!kets. Th*s, a %ae! m*st (e +ons*%tedho knos (oth the %o+a% app%i+a(%e %as and the )o!eign%egis%ation in ma!kets hi+h +o*%d (e !e%e&ant to the )i!m.

This +osts a %ot o) mone, one thing that ent!ep!ene*!s a!ein sho!t s*pp% o). @!ee %ega% ad&i+e is %ike% to (e high%



app!e+iated ( them.

?hen the )i!m is p!ope!% %ega%% esta(%ished, !egiste!edith a%% the !e%e&ant a*tho!ities and has appointed an

a++o*nting )i!m it +an go on to ta+k%e its main (*siness:de&e%oping ne p!od*+ts and se!&i+es. 't this stage the)i!m sho*%d adopt ?este!n a++o*nting standa!ds andmethodo%og. '++o*nting sstems in man +o*nt!ies%ea&e too m*+h !oom )o! +!eati&e p%aing ith !ese!&esand ith amo!tiation. No one in the ?est i%% gi&e the)i!m +!edits o! in&est in it (ased on domesti+ )inan+ia%

statements.

' ho%e host o) p!o(%ems )a+es the ne )i!m immediate%*pon its )o!mation.

ood ent!ep!ene*!s do not ne+essa!i% make goodmanage!s. =anagement te+hniG*es a!e not a geneti+he!itage.



The m*st (e %ea!nt and assimi%ated. Toda3s mode!nmanagement in+%*des man e%ements: manpoe!,)inan+es, ma!keting, in&esting in the )i!m3s )*t*!e th!o*gh

the de&e%opment o) ne p!od*+ts, se!&i+es, o! e&en ho%ene (*siness %ines. That is G*ite a %ot and &e! )e peop%ea!e p!ope!% t!ained to do the #o( s*++ess)*%%.

On top o) that, ma!kets do not a%as !ea+t the aent!ep!ene*!s eFpe+t them to !ea+t. =a!kets a!e e&o%&ing+!eat*!es: the +hange, the de&e%op, disappea! and !eappea!. The a!e eF+eeding% ha!d to p!edi+t. The sa%es p!o#e+tions o) the )i!m +o*%d p!o&e to (e *n)o*nded. Its+ontingen+ )*nds +an e&apo!ate.

Sometimes it is (ette! to +!eate a p!od*+t miF: e%%!e+ognied (!ands hi+h se%% e%% side ( side ithinno&ati&e p!od*+ts.

I ga&e o* a (!ie) and ( no a +omp!ehensi&e tasteo) hat aaits the ne (*siness and its initiato!, theent!ep!ene*!. >o* see that a %ot o) mone and e))o!t a!eneeded e&en in the )i!st phases o) +!eating a (*siness.

7o +an the o&e!nment he%pA

It +o*%d set *p an /Ent!ep!ene*!3s One Stop Shop/.

' pe!son ishing to esta(%ish a ne (*siness i%% go to ago&e!nment agen+.

In one o))i+e, he i%% )ind the !ep!esentati&es o) a%% the!e%e&ant go&e!nment o))i+es, a*tho!ities, agen+ies andm*ni+ipa%ities.



7e i%% p!esent his +ase and the (*siness that he ishes tode&e%op. In a matte! o) )e eeks he i%% !e+ei&e a%% thene+essa! pe!mits and %i+en+es itho*t ha&ing to go to

ea+h o))i+e sepa!ate%.

7a&ing o(tained the !eG*isite %i+en+es and pe!mits andha&ing !egiste!ed ith a%% the app!op!iate a*tho!ities theent!ep!ene*! i%% mo&e on to the neFt !oom in the same (*i%ding. 7e!e he i%% !e+ei&e a %ist o) a%% the so*!+es o)+apita% a&ai%a(%e to him (oth %o+a%% and )!om )o!eignso*!+es. The te!ms and +onditions o) the )inan+ing i%% (espe+i)ied )o! ea+h and e&e! so*!+e. EFamp%e: E<$D %oans o) *p to 10 ea!s inte!est (eteen H.J to KJ g!a+e pe!iod o) *p to ea!s )inan+es main% ind*st!,)inan+ia% se!&i+es, en&i!onmenta% p!o#e+ts, in)!ast!*+t*!eand p*(%i+ se!&i+es.

The ent!ep!ene*! i%% se%e+t the so*!+es o) )*nds most

s*ita(%e )o! his needs and p!o+eed to the neFt !oom.

The neFt !oom i%% +ontain a%% the eFpe!ts ne+essa! toesta(%ish the (*siness, get it going and, most impo!tant,!aise )*nds )!om (oth %o+a% and inte!nationa% instit*tions.@o! a sm(o%i+ s*m the i%% p!epa!e a%% the do+*ments!eG*i!ed ( the )inan+ing instit*tions as pe! thei!inst!*+tions.

<*t ent!ep!ene*!s in man de&e%oping +o*nt!ies a!e sti%%)ea!)*% and *nin)o!med. The a!e intimidated ( the+omp%eFit o) the task )a+ing them.

The so%*tion is simp%e: a t*to! o! a mento! i%% (e atta+hedto ea+h and e&e! ent!ep!ene*!. This t*to! i%% es+o!t the

ent!ep!ene*! )!om the )i!st phase to the %ast.

7e i%% (e emp%oed ( the /One Stop Shop/ and his !o%e



i%% (e to ease %i)e )o! the no&i+e (*sinessman. 7e i%%t!ans)o!m the pe!son to a (*sinessman.

'nd then the i%% ish the ent!ep!ene*!: /<on Voage/

and ma the (est ones in.



Making !our #orkers $our %artners

B!: Dr. Sam "aknin

&lso read these:

'he %rincipal-&gent Conundrum

'he (abour Divide - ". )mplo!ee Benefits and wnership

The!e is an inhe!ent +on)%i+t (eteen one!s andmanage!s o) +ompanies. The )o!me! ant, )o! instan+e, to

minimie +osts the %atte! to d!a h*ge sa%a!ies as %ong asthe a!e in poe!.

In p*(%i+% t!aded +ompanies, the )o!me! ish tomaFimie the &a%*e o) the sto+ks 5sho!t te!m6, the %atte!might ha&e a %onge! te!m &ie o) things. In the 4S',sha!eho%de!s p%a+e emphasis on the app!e+iation o) the

sto+ks 5the !es*%t o) G*a!te!% and ann*a% p!o)it )ig*!es6.This %ea&es %itt%e !oom )o! te+hno%ogi+a% inno&ation,in&estment in !esea!+h and de&e%opment and inin)!ast!*+t*!e. The theo! is that o!ke!s ho a%so onsto+ks a&oid these +an+e!o*s +on)%i+ts hi+h, at times, (!ing +ompanies to !*in and, in man +ases, di%apidatethem )inan+ia%% and te+hno%ogi+a%%. ?hethe! !ea%it %i&es

*p to theo!, is an a%togethe! di))e!ent G*estion.

' sto+k option is the !ight to p*!+hase 5o! se%% (*t this isnot app%i+a(%e in o*! +ase6 a sto+k at a spe+i)ied p!i+e5Lst!ike p!i+e6 on o! (e)o!e a gi&en date. Sto+k options a!eeithe! not t!aded 5in the +ase o) p!i&ate )i!ms6 o! t!aded ina sto+k eF+hange 5in the +ase o) p*(%i+ )i!ms hose sha!esa!e a%so t!aded in a sto+k eF+hange6.

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Sto+k options ha&e man *ses: the a!e pop*%a!in&estments and spe+*%ati&e &ehi+%es in man ma!kets inthe ?est, the a!e a a to hedge 5to ins*!e6 sto+k

positions 5in the +ase o) p*t options hi+h a%%o o* tose%% o*! sto+ks at a p!e)iFed p!i+e6. ?ith &e! mino!in&estment and &e! %itt%e !isk 5one +an %ose on% themone in&ested in (*ing the option6 h*ge p!o)its +an (e!ea%ied.

C!eati&e one!s and sha!eho%de!s (egan to *se sto+koptions to p!o&ide thei! o!ke!s ith an in+enti&e to o!k)o! the +ompan and on% )o! the +ompan. No!ma%% s*+h pe!ks e!e !ese!&ed to senio! management, tho*ghtindispensa(%e. "ate!, as +ompanies !ea%ied that thei! mainasset as thei! emp%oees, a%% emp%oees (egan to en#osimi%a! oppo!t*nities. 4nde! an in+enti&e sto+k options+heme, an emp%oee is gi&en ( the +ompan 5as pa!t o)his +ompensation pa+kage6 an option to p*!+hase its

sha!es at a +e!tain p!i+e 5at o! (e%o ma!ket p!i+e at thetime that the option as g!anted6 )o! a gi&en n*m(e! o)ea!s. P!o)its de!i&ed )!om s*+h options no +onstit*tethe main pa!t o) the +ompensation o) the top manage!s o)the @o!t*ne 00 in the 4S' and the ha(it is +at+hing one&en ith mo!e +onse!&ati&e E*!ope.

' Sto+k Option P%an is an o!ganied p!og!am )o!emp%oees o) a +o!po!ation a%%oing them to (* itssha!es. Sometimes the emp%oe! gi&es the emp%oeess*(sidied %oans to ena(%e them to in&est in the sha!es o!e&en mat+hes thei! p*!+hases: )o! e&e! sha!e (o*ght (an emp%oee, the emp%oe! aa!ds him ith anothe! one,)!ee o) +ha!ge. In man +ompanies, emp%oees a!e o))e!ed

the oppo!t*nit to (* the sha!es o) the +ompan at adis+o*nt 5hi+h t!ans%ates to an immediate pape! p!o)it6.



Di&idends that the o!ke!s !e+ei&e on the sha!es that theho%d +an (e !ein&ested ( them in additiona% sha!es o) the)i!m 5some )i!ms do it )o! them a*tomati+a%% and itho*t

o! ith !ed*+ed (!oke!age +ommissions6. =an+ompanies ha&e age /setaside/ p!og!ams: emp%oees!eg*%a!% *se a pa!t o) thei! ages to p*!+hase the sha!eso) the +ompan at the ma!ket p!i+es at the time o) p*!+hase. 'nothe! e%% knon st!*+t*!e is the Emp%oeeSto+k One!ship P%an 5ESOP6 he!e( emp%oees!eg*%a!% a++*m*%ate sha!es and ma *%timate% ass*me

+ont!o% o) the +ompan.

"et *s st*d in depth a )e o) these s+hemes:

It a%% (egan ith $ona%d $eagan. 7is administ!ation passed in Cong!ess the E+onomi+ $e+o&e! TaF '+t5E$T' 1BK16 *nde! hi+h +e!tain kinds o) sto+k options5/G*a%i)ing options/6 e!e de+%a!ed taF)!ee at the date

that the e!e g!anted and at the date that the e!eeFe!+ised. P!o)its on sha!es so%d a)te! (eing he%d )o! at%east to ea!s )!om the date that the e!e g!anted o! oneea! )!om the date that the e!e t!ans)e!!ed to anemp%oee e!e s*(#e+ted to p!e)e!entia% 5%oe! !ate6+apita% gains taF. ' ne +%ass o) sto+k options as th*sin&ented: the /M*a%i)ing Sto+k Option/. S*+h an option

as %ega%% !ega!ded as a p!i&i%ege g!anted to an emp%oeeo) the +ompan that a%%oed him to p*!+hase, )o! a spe+ia% p!i+e, sha!es o) its +apita% sto+k 5s*(#e+t to +onditions o)the Inte!na% $e&en*e the 'me!i+an in+ome taF +ode6.To G*a%i), the option p%an m*st (e app!o&ed ( thesha!eho%de!s, the options m*st not (e t!ans)e!a(%e 5i.e.,+annot (e so%d in the sto+k eF+hange o! p!i&ate% at %east

)o! a +e!tain pe!iod o) time6.



'dditiona% +onditions: the eFe!+ise p!i+e m*st not (e %essthan the ma!ket p!i+e o) the sha!es at the time that theoptions e!e iss*ed and that the emp%oee ho !e+ei&es

the sto+k options 5the g!antee6 ma not on sto+k!ep!esenting mo!e than 10J o) the +ompan3s &oting poe! *n%ess the option p!i+e eG*a%s 110J o) the ma!ket p!i+e and the option is not eFe!+isa(%e )o! mo!e than )i&eea!s )o%%oing its g!ant. No in+ome taF is paa(%e ( theemp%oee eithe! at the time o) the g!ant o! at the time thathe +on&e!ts the option to sha!es 5hi+h he +an se%% at the

sto+k eF+hange at a p!o)it6 the eFe!+ise pe!iod. I) thema!ket p!i+e )a%%s (e%o the option p!i+e, anothe! option,ith a %oe! eFe!+ise p!i+e +an (e iss*ed. The!e is a100,000 4SD pe! emp%oee %imit on the &a%*e o) the sto+k+o&e!ed ( options that +an (e eFe!+ised in an one+a%enda! ea!.

This %a designed to en+o*!age +%ose! (ondage (eteen

o!ke!s and thei! o!kp%a+es and to (oost sto+kone!ship %ed to the +!eation o) Emp%oee Sto+kOne!ship P%ans 5ESOPs6. These a!e p!og!ams hi+hen+o*!age emp%oees to p*!+hase sto+k in thei! +ompan.Emp%oees ma pa!ti+ipate in the management o) the+ompan. In +e!tain +ases )o! instan+e, hen the+ompan needs !es+*ing the +an e&en take +ont!o%

5itho*t %osing thei! !ights6. Emp%oees ma o))e! age+on+essions o! othe! o!k !*%es !e%ated +on+essions in!et*!n )o! one!ship p!i&i%eges (*t on% i) the +ompanis othe!ise %ia(%e to +%ose don 5/ma!gina% )a+i%it/6.

7o m*+h o) its sto+k sho*%d a +ompan o))e! to itso!ke!s and in hi+h manne!A

The!e a!e no !*%es 5eF+ept that one!ship and +ont!o%need not (e t!ans)e!!ed6. ' )e o) the methods:



1. The +ompan o))e!s pa+kages o) di))e!ent sies,+omp!ising sha!es and options and the emp%oees (id )o! them in open tende!

1. The +ompan se%%s its sha!es to the emp%oees onan eG*a% (asis 5a%% the mem(e!s o) the senio!management, )o! instan+e, ha&e the !ight to (*the same n*m(e! o) sha!es6 and the o!ke!s a!ethen a%%oed to t!ade the sha!es (eteen them

1. The +ompan +o*%d gi&e one o! mo!e o) the

+*!!ent sha!eho%de!s the !ight to o))e! his sha!es tothe emp%oees o! to a spe+i)i+ g!o*p o) them.

The mone gene!ated ( the +on&e!sion o) the sto+koptions 5hen an emp%oee eFe!+ises his !ight and (*ssha!es6 *s*a%% goes to the +ompan. The +ompan setsaside in its (ooks a n*m(e! o) sha!es s*))i+ient to meet thedemand hi+h ma (e gene!ated ( the +on&e!sion o) a%%

o*tstanding sto+k options. I) ne+essa!, the +ompaniss*es ne sha!es to meet s*+h a demand. $a!e%, thesto+k options a!e +on&e!ted into sha!es a%!ead he%d (othe! sha!eho%de!s.



*oing Bankrupt in the #orld

B!: Dr. Sam "aknin

It a%% sta!ts ( de)a*%ting on an o(%igation. =one oed to+!edito!s o! to s*pp%ie!s is not paid on time, inte!est paments d*e on (ank %oans o! on +o!po!ate (onds iss*edto the p*(%i+ a!e ithhe%d. It ma (e a tempo!a! p!o(%em o! a pe!manent one.

's time goes (, the +!edito!s gea! *p and %itigate in a

+o*!t o) %a o! in a +o*!t o) a!(it!ation. This %eads to atechnical or e+uit! insolvenc!, stat*s.

<*t this is not the on% a a +ompan +an (e !ende!edinso%&ent. It +o*%d a%so !*n %ia(i%ities hi+h o*teigh itsassets. This is +a%%ed bankruptc! insolvenc!,. T!*e,the!e is a de(ate !aging as to hat is the (est method to

app!aise the )i!ms assets and the %ia(i%ities. Sho*%d theseapp!aisa%s (e (ased on ma!ket p!i+es o! on (ook &a%*eA

The!e is no one de+isi&e anse!. In most +ases, the!e isst!ong !e%ian+e on the )ig*!es in the (a%an+e sheet.

I) the negotiations ith the +!edito!s o) the +ompan 5as toho to sett%e the disp*te a!ising )!om the +ompans

de)a*%t6 )ai%s, the +ompan itse%) +an )i%e 5Lask the +o*!t6)o! (ank!*pt+ in a /&oluntar! bankruptc! filing.

Ente! the +o*!t. It is on% one p%ae! 5a%(eit, the mostimpo!tant one6 in this *n)o%ding, +omp%eF d!ama. The+o*!t does not pa!ti+ipate di!e+t% in the s+!ipt.






Co*!t o))i+ia%s a!e appointed. The o!k hand in handith the !ep!esentati&es o) the +!edito!s 5most% %ae!s6and ith the management and the one!s o) the de)*n+t

+ompan.

The )a+e a to*gh de+ision: sho*%d the %iG*idate the+ompanA In othe! o!ds, sho*%d the te!minate its (*siness %i)e ( 5among othe! a+ts6 se%%ing its assetsA

The p!o+eeds o) the sa%e o) the assets a!e di&ided 5as/(ank!*pt+ di&idend/6 among the +!edito!s. It makes

sense to +hoose this !o*te on% i) the 5mone6 &a%*eie%ded ( %iG*idation eF+eeds the mone the +ompan, asa going +on+e!n, as a %i&ing, )*n+tioning, entit, +angene!ate.

The +ompan +an, th*s, go into /straight bankruptc!.The se+*!ed +!edito!s then !e+ei&e the &a%*e o) the

p!ope!t hi+h as *sed to se+*!e thei! de(t 5the/+o%%ate!a%/, o! the /mo!tgage, %ien/6. Sometimes, the!e+ei&e the p!ope!t itse%) i) it not eas to %iG*idate5Lse%%6 it.

On+e the assets o) the +ompan a!e so%d, the )i!st to (e)*%% paid o)) a!e the se+*!ed +!edito!s. On% then a!e the p!io!it +!edito!s paid 5ho%% o! pa!tia%%6.

The p!io!it +!edito!s in+%*de administ!ati&e de(ts, *npaidages 5*p to a gi&en %imit pe! o!ke!6, *nins*!ed pension+%aims, taFes, !ents, et+.

'nd on% i) an mone %e)t a)te! a%% these paments is it p!opo!tiona%% do%ed o*t to the *nse+*!ed +!edito!s.

The 4S' had man &e!sions o) (ank!*pt+ %as. The!eas the 1BK <ank!*pt+ '+t, hi+h as )o%%oed (



amended &e!sions in 1BK, 1BK and, %ate%, in 1BB.

Ea+h state has modi)ied the @ede!a% "a to )it its spe+ia%,%o+a% +onditions.

Sti%%, a )e things the spi!it o) the %a and its phi%osopha!e +ommon to a%% the &e!sions. '!g*a(%, the most)amo*s p!o+ed*!e is named a)te! the +hapte! in the %a inhi+h it is des+!i(ed, Chapte! 11. @o%%oing is a (!ie)dis+*ssion o) +hapte! 11 intended to demonst!ate thisspi!it and this phi%osoph.

This +hapte! a%%os )o! a me+hanism +a%%ed/!eo!ganiation/. It m*st (e app!o&ed ( to thi!ds o) a%%+%asses o) +!edito!s and then, again, it +o*%d (e &o%*nta!5initiated ( the +ompan6 o! in&o%*nta! 5initiated ( oneto th!ee o) its +!edito!s6.

The 'me!i+an %egis%ato! set the )o%%oing goa%s in the

(ank!*pt+ %as:

0.To p!o&ide a )ai! and eG*ita(%e t!eatment to the ho%de!so) &a!io*s +%asses o) se+*!ities o) the )i!m 5sha!es o)di))e!ent kinds and (onds o) di))e!ent tpes6

a.To e%iminate (*!densome de(t o(%igations, hi+ho(st!*+t the p!ope! )*n+tioning o) the )i!m and hinde! its

+han+es to !e+o&e! and e&e! !epa its de(ts to its +!edito!s.



(.To make s*!e that the ne +%aims !e+ei&ed ( the+!edito!s 5instead o) the o%d, dis+!edited, ones6 eG*a%, at%east, hat the o*%d ha&e !e+ei&ed in %iG*idation.

EFamp%es o) s*+h ne +%aims: one!s o) de(ent*!es o)the )i!m +an !e+ei&e, instead, ne, %ong te!m (onds5knon as !eo!ganiation (onds, hose inte!est is paa(%eon% )!om p!o)its6.

One!s o) s*(o!dinated de(ent*!es i%%, p!o(a(%, (e+ome sha!eho%de!s and sha!eho%de!s in the inso%&ent

)i!m *s*a%% !e+ei&e no ne +%aims.

The +hapte! dea%ing ith !eo!ganiation 5the )amo*s/Chapte! 11/6 a%%os )o! /arrangeen!s" to (e made (eteen de(to! and +!edito!s: an eFtension o! !ed*+tion o)the de(ts.

I) the +ompan is t!aded in a sto+k eF+hange, theSe+*!ities and EF+hange Commission 5SEC6 o) the 4S'ad&ises the +o*!t as to the (est p!o+ed*!e to adopt in +aseo) !eo!ganiation.

#$a! %$a&!er '' !ea%$es (s is !$a!:

'me!i+an "a %eans in )a&o*! o) maintaining the

+ompan as an ongoing +on+e!n. ' ho%e is %a!ge! thanthe s*m o) its pa!ts and a %i&ing (*siness is sometimeso!th mo!e than the s*m o) its assets, so%d sepa!ate%.

' mo!e indepth st*d o) the (ank!*pt+ %as shos thatthe p!es+!i(e th!ee as to ta+k%e a state o) ma%ignantinso%&en+ hi+h th!eatens the e%% (eing and the+ontin*ed )*n+tioning o) the )i!m:

C$a&!er ) 51BK '+t6 li*(ida!ion



' Dist!i+t +o*!t appoints an /inte!im t!*stee/ ith (!oad poe!s. S*+h a t!*stee +an a%so (e appointed at the !eG*esto) the +!edito!s and ( them.

The Inte!im T!*stee is empoe!ed to do the )o%%oing:

• %iG*idate p!ope!t and make dist!i(*tion o)

%iG*idating di&idends to +!edito!s

• make management +hanges

• a!!ange *nse+*!ed )inan+ing )o! the )i!m

• ope!ate the de(to! (*siness to p!e&ent )*!the!

%osses

< )i%ing a (ond, the de(to! 5!ea%%, the one!s o) thede(to!6 is a(%e to !egain possession o) the (*siness )!omthe t!*stee.

C$a&!er '' reorgani+a!ion

4n%ess the +o*!t !*%es othe!ise, the de(to! !emains in possession and in +ont!o% o) the (*siness and the de(to!and the +!edito!s a!e a%%oed to o!k togethe! )%eFi(%.The a!e en+o*!aged to !ea+h a sett%ement ( +omp!omiseand ag!eement !athe! than ( +o*!t ad#*di+ation.

=a(e the (iggest %ega% !e&o%*tion em(edded in +hapte!11 is the !e%aFation o) the age o%d &BS(')

%0101'$ !*%e, that sas that the +%aims o) +!edito!sha&e +atego!i+a% p!e+eden+e o&e! one!ship +%aims.$athe!, the inte!ests o) the +!edito!s ha&e to (e (a%an+edith the inte!ests o) the one!s and e&en ith the %a!ge!good o) the +omm*nit and so+iet at %a!ge.

'nd so, +hapte! 11 a%%os the de(to! and +!edito!s to (e indi!e+t to*+h, to negotiate pament s+hed*%es, the



+o!ne!stone o) e))i+ient, th!i&ing ma!kets. The +o*!ts a!eent!*sted ith the p!ote+tion o) this mo!a% pi%%a! o) thee+onom.

E+onomies in t!ansition a!e in t!ansition not on%e+onomi+a%% (*t a%so %ega%%. Th*s, ea+h one adopted itson &e!sion o) the (ank!*pt+ %as.

In .(ngar/ <ank!*pt+ is a*tomati+a%% t!igge!ed. De(t)o! eG*it saps a!e disa%%oed. =o!eo&e!, the %a p!o&ides )o! a &e! sho!t time to !ea+h ag!eement ith

+!edito!s a(o*t !eo!ganiation o) the de(to!. These)eat*!es %ed to 000 (ank!*pt+ies in the ake o) the ne%a a n*m(e! hi+h m*sh!oomed to 0,000 ( B.

In !$e C+e%$ Re&(0li% the inso%&en+ %a +omp!isesspe+ia% +ases 5o&e!inde(tedness, )o! instan+e6. Itde%ineates to !es+*e p!og!ams:

0.' de(t to eG*it sap 5an a%te!nati&e to (ank!*pt+6s*pe!&ised ( the =inist! o) P!i&atiation.

a.The Conso%idation <ank 5)o*nded ( the State6 +an (*a )i!ms o(%igations, i) it ent (ank!*pt, at H0J o) pa!.



4nti% s*+h time as these G*estions a!e anse!ed and as%ong as the +o!po!ate de(t +!isis deepens e i%% itnessa )%oe!ing o) &e!sions o) (ank!*pt+ %as a%% o&e! the

o!%d.



'he 1nferno of the 2inance Director

B!: Dr. Sam "aknin

Sometimes, I ha!(o*! a s*spi+ion that Dante as a@inan+ia% Di!e+to!. 7is )amo*s o!k, /The In)e!no/, is ana++*!ate des+!iption o) the #o(.

The C@O 5Chie) @inan+ia% O))i+e!6 is )e!&ent% hated (the o!ke!s. 7e is tho!o*gh% despised ( othe!manage!s, most% )o! s+!*tiniing thei! eFpense a++o*nts.

7e is d!eaded ( the one!s o) the )i!m (e+a*se his poe!s that o)ten o*teigh thei!s. Sha!eho%de!s ho%d him!esponsi(%e in ann*a% meetings. ?hen the )inan+ia% !es*%tsa!e good - the a!e att!i(*ted to the ta%ented Chie)EFe+*ti&e O))i+e! 5CEO6. ?hen the a!e (ad - the@inan+ia% Di!e+to! gets (%amed )o! not en)o!+ing (*dgeta! dis+ip%ine. It is a noin, thank%ess #o(. Ve!

)e make it to the top. Othe!s !eti!e, e!oded andem(itte!ed.

The #o( o) the @inan+ia% Di!e+to! is +omposed o) 10e%ements. 7e!e is a *ni&e!sa% #o( des+!iption hi+h is+ommon th!o*gho*t the ?est.

rgani3ational &ffiliation

The Chie) @inan+ia% O))i+e!is s*(o!dinated to the Chie)EFe+*ti&e O))i+e!, anse!s to him and !eg*%a!% !epo!ts tohim.






The C@O is in +ha!ge o):

1. The @inan+e Di!e+to!

2. The @inan+ing Depa!tment

. The '++o*nting Depa!tment hi+h anse!s to himand !eg*%a!% !epo!ts to him.

Despite the a(o&e said, the C@O +an !epo!t di!e+t% to the<oa!d o) Di!e+to!s th!o*gh the pe!son o) the Chai!man o)

the <oa!d o) Di!e+to!s o! ( di!e+t s*mmons )!om the<oa!d o) Di!e+to!s.

In man de&e%oping +o*nt!ies this o*%d (e +onside!edt!eason - (*t, in the ?est e&e! )*n+tion ho%de! in the+ompan +an - and !eg*%a!% is - s*mmoned ( the5a+ti&e6 <oa!d. ' g!i%%ing session then ens*es: de(!ie)ingthe o))i+e! and t!ing to spot +ont!adi+tions (eteen his

testimon and othe!s. The st!*+t*!e o) (*siness )i!ms inthe 4S' !e)%e+ts its po%iti+a% st!*+t*!e. The <oa!d o)Di!e+to!s !esem(%es Cong!ess, the =anagement is theEFe+*ti&e 5P!esident and 'dminist!ation6, thesha!eho%de!s a!e the peop%e. The *s*a% +he+ks and (a%an+es a!e app%ied: the a*tho!ities a!e s*pposed%sepa!ated and the <oa!d +!iti+ies the =anagement.

The same p!o+ed*!es a!e app%ied: the <oa!d +an s*mmona o!ke! to testi) - the same a that the Senate ho%dshea!ings and +!ossG*estions o!ke!s in theadminist!ation. "ate%, hoe&e!, the de%ineation (e+ame)*ie! ith manage!s se!&ing on the <oa!d o!, o!se,+o%%*ding ith it. I!oni+a%%, E*!ope, he!e s*+hin+est*o*s p!a+ti+es e!e +ommon hithe!to - is !e)o!mingitse%) ith ea% 5espe+ia%% <!itain and e!man6.



De&e%oping +o*nt!ies a!e sti%% a)te! the +os, o*tdatedE*!opean mode%. <oa!ds o) Di!e+to!s a!e !*((e! stamps,de&oid o) an i%% to eFe!+ise thei! poe!s. The a!esta))ed ith +!onies and )!iends and )ami% mem(e!s o)the senio! management and the do and de+ide hat theene!a% =anage!s te%% them to do and to de+ide. ene!a%=anage!s - *n+he+ked - get n&o%&ed in +o%ossa% (%*nde!s5not to mention o!se6. The +on+ept o) +o!po!atego&e!nan+e is a%ien to most )i!ms in de&e%oping +o*nt!iesand +ompanies a!e !ega!ded ( most gene!a% manage!s asmi%king +os - )ast paths to pe!sona% en!i+hment.

2unctions of the Chief 2inancial fficer 4C25:

465 'o regulate7 supervise and implement a timel!7 full

and accurate set of accounting books of the firm

reflecting all its activities in a manner commensurate

with the relevant legislation and regulation in the

territories of operation of the firm and sub8ect tointernal guidelines set from time to time b! the Board of

Directors of the firm.

This is somehat di))i+*%t in de&e%oping +o*nt!ies. The (ooks do not !e)%e+t !ea%it (e+a*se the a!e /taF d!i&en/5i.e., intended to +heat the taF a*tho!ities o*t o) taF!e&en*es6. To sets o) (ooks a!e maintained: the !ea% one

hi+h in+o!po!ates a%% the in+ome - and anothe! onehi+h is p!esented to the taF a*tho!ities. This gi&es theC@O an ino!dinate poe!. 7e is in a position to (%a+kmai%the management and the sha!eho%de!s o) the )i!m. 7e (e+omes the in)o!mation #*n+tion o) the )i!m, the on% oneho has a++ess to the ho%e pi+t*!e. I) he is dishonest, he+an easi% en!i+h himse%). <*t he +annot (e honest: he has

to +onstant% %ie and he does so as a %i)e %ong ha(it.



7e 5o! she6 de&e%ops a +ogniti&e dissonan+e: I am honestith m s*pe!io!s - I on% %ie to the state.

495 'o implement continuous financial audit and controls!stems to monitor the performance of the firm7 its flow

of funds7 the adherence to the budget7 the ependitures7

the income7 the cost of sales and other budgetar! items.

In de&e%oping +o*nt!ies, this is o)ten +on)*sed ith +ent!a% p%anning. @inan+ia% +ont!o% does not mean the aste o) p!e+io*s management !eso*!+es on &e!i)ing pett

eFpenses. No! does it mean a (*dget hi+h goes to s*+hdetai%s as ho man tea (ags i%% (e +ons*med ( homand he!e. =anage!s in de&e%oping +o*nt!ies sti%% )ee% thatthe a!e (eing s*pe!&ised and )o%%oed, that the ha&eG*otas to +omp%ete, that the ha&e to a+t as tho*gh thea!e (*s 5e&en i) the a!e, in !ea%it, most o) the time,id%e6. So, the engage in the o%d time +ent!a% p%anning and

the do it th!o*gh the (*dget. This is !ong.

' (*dget in a )i!m is no di))e!ent than the (*dget o) thestate. It has eFa+t% the same )*n+tions. It is a statement o) po%i+, a (ea+on shoing the a to a mo!e p!o)ita(%e)*t*!e. It sets the st!ategi+ 5and not the ta+ti+a%6 goa%s o)the )i!m: ne p!od*+ts to de&e%op, ne ma!kets to penet!ate, ne management te+hniG*es to imp%ement, possi(%e +o%%a(o!ations, identi)i+ation o) the +ompetition,o) the !e%ati&e +ompetiti&e ad&antages. '(o&e a%%, a (*dget m*st a%%o+ate the s+a!+e !eso*!+es o) the )i!m ino!de! to o(tain a maFim*m impa+t 5Le))i+ient%6. '%% this,*n)o!t*nate%, is missing )!om (*dgets o) )i!ms inde&e%oping +o*nt!ies.



It is impo!tant to emphasie that not a%% the (*sinesses inde&e%oping +o*nt!ies a!e %ike that. In some p%a+es thesit*ation is m*+h (ette! and +%ose! to the ?est. <*tgeopo%iti+a% inse+*!it 5hat i%% (e the )*t*!e o)de&e%oping +o*nt!ies in gene!a% and m +o*nt! in pa!ti+*%a!6, po%iti+a% inse+*!it 5i%% m pa!t !emain in poe!6, +o!po!ate inse+*!it 5i%% m +ompan +ontin*eto eFist in this ho!!i(%e e+onomi+ sit*ation6 and pe!sona%inse+*!it 5i%% I +ontin*e to (e the ene!a% =anage!6+om(ine to (!eed sho!tsightedness, spe+*%ati&e st!eaks, ad!i&e to get !i+h hi%e the going is good 5and th*s !o( the

+ompan6 - and *p to +!imina% tenden+ies.

4<5 'o compl! with all reporting7 accounting and audit

re+uirements imposed b! the capital markets or

regulator! bodies of capital markets in which the

securities of the firm are traded or are about to be traded

or otherwise listed.

The a(sen+e o) a )*n+tioning +apita% ma!ket in mande&e%oping +o*nt!ies and the ina(i%it o) de&e%oping+o*nt!ies )i!ms to a++ess )o!eign +apita% ma!kets - makethe %i)e o) the C@O ha!de! and easie! at the same time.7a!de! - (e+a*se the!e is nothing %ike a sto+k eF+hange%isting to impose dis+ip%ine, t!anspa!en+ and %ongte!m,managementindependent st!ategi+ thinking on a )i!m.Dis+ip%ine and t!anspa!en+ !eG*i!e an eno!mo*s amo*nto) in&estment ( the )inan+ia% st!*+t*!es o) the )i!m:G*a!te!% !epo!ts, a*dited ann*a% )inan+ia% statements,dis+%os*!e o) impo!tant (*siness de&e%opments,inte!a+tion ith !eg*%ato!s 5a tedio*s a))ai!6 - a%% )a%%ithin the !emit o) the C@O. ?h, the!e)o!e, sho*%d hee%+ome itA



<e+a*se dis+ip%ine and t!anspa!en+ make the %i)e o) aC@O easie! in the %ong !*n. 9*st think ho m*+h easie! itis to maintain one set o) (ooks instead o) to o! to a&oid

+on)%i+ts ith taF a*tho!ities on the one hand and o*!management on the othe!.

4=5 'o prepare and present for the approval of the Board

of Directors an annual budget7 other budgets7 financial

plans7 business plans7 feasibilit! studies7 investment

memoranda and all other financial and business

documents as ma! be re+uired from time to time b! the

Board of Directors of the firm.

The p!ima% sin in de&e%oping +o*nt!ies as so +a%%edp!i&atiationQ. The %as e!e )%aed. To miF the)*n+tions o) management, o!ke!s and one!ship isdet!imenta% to a )i!m, et this is eFa+t% the path that as+hosen in n*me!o*s de&e%oping +o*nt!ies. =anagement

takeo&e!s and emp%oee takeo&e!s )o!+ed the ne,impo&e!ished, one!s to !o( the )i!m in o!de! to pa )o!thei! sha!es. Th*s, the e!e *na(%e to in)*se the )i!mith ne +apita%, ne eFpe!tise, o! ne management.P!i&atied +ompanies a!e ding s%o%.

One o) the p!o(%ems th*s !o*ght as the tota% +on)*sion!ega!ding the o!gani+ st!*+t*!e o) the )i!m. <oa!ds e!e+omposed o) )!iends and +!onies o) the management (e+a*se the manage!s a%so oned the )i!m - (*t the+o*%d (e easi% )i!ed ( thei! on o!ke!s, ho e!e a%soone!s and so on. These in+est*o*s !e%ationshipsint!od*+ed an in+!edi(%e amo*nt o) inse+*!it intomanagement !anks 5see p!e&io*s point6.



4>5 'o alert the Board of Directors and to warn it

regarding an! irregularit!7 lack of compliance7 lack of

adherence7 lacunas and problems whether actual or

potential concerning the financial s!stems7 the financialoperations7 the financing plans7 the accounting7 the

audits7 the budgets and an! other matter of a financial

nature or which could or does have a financial

implication.

The C@O is a(so%*te% a%igned and identi)ied ith themanagement. The <oa!d is meaning%ess. The +on+ept o)one!ship is meaning%ess (e+a*se e&e!one onse&e!thing and the!e a!e no identi)ia(%e one!s 5eF+ept ina )e +ompanies6. '(s*!d%, Comm*nism 5the +ommonone!ship o) means o) p!od*+tion6 has !et*!ned in )*%%&engean+e, tho*gh in disg*ise, p!e+ise% (e+a*se o) theostensi(% most +apita%ist a+t o) a%%, p!i&atiation.

4?5 'o collaborate and coordinate the activities ofoutside suppliers of financial services hired or

contracted b! the firm7 including accountants7 auditors7

financial consultants7 underwriters and brokers7 the

banking s!stem and other financial venues.

=an )i!ms in de&e%oping +o*nt!ies 5again, not a%%6 a!einte!ested in +o%%*sion - not in +ons*%tan+. 7a&ing hi!eda +ons*%tant o! the a++o*ntant - the (e%ie&e that theon him. The a!e (itte!% disappointed and en!agedhen the dis+o&e! that an a++o*ntant has to +omp% iththe !*%es o) his t!ade o! that a )inan+ia% +ons*%tant p!ote+tshis !ep*tation ( !e)*sing to +o%%a(o!ate ith shenaniganso) the management.



4@5 'o maintain a working relationship and to develop

additional relationships with banks7 financial

institutions and capital markets with the aim of securing

the funds necessar! for the operations of the firm7 theattainment of its development plans and its investments.

One o) the main )*n+tions o) the C@O is to esta(%ish a pe!sona% !e%ationship ith the )i!ms (anke!s. The)inan+ia% instit*tions hi+h pass )o! (anks in de&e%oping+o*nt!ies %end mone on the (asis o) pe!sona%a+G*aintan+e mo!e than on the (asis o) ana%sis o! !ationa%de+ision making. This /o%d (o neto!k/ s*(stit*tes )o!the o!de!% +o%%e+tion o) data and +!edit !ating o) (o!!oe!s. This a%so a%%os )o! )a&o*!itism and +o!!*ptionin the (anking se+to!. ' C@O ho is *na(%e to pa!ti+ipatein these games is deemed ( the management to (e/eak/, /ine))e+ti&e/ o! /nogood/. The %a+k o) non(ank)inan+ing options and the gene!a% sG*eee on %iG*idit

make matte!s e&en o!se )o! the )inan+e manage!. 7em*st +o%%a(o!ate ith the skeed p!a+ti+es and de+isionmaking p!o+esses o) the (anks - o! pe!ish.

4A5 'o full! computeri3e all the above activities in a

combined hardware-software and communications

s!stem which integrates with the s!stems of other

members of the group of companies.

465 therwise7 to initiate and engage in all manner of

activities7 whether financial or other7 conducive to the

financial health7 the growth prospects and the

fulfillment of investment plans of the firm to the best of

his abilit! and with the appropriate dedication of the

time and efforts re+uired.

It is this, point 10, that o++*pies the o!king time o)?este!n C@Os. it is thei! (!ain that is &a%*ed - not thei!



+onne+tions o! +*nning.



Decision Support S!stems

B!: Dr. Sam "aknin

=an +ompanies in de&e%oping +o*nt!ies ha&e a &e!detai%ed !epo!ting sstem going don to the %e&e% o) asing%e p!od*+t, a sing%e s*pp%ie!, a sing%e da. 7oe&e!,these !epo!ts - hi+h a!e no!ma%% p!o&ided to theene!a% =anage! sho*%d not, in m &ie, (e *sed (them at a%%. The a!e too detai%ed and, th*s, tend too(s+*!e the t!*e pi+t*!e. ' ene!a% =anage! m*st ha&e a (i!d3s ee &ie o) his +ompan. 7e m*st (e a%e!ted to*n*s*a% happenings, dist*!(ing )inan+ia% data and othe!i!!eg*%a!ities.

's things stand no, the )o%%oing phenomena +o*%dhappen:

0.That the management i%% high% %e&e!age the +ompan ( ass*ming eF+essi&e de(ts (*!dening the +ash )%o o)the +ompan and o!

a.That a )a%se P!o)it and "oss 5PN"6 pi+t*!e i%% eme!ge (oth on the sing%e p!od*+t %e&e% and gene!a%%. This+o*%d %ead to !ong de+ision making, (ased on !ongdata.

(.That the +ompan i%% pa eF+essi&e taFes on itsea!nings and o!

+.That the in&ento! i%% not (e )*%% +ont!o%%ed andapp!aised +ent!a%% and o!

d.That the !ong +ash )%o pi+t*!e i%% disto!t the

de+isions o) the management and %ead to !ong 5e&en todange!o*s6 de+isions.






To assist in o&e!+oming the a(o&e, the!e a!e )o*! %e&e%s o)!epo!ting and )%os o) data hi+h e&e! +ompan sho*%dinstit*te:

The )i!st %e&e% is the ann*a% (*dget o) the +ompan hi+his !ea%% a (*siness p%an. The (*dget a%%o+ates amo*nts o)mone to e&e! a+ti&it and o! depa!tment o) the )i!m.

's time passes, the a+t*a% eFpendit*!es a!e +ompa!ed tothe (*dget in a )eed(a+k %oop. D*!ing the ea!, o! at theend o) the )is+a% ea!, the )i!m gene!ates its )inan+ia%

statements: the in+ome statement, the (a%an+e sheet, the+ash )%o statement.

P*t togethe!, these )o*! do+*ments a!e the )o!ma% edi)i+eo) the )i!m3s )inan+es. 7oe&e!, the +an not se!&e as dato da g*ides to the ene!a% =anage!.

The se+ond tie! o) )inan+ia% a*dit and +ont!o% is hen the

)inan+e depa!tment 5eG*ipped ith p!ope! so)ta!e -So%omon IV is the most ide% *sed in the ?est6 is a(%e to p!od*+e p!o )o!ma )inan+ia% statements month%.

These )inan+ia% statements, hoe&e! ina++*!ate, p!o&ide a (ette! sense o) the dnami+s o) the ope!ation and sho*%d (e +onst!*+ted on the (asis o) ?este!n a++o*nting

p!in+ip%es 5''P and @'S<s, o! I'S6.<*t the =anage! sho*%d (e a(%e to open this +omp*te!dai% and !e+ei&e to kinds o) data, )*%% *pdated and)*%% integ!ated:

1. Dai% )inan+ia% statements

2. Dai% !atios !epo!t.T$e dail/ inan%ial s!a!een!s



The =anage! sho*%d ha&e a++ess to +ontin*o*s% *pdatedstatements o) in+ome, +ash )%o, and a (a%an+e sheet. Themost impo!tant statement is that o) the +ash )%o. Themanage! sho*%d (e a(%e to kno, at ea+h and e&e! stage,hat his !ea% +ash sit*ation is as opposed to thetheo!eti+a% +ash sit*ation hi+h in+%*des a++o*nts paa(%eand a++o*nt !e+ei&a(%e in the )o!m o) eFpenses andin+ome.

These p!o )o!ma )inan+ia% statements sho*%d in+%*de a%%the )*t*!e )%os o) mone hethe! in&oi+ed o! not. This

a, the =anage! i%% (e a(%e to tpe a )*t*!e date intohis +omp*te! and get the )inan+ia% !epo!ts and statements!e%ating to that date.

In othe! o!ds, the =anage! i%% not (e a(%e to see on% a p!esent sit*ation o) his +ompan, (*t its )*t*!e sit*ation,)*%% ana%sed and )*%% *pdated.

7sing !oda/s !e%$nolog/ - a ireless-%onne%!ed la&!o&

anagers are a0le !o a%%ess all !$ese da!a ro

an/$ere in !$e orld ro $oe $ile !raveling

and so on



T$e dail/ ra!ios re&or!

This is the most impo!tant pa!t o) the de+ision s*ppo!t

sstem.It ena(%es the =anage! to instant% ana%se doens o)impo!tant aspe+ts o) the )*n+tioning o) his +ompan. Ita%%os him to +ompa!e the (eha&io*! o) these pa!amete!sto histo!i+a% data and to sim*%ate the )*t*!e )*n+tioning o)his +ompan *nde! di))e!ent s+ena!ios.

It a%so a%%os him to +ompa!e the pe!)o!man+e o) his+ompan to the pe!)o!man+e o) his +ompetito!s, othe!)i!ms in his (!an+h and to the o&e!a%% pe!)o!man+e o) theind*st! that he is ope!ating in.

The =anage! +an !e&ie these )inan+ia% and p!od*+tion!atios. ?he!e the!e is a st!ong de&iation )!om histo!i+a% patte!ns, o! he!e the !atios a!n a(o*t p!o(%ems in the)*t*!e - management inte!&ention ma (e !eG*i!ed..

Instead o) si)ting th!o*gh mo*ntains o) do+*ments, the=anage! i%% on% ha&e to %ook at )o*! +omp*te! s+!eensin the mo!ning, spot the a%e!ts, !ead the eFp%anationso))e!ed ( the so)ta!e, +he+k hat is happening and (ette! p!epa!e himse%) )o! the )*t*!e.



E;a&les o !$e ra!ios !o 0e in%l(ded in !$e de%ision

s/s!e

a. S) measure de&iation o) a+t*a% p!o)its )!omeFpe+ted p!o)its

(. 0) the !et*!n on the ad#*sted eG*it +apita%

+. Debt to e+uit! !atios

d. 0& the !et*!n on the assets

e. The financial average

). 0S the p!o)it ma!gin on the sa%es

g. &' asset t*!no&e!, ho e))i+ient% assets a!e*sed

h. 'a burden and interest burden !atios

i. Compounded leverage

#. Sales to fied assets !atios

k. 1nventor! turnover !atios

l. Da!s receivable and da!s pa!able

m. Current ratio7 +uick ratio7 interest coverage ratio

and othe! %iG*idit and +o&e!age !atios

n. "aluation price !atiosand man othe!s.

T$e ee%!s o (sing a de%ision s/s!e

' de+ision sstem has g!eat impa+t on the p!o)its o) the+ompan. It )o!+es the management to !ationa%ie the



dep!e+iation, in&ento! and in)%ation po%i+ies. It a!ns themanagement against impending +!ises and p!o(%ems in the+ompan. It spe+ia%% he%ps in )o%%oing a!eas:

0.The management knos eFa+t% ho m*+h +!edit it+o*%d take, )o! ho %ong 5)o! hi+h mat*!ities6 and inhi+h inte!est !ate. It has (een p!o&en that itho*t p!ope!)eed(a+k, manage!s tend to take too m*+h +!edit and (*!den the +ash )%o o) thei! +ompanies.

(. ' de+ision sstem a%%os )o! +a!e)*% )inan+ia%

p%anning and taF p%anning. P!o)its go *p, non +asho*t%as a!e +ont!o%%ed, taF %ia(i%ities a!e minimiedand +ash )%os a!e maintained positi&e th!o*gho*t.

+. 's a !es*%t o) a%% the a(o&e e))e+ts the &a%*e o) the+ompan g!os and its sha!es app!e+iate.

1. The de+ision sstem is an integ!a% pa!t o) )inan+ia%

management in the ?est. It is +omp%ete%+ompati(%e ith este!n a++o*nting methods andde!i&es a%% the data that it needs )!om in)o!mationeFtant in the +ompan.

So, the esta(%ishment o) a de+ision sstem does not hinde!the )*n+tioning o) the +ompan in an a and does not

inte!)e!e ith the a*tho!it and )*n+tioning o) the)inan+ia% depa!tment.

De+ision S*ppo!t Sstems +ost as %itt%e as 20,000 4SD5a%% in+%*ded: so)ta!e, ha!da!e, and t!aining6. The a!eone o) the (est in&estments that a )i!m +an make.



"aluing Stocks

B!: Dr. Sam "aknin

&lso 0ead

'he M!th of the )arnings $ield

'he 2riendl! 'rend - 'echnical vs. 2undamental &nal!sis

'he 0oller Coaster Market - n "olatilit! and 0isk

The de(ate !ages a%% o&e! Easte!n and Cent!a% E*!ope, in+o*nt!ies in t!ansition as e%% as in ?este!n E*!ope. It!aged in <!itain d*!ing the K0s.

Is p!i&atiation !ea%% the !o((e! in disg*ise o) stateassets ( a se%e+t )e, +!onies o) the po%iti+a% !egimeA=a!ga!et That+he! as a++*sed o) it and so e!e p!i&atie!s in de&e%oping +o*nt!ies. ?hat p!i+e sho*%dstateoned +ompanies ha&e )et+hedA This G*estion is notas simp%e and st!aight)o!a!d as it so*nds.

The!e is a sto+k p!i+ing me+hanism knon as the Sto+kEF+hange. ?i%%ing (*e!s and i%%ing se%%e!s meet the!e to)!ee% negotiate dea%s o) sto+k p*!+hases and sa%es. Nein)o!mation, ma+!oe+onomi+ and mi+!oe+onomi+,

dete!mines the &a%*e o) +ompanies.

!eenspan testi)ies in the Senate, e+onomi+ )ig*!es a!e!e%eased and the !*mo*! mi%% sta!ts o!king: inte!est!ates might go *p. The sto+k ma!ket !ea+ts ith )!eni% it +!ashes. ?hA

' top eFe+*ti&e is asked ho p!o)ita(%e i%% his )i!m (e

this G*a!te!. 7e inks, he g!ins this is inte!p!eted (?a%% St!eet to mean that p!o)its i%% go *p. The sha!e p!i+e



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s*!ges: no one ants to se%% it, e&e!one ant to (* it.The !es*%t: a sha!p !ise in its p!i+e. ?hA

=o!eo&e!: the sha!e p!i+e o) a +ompan o) an identi+a%

sie, simi%a! )inan+ia% !atios 5and in the same ind*st!6 (a!e% (*dges. ?h notA

?e sa that the sto+ks o) the to +ompanies ha&edi))e!ent e%asti+it 5thei! p!i+es mo&e *p and dondi))e!ent%6, p!o(a(% the !es*%t o) di))e!ent sensiti&ities to+hanges in inte!est !ates and in ea!nings estimates. <*t

this is #*st to !ename the p!o(%em. The G*estion !emains:?h do the sha!es o) simi%a! +ompanies !ea+t di))e!ent%A

E+onom is a (!an+h o) ps+ho%og and he!e&e! andhene&e! h*mans a!e in&o%&ed, anse!s don3t +ome eas.' )e mode%s ha&e (een de&e%oped and a!e in ide *se (*t it is di))i+*%t to sa that an o) them has !ea% p!edi+ti&eo! e&en eFp%anato! poe!s. Some o) these mode%s a!e

/te+hni+a%/ in nat*!e: the igno!e the )*ndamenta%s o) the+ompan. S*+h mode%s ass*me that a%% the !e%e&antin)o!mation is a%!ead in+o!po!ated in the p!i+e o) thesto+k and that +hanges in eFpe+tations, hopes, )ea!s andattit*des i%% (e !e)%e+ted in the p!i+es immediate%.Othe!s a!e )*ndamenta%: these mode%s !e% on the+ompan3s pe!)o!man+e and assets. The )o!me! mode%s a!e

app%i+a(%e most% to +ompanies hose sha!es a!e t!aded p*(%i+%, in sto+k eF+hanges. The a!e not &e! *se)*% int!ing to atta+h a &a%*e to the sto+k o) a p!i&ate )i!m. The%atte! tpe 5)*ndamenta%6 mode%s +an (e app%ied mo!e (!oad%.



The &a%*e o) a sto+k 5a (ond, a )i!m, !ea% estate, o! anasset6 is the s*m o) the in+ome 5+ash )%o6 that a!easona(%e in&esto! o*%d eFpe+t to get in the )*t*!e,

dis+o*nted at the app!op!iate !ate. The dis+o*nting !e)%e+tsthe )a+t that mone !e+ei&ed in the )*t*!e has %oe!5dis+o*nted6 p*!+hasing poe! than mone !e+ei&ed no.=o!eo&e!, e +an in&est mone !e+ei&ed no and getinte!est on it 5hi+h sho*%d no!ma%% eG*a% the dis+o*nt6.P*t di))e!ent%: the dis+o*nt !e)%e+ts the %oss in p*!+hasing poe! o) mone de)e!!ed o! the inte!est %ost ( not (eing

a(%e to in&est the mone !ight aa. This is the time &a%*eo) mone.

'nothe! p!o(%em is the *n+e!taint o) )*t*!e paments, o!the !isk that e i%% ne&e! !e+ei&e them. The %onge! the pament pe!iod, the highe! the !isk, o) +o*!se. ' mode%eFists hi+h %inks time, the &a%*e o) the sto+k, the +ash)%os eFpe+ted in the )*t*!e and the dis+o*nt 5inte!est6

!ates.

The !ate that e *se to dis+o*nt )*t*!e +ash )%os is the p!e&ai%ing inte!est !ate. This is pa!t% t!*e in sta(%e, p!edi+ta(%e and +e!tain e+onomies. <*t the dis+o*nt !atedepends on the in)%ation !ate in the +o*nt! he!e the )i!mis %o+ated 5o!, i) a m*%tinationa%, in a%% the +o*nt!ies he!e

it ope!ates6, on the p!o#e+ted s*pp% o) and demand )o! itssha!es and on the a)o!ementioned !isk o) nonpament. In+e!tain p%a+es, additiona% )a+to!s m*st (e taken intoa++o*nt 5)o! eFamp%e: +o*nt! !isk o! )o!eign eF+hange!isks6.



The s*pp% o) a sto+k and, to a %esse! eFtent, the demand)o! it dete!mine its dist!i(*tion 5ho man sha!eone!sa!e the!e6 and, as a !es*%t, its %iG*idit. "iG*idit means

ho )!ee% +an one (* and se%% it and at hi+h G*antitiesso*ght o! so%d do p!i+es (e+ome !igid.

EFamp%e: i) a +ont!o%%ing stake is so%d the (*e!no!ma%% pas a /+ont!o% p!emi*m/. 'nothe! eFamp%e: inthin ma!kets it is easie! to manip*%ate the p!i+e o) a sto+k ( a!ti)i+ia%% in+!easing the demand o! de+!easing thes*pp% 5/+o!ne!ing/ the ma!ket6.

In a %iG*id ma!ket 5no p!o(%ems to (* and to se%%6, thedis+o*nt !ate is +omp!ised o) to e%ements: one is the!isk)!ee !ate 5no!ma%%, the inte!est paa(%e ongo&e!nment (onds6, the othe! (eing the !isk!e%ated !ate5the !ate hi+h !e)%e+ts the !isk !e%ated to the spe+i)i+sto+k6.

<*t hat is this !isk!e%ated !ateA

The most ide% *sed mode% to e&a%*ate spe+i)i+ !isks isthe Capita% 'sset P!i+ing =ode% 5C'P=6.

'++o!ding to it, the dis+o*nt !ate is the !isk)!ee !ate p%*sa +oe))i+ient 5+a%%ed (eta6 m*%tip%ied ( a !isk p!emi*m

gene!a% to a%% sto+ks 5in the 4S' it as +a%+*%ated to (e.J6. <eta is a meas*!e o) the &o%ati%it o) the !et*!n o)the sto+k !e%ati&e to that o) the !et*!n o) the ma!ket. 'sto+k3s <eta +an (e o(tained ( +a%+*%ating the +oe))i+iento) the !eg!ession %ine (eteen the eek% !et*!ns o) thesto+k and those o) the sto+k ma!ket d*!ing a se%e+ted pe!iod o) time.



4n)o!t*nate%, di))e!ent (etas +an (e +a%+*%ated (se%e+ting di))e!ent pa!amete!s 5)o! instan+e, the %ength o)the pe!iod on hi+h the +a%+*%ation is pe!)o!med6. 'nothe!

p!o(%em is that (etas +hange ith e&e! ne dat*m.P!o)essiona%s !eso!t to sensiti&it tests hi+h ne*t!a%iethe +hanges that (etas *nde!go ith time.

Sti%%, ith a%% its sho!t+omings and disp*ted ass*mptions,the C'P= sho*%d (e *sed to dete!mine the dis+o*nt !ate.<*t to *se the dis+o*nt !ate e m*st ha&e )*t*!e +ash)%os to dis+o*nt.

The on% !e%ati&e% +e!tain +ash )%os a!e di&idends paidto the sha!eho%de!s. So, Di&idend Dis+o*nt =ode%s5DD=6 e!e de&e%oped.

Othe! mode%s !e%ate to the p!o#e+ted g!oth o) the+ompan 5hi+h is s*pposed to in+!ease the paa(%e

di&idends and to +a*se the sto+k to app!e+iate in &a%*e6.

Sti%%, DD=s !eG*i!e, as inp*t, the *%timate &a%*e o) thesto+k and g!oth mode%s a!e on% s*ita(%e )o! mat*!e)i!ms ith a sta(%e, %o di&idend g!oth. Tostagemode%s a!e mo!e poe!)*% (e+a*se the +om(ine (othemphases, on di&idends and on g!oth. This is (e+a*se o)the %i)e++%e o) )i!ms. 't )i!st, the tend to ha&e a high

and *nsta(%e di&idend g!oth !ate 5the DD= ta+k%es thisadeG*ate%6. 's the )i!m mat*!es, it is eFpe+ted to ha&e a%oe! and sta(%e g!oth !ate, s*ita(%e )o! the t!eatment o)!oth =ode%s.



<*t ho man ea!s o) )*t*!e in+ome 5)!om di&idends6sho*%d e *se in o*! +a%+*%ationsA I) a )i!m is p!o)ita(%eno, is the!e an g*a!antee that it i%% +ontin*e to (e so in

the neFt ea!, o! the neFt de+adeA I) it does +ontin*e to (e p!o)ita(%e ho +an g*a!antee that its di&idend po%i+ i%%not +hange and that the same !ate o) di&idends i%%+ontin*e to (e dist!i(*tedA

The n*m(e! o) pe!iods 5no!ma%%, ea!s6 se%e+ted )o! the+a%+*%ation is +a%%ed the /p!i+e to ea!nings 5PE6 m*%tip%e/.The m*%tip%e denotes ( ho m*+h e m*%tip% the 5a)te!taF6 ea!nings o) the )i!m to o(tain its &a%*e. It depends onthe ind*st! 5g!oth o! ding6, the +o*nt! 5sta(%e o!geopo%iti+a%% pe!i%o*s6, on the one!ship st!*+t*!e5)ami% o! p*(%i+6, on the management in p%a+e5+ommitted o! mo(i%e6, on the p!od*+t 5ne o! o%dte+hno%og6 and a m!iad o) othe! )a+to!s. It is a%mostimpossi(%e to o(#e+ti&e% G*anti) o! )o!m*%ate this

p!o+ess o) ana%sis and de+ision making. Inte%e+omm*ni+ations, the !ange o) n*m(e!s *sed )o!&a%*ing sto+ks o) a p!i&ate )i!m is (eteen and 10, )o!instan+e. I) the +ompan is in the p*(%i+ domain, then*m(e! +an shoot *p to 20 times net ea!nings.

?hi%e some +ompanies pa di&idends 5some e&en (o!!o

to do so6, othe!s do not. So in sto+k &a%*ation, di&idendsa!e not the on% )*t*!e in+omes o* o*%d eFpe+t to get.Capita% gains 5p!o)its hi+h a!e the !es*%t o) theapp!e+iation in the &a%*e o) the sto+k6 a%so +o*nt. This isthe !es*%t o) eFpe+tations !ega!ding the )i!m3s )!ee +ash)%o, in pa!ti+*%a! the )!ee +ash )%o that goes to thesha!eho%de!s.



The!e is no ag!eement as to hat +onstit*tes )!ee +ash)%o. In gene!a%, it is the +ash hi+h a )i!m has a)te!s*))i+ient% in&esting in its de&e%opment, !esea!+h and

5p!edete!mined6 g!oth. Cash @%o Statements ha&e (e+ome a standa!d a++o*nting !eG*i!ement in the K0s5sta!ting ith the 4S'6. <e+a*se /)!ee/ +ash )%o +an (eeasi% eFt!a+ted )!om these !epo!ts, sto+k &a%*ation (asedon )!ee +ash )%o (e+ame in+!easing% pop*%a! and)easi(%e. Cash )%o statements a!e +onside!ed independento) the idiosn+!ati+ pa!amete!s o) di))e!ent inte!nationa%

en&i!onments and the!e)o!e app%i+a(%e to m*%tinationa%s o!to nationa%, eFpo!to!ientated )i!ms.

The )!ee +ash )%o o) a )i!m that is de(t)inan+ed so%e% ( its sha!eho%de!s (e%ongs so%e% to them. @!ee +ash )%oto eG*it 5@C@E6 is:

2C2) < O&era!ing Cas$ =lo >IN7S Cas$ needed

or ee!ing gro!$ !arge!s ?he!eperating Cash 2low < Ne! In%oe NI5 1L7S

?e&re%ia!ion and @or!i+a!ion

Cash needed for meeting growth targets < Ca&i!al

E;&endi!(res A C$ange in #orking Ca&i!al

#orking Capital < To!al C(rren! @sse!s - To!al C(rren!

Lia0ili!ies

Change in #orking Capital < One ears #orking

Ca&i!al >IN7S 1revio(s ears #orking Ca&i!al



The +omp%ete )o!m*%a is:

=C=E < Ne! In%oe 1L7S ?e&re%ia!ion and @or!i+a!ion >IN7S

Ca&i!al E;&endi!(res 1L7S C$ange in #orking Ca&i!al

' %e&e!aged )i!m that (o!!oed mone )!om othe! so*!+es5e&en )!om p!e)e!!ed sto+k ho%de!s6 eFhi(its a di))e!ent)!ee +ash )%o to eG*it. Its C@CE m*st (e ad#*sted to!e)%e+t the p!e)e!!ed di&idends and p!in+ipa% !epamentso) de(t 5=IN4S sign6 and the p!o+eeds )!om ne de(tand p!e)e!!ed sto+ks 5P"4S sign6. I) its (o!!oings a!es*))i+ient to pa the di&idends to the ho%de!s o) p!e)e!en+esha!es and to se!&i+e its de(t its de(t to +apita% !atio isso*nd.

The @C@E o) a %e&e!aged )i!m is:

=C=E < Ne! In%oe 1L7S

?e&re%ia!ion and @or!i+a!ion >IN7S

1rin%i&al Re&a/en! o ?e0! >IN7S

1reerred ?ividends 1L7S

1ro%eeds ro Ne ?e0! and 1reerred >IN7S

Ca&i!al E;&endi!(res >IN7S

C$anges in #orking Ca&i!al



' so*nd de(t !atio means:

=C=E < Ne! In%oe >IN7S ' - ?e0! Ra!io5Ca&i!al E;&endi!(res >IN7S

?e&re%ia!ion and @or!i+a!ion 1L7S C$ange in #orking Ca&i!al5



'he %rocess of Due Diligence

B!: Dr. Sam "aknin

' (*siness hi+h ants to att!a+t )o!eign in&estmentsm*st p!esent a (*siness p%an. <*t a (*siness p%an is theeG*i&a%ent o) a &isit +a!d. The int!od*+tion is &e!impo!tant (*t, on+e the )o!eign in&esto! has eFp!essedinte!est, a se+ond, mo!e se!io*s, mo!e one!o*s and mo!etedio*s p!o+ess +ommen+es: D*e Di%igen+e.

/D*e Di%igen+e/ is a %ega% te!m 5(o!!oed )!om these+*!ities ind*st!6. It means, essentia%%, to make s*!ethat a%% the )a+ts !ega!ding the )i!m a!e a&ai%a(%e and ha&e (een independent% &e!i)ied. In some !espe+ts, it is &e!simi%a! to an a*dit. '%% the do+*ments o) the )i!m a!eassem(%ed and !e&ieed, the management is inte!&ieedand a team o) )inan+ia% eFpe!ts, %ae!s and a++o*ntants

des+ends on the )i!m to ana%e it.

2irst 0ule:

The )i!m m*st appoint ONE d*e di%igen+e +oo!dinato!.This pe!son inte!)a+es ith a%% o*tside d*e di%igen+eteams. 7e +o%%e+ts a%% the mate!ia%s !eG*ested and o&e!seesa%% the a+ti&ities hi+h make *p the d*e di%igen+e p!o+ess.

The )i!m m*st ha&e ONE VOICE. On% one pe!son!ep!esents the +ompan, anse!s G*estions, makes p!esentations and se!&es as a +oo!dinato! hen the DDteams ish to inte!&ie peop%e +onne+ted to the )i!m.






Second 0ule:

<!ie) o*! o!ke!s. i&e them the (ig pi+t*!e. ?h is the

+ompan !aising )*nds, ho a!e the in&esto!s, ho i%%the )*t*!e o) the )i!m 5and thei! pe!sona% )*t*!e6 %ook i) thein&esto! +omes in. <oth emp%oees and management m*st!ea%ie that this is a top p!io!it. The m*st (e inst!*+tednot to %ie. The m*st kno the DD +oo!dinato! and the+ompan3s spokesman in the DD p!o+ess.

The DD is a p!o+ess hi+h is mo!e st!*+t*!ed than the

p!epa!ation o) a <*siness P%an. It is +on)ined (oth in timeand in s*(#e+ts: "ega%, @inan+ia%, Te+hni+a%, =a!keting,Cont!o%s.

'he Marketing %lan

=*st in+%*de the )o%%oing e%ements:

• ' (!ie) histo! o) the (*siness 5to sho its t!a+k pe!)o!man+e and g!oth6

• Points !ega!ding the po%iti+a%, %ega% 5%i+en+es6 and

+ompetiti&e en&i!onment

• ' &ision o) the (*siness in the )*t*!e

• P!od*+ts and se!&i+es and thei! *ses

• Compa!ison o) the )i!m3s p!od*+ts and se!&i+es to

those o) the +ompetito!s

• ?a!!anties, g*a!antees and a)te!sa%es se!&i+e

• De&e%opment o) ne p!od*+ts o! se!&i+es

• ' gene!a% o&e!&ie o) the ma!ket and ma!ket

segmentation



• Is the ma!ket !ising o! )a%%ing 5the t!end: past and

)*t*!e6

• ?hat +*stome! needs do the p!od*+ts se!&i+es

satis)

• ?hi+h ma!kets segments do e +on+ent!ate on

and h

• ?hat )a+to!s a!e impo!tant in the +*stome!3s

de+ision to (* 5o! not to (*6

• ' %ist o) the di!e+t +ompetito!s and a sho!tdes+!iption o) ea+h

• The st!engths and eaknesses o) the +ompetito!s

!e%ati&e to the )i!m

• =issing in)o!mation !ega!ding the ma!kets, the

+%ients and the +ompetito!s

• P%anned ma!ket !esea!+h

• ' sa%es )o!e+ast ( p!od*+t g!o*p

• The p!i+ing st!ateg 5ho is p!i+ing de+ided6

• P!omotion o) the sa%es o) the p!od*+ts 5in+%*ding a

des+!iption o) the sa%es )o!+e, sa%es!e%atedin+enti&es, sa%es ta!gets, t!aining o) the sa%es pe!sonne%, spe+ia% o))e!s, dea%e!ships,te%ema!keting and sa%es s*ppo!t6. 'tta+h a )%o+ha!t o) the p*!+hasing p!o+ess )!om the momentthat the +%ient is app!oa+hed ( the sa%es )o!+e*nti% he (*s the p!od*+t.

• =a!keting and ad&e!tising +ampaigns 5in+%*ding

+ost estimates6 (!oken ( ma!ket and ( media



• Dist!i(*tion o) the p!od*+ts

• ' )%o +ha!t des+!i(ing the !e+eipt o) o!de!s,

in&oi+ing, shipping.

• C*stome! a)te!sa%es se!&i+e 5hot%ine, s*ppo!t,

maintenan+e, +omp%aints, *pg!ades, et+.6

• C*stome! %oa%t 5eFamp%e: +h*!n !ate and ho is

it monito!ed and +ont!o%%ed6.



(egal Details

• @*%% name o) the )i!m

• One!ship o) the )i!m

• Co*!t !egist!ation do+*ments

• Copies o) a%% p!oto+o%s o) the <oa!d o) Di!e+to!s

and the ene!a% 'ssem(% o) Sha!eho%de!s

• Signato! !ights (a+ked ( the app!op!iate

de+isions

• The +ha!te! 5stat*te6 o) the )i!m and othe!

in+o!po!ation do+*ments

• Copies o) %i+en+es g!anted to the )i!m

• ' %ega% opinion !ega!ding the a(o&e %i+en+es

• ' %ist o) %as*it that e!e )i%ed against the )i!m

and that the )i!m )i%ed against thi!d pa!ties5%itigation6 p%*s a %ist o) disp*tes hi+h a!e %ike%to !ea+h the +o*!ts

• "ega% opinions !ega!ding the possi(%e o*t+omes o)

a%% the %as*its and disp*tes in+%*ding thei! potentia% in)%*en+e on the )i!m

2inancial Due Diligence

• "ast ea!s in+ome statements o) the )i!m o! o)

+onstit*ents o) the )i!m, i) the )i!m is the !es*%t o)a me!ge!. The statements ha&e to in+%*de:

• <a%an+e Sheets



• In+ome Statements

• Cash @%o statements

• '*dit !epo!ts 5p!e)e!a(% done a++o!ding to theInte!nationa% '++o*nting Standa!ds, o!, i) the )i!mis %ooking to !aise mone in the 4S', ina++o!dan+e ith @'S<6

• Cash @%o P!o#e+tions and the ass*mptions

*nde!%ing them

Controls

• '++o*nting sstems *sed

• =ethods to p!i+e p!od*+ts and se!&i+es

• Pament te!ms, +o%%e+tions o) de(ts and ageing o)

!e+ei&a(%es

• Int!od*+tion o) inte!nationa% a++o*nting standa!ds

• =onito!ing o) sa%es

• =onito!ing o) o!de!s and shipments

• ;eeping o) !e+o!ds, )i%ing, a!+hi&es

• Cost a++o*nting sstem

• <*dgeting and (*dget monito!ing and +ont!o%s

• Inte!na% a*dits 5)!eG*en+ and p!o+ed*!es6

• EFte!na% a*dits 5)!eG*en+ and p!o+ed*!es6

• The (anks that the )i!m is o!king ith: histo!,

!e)e!en+es, (a%an+es



'echnical %lan

• Des+!iption o) man*)a+t*!ing p!o+esses 5ha!da!e,

so)ta!e, +omm*ni+ations, othe!6

• Need )o! knoho, te+hno%ogi+a% t!ans)e! and

%i+ensing !eG*i!ed

• S*pp%ie!s o) eG*ipment, so)ta!e, se!&i+es

5in+%*ding o))e!s6

• =anpoe! 5ski%%ed and *nski%%ed6

• In)!ast!*+t*!e 5poe!, ate!, et+.6

• T!anspo!t and +omm*ni+ations 5eFamp%e:

sate%%ites, %ines, !e+ei&e!s, t!ansmitte!s6

• $a mate!ia%s: so*!+es, +ost and G*a%it

• $e%ations ith s*pp%ie!s and s*ppo!t ind*st!ies

• Impo!t !est!i+tions o! %i+ensing 5he!e app%i+a(%e6

• Sites, te+hni+a% spe+i)i+ation

• En&i!onmenta% iss*es and ho the a!e add!essed

• "eases, spe+ia% a!!angements

• Integ!ation o) ne ope!ations into eFisting ones

5p!oto+o%s, et+.6

' s*++ess)*% d*e di%igen+e is the ke to an e&ent*a%in&estment. This is a p!o+ess m*+h mo!e se!io*s andimpo!tant than the p!epa!ation o) the <*siness P%an.



2inancial 1nvestor7 Strategic 1nvestor

B!: Dr. Sam "aknin

In the not so distant past, the!e as %itt%e di))e!en+e (eteen )inan+ia% and st!ategi+ in&esto!s. In&esto!s o) a%%+o%o!s so*ght to sa)eg*a!d thei! in&estment ( taking o&e!as man management )*n+tions as the +o*%d.'dditiona%%, in&estments e!e sma%% and sha!eho%de!s)e. ' )i!m !esem(%ed a ho*seho%d and the n*m(e! o) peop%e in&o%&ed - in one!ship and in management - as+o!!esponding% %imited. Peop%e in&ested in ind*st!iesthe e!e a+G*ainted ith )i!st hand.

's ma!kets g!e, the s+a%es o) ind*st!ia% p!od*+tion 5ando) se!&i+e p!o&ision6 eFpanded. ' sing%e in&esto! 5o! asma%% g!o*p o) in&esto!s6 +o*%d no %onge! a++ommodatethe needs e&en o) a sing%e )i!m. 's kno%edge in+!eased

and spe+ia%iation ens*ed - it as no %onge! )easi(%e o! possi(%e to mi+!omanage a )i!m one in&ested in. '+t*a%%,sepa!ate (*sinesses o) mone making and (*sinessmanagement eme!ged. 'n in&esto! as eFpe+ted to eF+e%in o(taining high ie%ds on his +apita% - not in ind*st!ia%management o! in ma!keting. ' manage! as eFpe+ted tomanage, not to (e +apa(%e o) pe!sona%% ta+k%ing the

&a!io*s and &a!ing tasks o) the (*siness that he managed.

Th*s, to +%asses o) in&esto!s eme!ged. One tpe s*pp%ied)i!ms ith +apita%. The othe! tpe s*pp%ied them ithknoho, te+hno%og, management ski%%s, ma!ketingte+hniG*es, inte%%e+t*a% p!ope!t, +%iente%e and a &ision, asense o) di!e+tion.






In man +ases, the st!ategi+ in&esto! a%so p!o&ided thene+essa! )*nding. <*t, mo!e and mo!e, a sepa!ation asmaintained. Vent*!e +apita% and !isk +apita% )*nds, )o!

instan+e, a!e p*!e% )inan+ia% in&esto!s. So a!e, to ag!oing eFtent, in&estment (anks and othe! )inan+ia%instit*tions.

The )inan+ia% in&esto! !ep!esents the past. Its mone is the!es*%t o) past !ight and !ong de+isions. Its o!ientationis sho!t te!m: an /eFit st!ateg/ is so*ght as soon as)easi(%e. @o! eFit st!ategQ !ead G*i+k p!o)its. The)inan+ia% in&esto! is a%as on the %ooko*t, sea!+hing )o!i%%ing (*e!s )o! his stake. The sto+k eF+hange is a pop*%a! eFit st!ateg. The )inan+ia% in&esto! has %itt%einte!est in the +ompan3s management. Optima%%, hismone (*s )o! him not on% a good p!od*+t and a goodma!ket, (*t a%so a good management. <*t hisinte!p!etation o) the !o%%s and )*n+tions o) /good

management/ a!e &e! di))e!ent to that o))e!ed ( thest!ategi+ in&esto!. The )inan+ia% in&esto! is satis)ied ith amanagement team hi+h maFimies &a%*e. The p!i+e o)his sha!es is the most impo!tant indi+ation o) s*++ess.This is /(ottom %ine/ sho!t te!mism hi+h a%so+ha!a+te!ies ope!ato!s in the +apita% ma!kets. In&ested inso man &ent*!es and +ompanies, the )inan+ia% in&esto!

has no inte!est, no! the !eso*!+es to get se!io*s% in&o%&edin an one o) them. =i+!omanagement is %e)t to othe!s (*t, in man +ases, so is ma+!omanagement. The)inan+ia% in&esto! pa!ti+ipates in G*a!te!% o! ann*a%gene!a% sha!eho%de!s meetings. This is the eFtent o) itsin&o%&ement.



The st!ategi+ in&esto!, on the othe! hand, !ep!esents the!ea% %ong te!m a++*m*%ato! o) &a%*e. Pa!adoFi+a%%, it isthe st!ategi+ in&esto! that has the g!eate! in)%*en+e on the

&a%*e o) the +ompan3s sha!es. The G*a%it o)management, the !ate o) the int!od*+tion o) ne p!od*+ts,the s*++ess o! )ai%*!e o) ma!keting st!ategies, the %e&e% o)+*stome! satis)a+tion, the ed*+ation o) the o!k)o!+e a%%depend on the st!ategi+ in&esto!. That the!e is a st!ong!e%ationship (eteen the G*a%it and de+isions o) thest!ategi+ in&esto! and the sha!e p!i+e is sma%% onde!. The

st!ategi+ in&esto! !ep!esents a dis+o*nted )*t*!e in thesame manne! that sha!es do. Indeed, g!ad*a%%, the (a%an+e (eteen )inan+ia% in&esto!s and st!ategi+ in&esto!sis shi)ting in )a&o*! o) the %atte!. Peop%e *nde!stand thatmone is a(*ndant and hat is in sho!t s*pp% is goodmanagement. i&en the a(i%it to +!eate a (!and, togene!ate p!o)its, to iss*e ne p!od*+ts and to a+G*i!e ne+%ients mone is a(*ndant.

These a!e the )*n+tions no!ma%% !ese!&ed to )inan+ia%in&esto!s:

=inan%ial >anageen!

The )inan+ia% in&esto! is eFpe+ted to take o&e! the)inan+ia% management o) the )i!m and to di!e+t% appointthe senio! management and, espe+ia%%, the managemente+he%ons, hi+h di!e+t% dea% ith the )inan+es o) the)i!m.



1. To !eg*%ate, s*pe!&ise and imp%ement a time%, )*%%

and a++*!ate set o) a++o*nting (ooks o) the )i!m!e)%e+ting a%% its a+ti&ities in a manne!+ommens*!ate ith the !e%e&ant %egis%ation and!eg*%ation in the te!!ito!ies o) ope!ations o) the)i!m and ith inte!na% g*ide%ines set )!om time totime ( the <oa!d o) Di!e+to!s o) the )i!m. This is*s*a%% a+hie&ed (oth d*!ing a D*e Di%igen+e p!o+ess and %ate!, as )inan+ia% management isimp%emented.

1. To imp%ement +ontin*o*s )inan+ia% a*dit and+ont!o% sstems to monito! the pe!)o!man+e o) the)i!m, its )%o o) )*nds, the adhe!en+e to the (*dget, the eFpendit*!es, the in+ome, the +ost o)sa%es and othe! (*dgeta! items.

1. To time%, !eg*%a!% and d*% p!epa!e and p!esentto the <oa!d o) Di!e+to!s )inan+ia% statements and!epo!ts as !eG*i!ed ( a%% pe!tinent %as and!eg*%ations in the te!!ito!ies o) the ope!ations o)the )i!m and as deemed ne+essa! and demanded)!om time to time ( the <oa!d o) Di!e+to!s o) the@i!m.

1. To +omp% ith a%% !epo!ting, a++o*nting and a*dit!eG*i!ements imposed ( the +apita% ma!kets o!!eg*%ato! (odies o) +apita% ma!kets in hi+h these+*!ities o) the )i!m a!e t!aded o! a!e a(o*t to (et!aded o! othe!ise %isted.



1. To p!epa!e and p!esent )o! the app!o&a% o) the<oa!d o) Di!e+to!s an ann*a% (*dget, othe! (*dgets, )inan+ia% p%ans, (*siness p%ans, )easi(i%it

st*dies, in&estment memo!anda and a%% othe!)inan+ia% and (*siness do+*ments as ma (e!eG*i!ed )!om time to time ( the <oa!d o)Di!e+to!s o) the @i!m.

1. To a%e!t the <oa!d o) Di!e+to!s and to a!n it!ega!ding an i!!eg*%a!it, %a+k o) +omp%ian+e,%a+k o) adhe!en+e, %a+*nas and p!o(%ems hethe!a+t*a% o! potentia% +on+e!ning the )inan+ia%sstems, the )inan+ia% ope!ations, the )inan+ing p%ans, the a++o*nting, the a*dits, the (*dgets andan othe! matte! o) a )inan+ia% nat*!e o! hi+h+o*%d o! does ha&e a )inan+ia% imp%i+ation.

1. To +o%%a(o!ate and +oo!dinate the a+ti&ities o)

o*tside s*pp%ie!s o) )inan+ia% se!&i+es hi!ed o!+ont!a+ted ( the )i!m, in+%*ding a++o*ntants,a*dito!s, )inan+ia% +ons*%tants, *nde!!ite!s and (!oke!s, the (anking sstem and othe! )inan+ia%&en*es.

1. To maintain a o!king !e%ationship and to de&e%opadditiona% !e%ationships ith (anks, )inan+ia%instit*tions and +apita% ma!kets ith the aim o)se+*!ing the )*nds ne+essa! )o! the ope!ations o)the )i!m, the attainment o) its de&e%opment p%ansand its in&estments.

1. To )*%% +omp*te!ie a%% the a(o&e a+ti&ities in a+om(ined ha!da!eso)ta!e and +omm*ni+ations

sstem hi+h i%% integ!ate into the sstems o)othe! mem(e!s o) the g!o*p o) +ompanies.



1. Othe!ise, to initiate and engage in a%% manne! o)a+ti&ities, hethe! )inan+ia% o! o) othe! nat*!e,+ond*+i&e to the )inan+ia% hea%th, the g!oth p!ospe+ts and the )*%)i%%ment o) in&estment p%anso) the )i!m to the (est o) his a(i%it and ith theapp!op!iate dedi+ation o) the time and e))o!ts!eG*i!ed.

Colle%!ion and Credi! @ssessen!

1. To +onst!*+t and imp%ement +!edit !isk assessment

too%s, G*estionnai!es, G*antitati&e methods, datagathe!ing methods and &en*es in o!de! to p!ope!%e&a%*ate and p!edi+t the +!edit !isk !ating o) a+%ient, dist!i(*to!, o! s*pp%ie!.

1. To +onstant% monito! and ana%se the pamentmo!a%e, !eg*%a!it, nonpament and non pe!)o!man+e e&ents, et+. - in o!de! to dete!mine

the +hanges in the +!edit !isk !ating o) said )a+to!s.

1. To ana%se !e+ei&a(%es and +o%%e+ti(%es on a!eg*%a! and time% (asis.

. To imp!o&e the +o%%e+tion methods in o!de! to!ed*+e the amo*nts o) a!!ea!s and o&e!d*e

paments, o! the a&e!age pe!iod o) s*+h a!!ea!sand o&e!d*e paments.

. To +o%%a(o!ate ith %ega% instit*tions, %aen)o!+ement agen+ies and p!i&ate +o%%e+tion )i!msin ass*!ing the time% )%o and pament o) a%% d*e paments, a!!ea!s and o&e!d*e paments and othe!+o%%e+ti(%es.

H. To +oo!dinate an ed*+ationa% +ampaign to ens*!ethe &o%*nta! +o%%a(o!ation o) the +%ients,



dist!i(*to!s and othe! de(to!s in the time% ando!de!% pament o) thei! d*es.

The st!ategi+ in&esto! is, *s*a%%, p*t in +ha!ge o) the

)o%%oing:

1roje%! 1lanning and 1roje%! >anageen!

The st!ategi+ in&esto! is *niG*e% positioned to p%an thete+hni+a% side o) the p!o#e+t and to imp%ement it. 7e is,the!e)o!e, p*t in +ha!ge o):

The se%e+tion o) in)!ast!*+t*!e, eG*ipment, !a mate!ia%s,ind*st!ia% p!o+esses, et+.

Negotiations and ag!eements ith p!o&ide!s and s*pp%ie!s

=inimiing the +osts o) in)!ast!*+t*!e ( dep%oing p!op!ieta! +omponents and p%anning

The p!o&ision o) +o!po!ate g*a!antees and %ette!s o)+om)o!t to s*pp%ie!s

The p%anning and e!e+ting o) the &a!io*s sites, st!*+t*!es, (*i%dings, p!emises, )a+to!ies, et+.

The p%anning and imp%ementation o) %ine +onne+tions,+omp*te! neto!k +onne+tions, p!oto+o%s, so%&ing iss*eso) +ompati(i%it 5ha!da!e and so)ta!e, et+.6

P!o#e+t p%anning, imp%ementation and s*pe!&ision



H. The st!ategi+ in&esto! *s*a%% o!ganies adist!i(*tion and dea%e!ship neto!k, a )!an+hisingneto!k, o! a sa%es neto!k 5!etai% +hains6

in+%*ding: t!aining, p!i+ing, pe+*nia! and G*a%its*pe!&ision, neto!k +ont!o%, in&ento! anda++o*nting +ont!o%s, ad&e!tising, %o+a% ma!ketingand sa%es p!omotion and othe! neto!kmanagement )*n+tions.

. The st!ategi+ in&esto! is a%so in +ha!ge o) /&isionthinking/: ne methods o) ope!ation, nema!keting p%os, ne ma!ket ni+hes, p!edi+tingthe )*t*!e t!ends and ma!ket needs, ma!ketana%ses and !esea!+h, et+.

The st!ategi+ in&esto! tpi+a%% (!ings to the )i!m &a%*a(%eeFpe!ien+e in ma!keting and sa%es. It has n*me!o*s o)) theshe%) ma!keting p%ans and d!ae! sa%es p!omotion

+ampaigns. It de&e%oped so)ta!e and pe!sonne% +apa(%eo) ana%sing an ma!ket into e))e+ti&e ni+hes and o)+!eating the !ight media 5image and P$6, ad&e!tising andsa%es p!omotion d!i&es (est s*ited )o! it. It has (*i%t %a!gedata(ases ith m*%tiea! p!o)i%es o) the p*!+hasing patte!ns and demog!aphi+ data !e%ated to tho*sands o)+%ients in man +o*nt!ies. It ons %i(!a!ies o) mate!ia%,

images, so*nds, pape! +%ippings, a!ti+%es, P$ and imagemate!ia%s, and p!op!ieta! t!adema!ks and (!and names.'(o&e a%%, it a++*m*%ated ea!s o) ma!keting and sa%es p!omotion ideas hi+h +!sta%%ied into a ne +on+eptiono) the (*siness.



Te%$nolog/

1. The p%anning and imp%ementation o) ne

te+hno%ogi+a% sstems *p to thei! )*%% ope!ationa% phase. The st!ategi+ pa!tne!3s enginee!s a!ea&ai%a(%e to p%an, imp%ement and s*pe!&ise a%% thestages o) the te+hno%ogi+a% side o) the (*siness.

2. The p%anning and imp%ementation o) a )*%%ope!ati&e +omp*te! sstem 5ha!da!e, so)ta!e,+omm*ni+ation, int!anet6 to dea% ith a%% the

aspe+ts o) the st!*+t*!e and the ope!ation o) the)i!m. The st!ategi+ in&esto! p*ts at the disposa% o)the )i!m p!op!ieta! so)ta!e de&e%oped ( it andspe+i)i+a%% tai%o!ed to the needs o) +ompaniesope!ating in the )i!m3s ma!ket.

. The en+o*!agement o) the de&e%opment o) in

ho*se, p!op!ieta!, te+hno%ogi+a% so%*tions to theneeds o) the )i!m, its +%ients and s*pp%ie!s.

. The p%anning and the eFe+*tion o) an integ!ation p!og!am ith ne te+hno%ogies in the )ie%d, in+o%%a(o!ation ith othe! s*pp%ie!s o! ma!kette+hno%ogi+a% %eade!s.

Ed(%a!ion and Training

The st!ategi+ in&esto! is !esponsi(%e to t!ain a%% the pe!sonne% in the )i!m: ope!ato!s, +*stome! se!&i+es,dist!i(*to!s, &endo!s, sa%es pe!sonne%. The t!aining is+ond*+ted at its so%e eFpense and in+%*des to*!s o) its)a+i%ities a(!oad.

The ent!ep!ene*!s - ho so*ght to int!od*+e the totpes o) in&esto!s, in the )i!st p%a+e - a!e *s*a%% %e)t ith



the )o%%oing )*n+tions:

@dinis!ra!ion and Con!rol

1. To st!*+t*!e the )i!m in an optima% manne!, most+ond*+i&e to the +ond*+t o) its (*siness and to p!esent the ne st!*+t*!e )o! the <oa!d3s app!o&a%ithin 0 das )!om the date o) the =3sappointment.

2. To !*n the da to da (*siness o) the )i!m.

. To o&e!see the pe!sonne% o) the )i!m and to !eso%&ea%% the pe!sonne% iss*es.

. To se+*!e the *no(st!*+ted )%o o) !e%e&antin)o!mation and the p!ote+tion o) +on)identia%o!ganiation.

. To !ep!esent the )i!m in its +onta+ts,!ep!esentations and negotiations ith othe! )i!ms,a*tho!ities, o! pe!sons.

This is h ent!ep!ene*!s )ind it &e! ha!d to +oha(itateith in&esto!s o) an kind. Ent!ep!ene*!s a!e eF+e%%ent atidenti)ing the needs o) the ma!ket and at int!od*+ingte+hno%ogi+a% o! se!&i+e so%*tions to satis) s*+h needs.

<*t the &e! pe!sona%it t!aits hi+h G*a%i) them to (e+ome ent!ep!ene*!s - a%so hinde! the )*t*!ede&e%opment o) thei! )i!ms. On% the int!od*+tion o)o*tside in&esto!s +an !eso%&e the di%emma. O*tsidein&esto!s a!e not emotiona%% in&o%&ed. The ma (e %ess&isiona! - (*t a%so mo!e eFpe!ien+ed.



The a!e mo!e inte!ested in (*siness !es*%ts than ind!eams. 'nd - (eing e%% a+G*ainted ith ent!ep!ene*!s -the insist on ha&ing *nmitigated +ont!o% o) the (*siness,

)o! )ea! o) %osing a%% thei! mone. These things antagoniethe ent!ep!ene*!s. The )ee% that the a!e %osing thei!+!eation to +o%dhea!ted, mean spi!ited, +o!po!ate p!edato!s. The !e(e% and p!e)e! to !emain sma%% o! e&ento +%ose shop than to gi&e *p thei! +he!ished )!eedoms.This is he!e nine o*t o) ten ent!ep!ene*!s )ai% inknoing hen to %et go.



Mortgage Backed Construction

B!: Dr. Sam "aknin

T.E B7ERS

1. The <*e!s o) !esidentia% p!ope!t )o!m an'sso+iation.

2. The <*e!s 'sso+iation signs a +ont!a+t ith a+onst!*+tion +ompan +hosen ( open and p*(%i+

tende!.

. The +ont!a+t ith the +onst!*+tion +ompan is )o!the +onst!*+tion o) !esidentia% p!ope!t to (eoned ( the <*e!s.

. The <*e!s se+*!e )inan+ing )!om the <ank 5see (e%o6.

. The <*e!s then pa the +onst!*+tion +ompan2J o) the )ina% &a%*e o) the p!ope!t to (e+onst!*+ted in ad&an+e 5L<*e!s EG*it6. Thismone is the <*e!s on )*nds, o*t o) po+ket - NOT !e+ei&ed )!om the <anks.

H. The <*e!s 'sso+iation togethe! ith the <anksappoints s*pe!&iso!s to o&e!see the o!k done (the +onst!*+tion +ompan: its G*a%it andadhe!en+e to s+hed*%e.






T.E B@NDS

1. The go&e!nment p!o&ides a %ast !eso!t g*a!antee to

the +omme!+ia% (anks. This g*a!antee +an (e *sedON"> '@TE$ the (anks ha&e eFha*sted a%% othe!%ega% means o) mate!ia%iing a +o%%ate!a% o! seiingthe assets o) a de%inG*ent de(to! in de)a*%t.

2. 'gainst this g*a!antee, the +omme!+ia% (anks iss*e10 ea!s mo!tgages 5L%end mone ith a!epament pe!iod o) 120 months6 to the p!i&ate

<*e!s o) !esidentia% p!ope!t.

. The mone %ent to the <*e!s 5Lthe mo!tgages6$E='INS in the (ank. It is NOT (e gi&en to the<*e!s.

. The mo!tgage %oan +o&e!s a maFim*m o) J o)the )ina% &a%*e o) the p!ope!t to (e +onst!*+teda++o!ding to app!aisa%s ( eFpe!ts.

. ' %ien in )a&o*! o) the (ank is p%a+ed on the %andand p!ope!t on it - to (e (*i%t *sing the <anksmone and the <*e!s eG*it. Ea+h <*e! p%edgeson% 7IS pa!t o) the p!ope!t 5)o! instan+e, ON">the apa!tment (eing +onst!*+ted )o! 7I=6. This

%ien is an insepa!a(%e pa!t o) the mo!tgage 5%oan6+ont!a+t ea+h and e&e! (*e! signs. It is!egiste!ed in the $egist!a! o) =o!tgages and theCo*!ts.



T.E CONSTR7CTION CO>1@N

1. The +onst!*+tion +ompanies *se the ad&an+e o)

2J to sta!t the +onst!*+tion o) the !esidentia% p!ope!t - to (* the %and, %a the )o*ndations andsta!t the ske%eton. '%% the p!ope!t (e%ongs to the<4>E$S and is !egiste!ed so%e% to thei! names.The <anks ha&e a %ien o) the p!ope!t, as pe!a(o&e.

2. ?hen the ad&an+emone is )inished, the

+onst!*+tion +ompan noti)ies the <4>E$S.

. The <*e!s then app!oa+h the <ank )o! additiona%mone to (e taken )!om the mo!tgage %oansdeposited at the <ank 5Lthe mone that the <ank%ent the <*e!s6.

. The <ank &e!i)ies that the +onst!*+tion is p!og!essing a++o!ding to s+hed*%e and a++o!dingto G*a%it standa!ds set in the +onst!*+tion+ont!a+t.

. I) e&e!thing is a++o!ding to +ont!a+t, the <ank!e%eases the neFt t!an+he 5%ot6 o) )inan+ing to the<*e!s, ho then )o!a!d it to the +onst!*+tion

)i!m.

H. The )*nds that the <*e!s (o!!oed )!om the<anks a!e !e%eased in a )e t!an+hes a++o!ding tothe p!og!ess o) the +onst!*+tion o!k. ?hen the+onst!*+tion is )inished - the )*nds sho*%d (e+omp%ete% eFha*sted 5L*sed6.



#.EN T.E CONSTR7CTION IS =INIS.E?

1. The +onst!*+tion +ompan i%% ha&e !e+ei&ed

100J o) the p!i+e ag!eed in the +ont!a+t.2. The <*e!s +an mo&e into the apa!tments.

. The <*e!s go on !epaing the mo!tgage %oans tothe <anks.

. 's %ong as the mo!tgage %oan is not )*%% paid - the

%ien on the p!ope!t in )a&o*! o) the <ank !emains.It is %i)ted 5L+an+e%%ed6 on+e the mo!tgage %oan andthe inte!est and +ha!ges the!eo) has (een )*%%!epaid ( the <*e!s.

#.ILE T.E >ORT@E LO@N IS BEIN

RE1@I?F

1. The <*e!s +an !ent the apa!tment.

2. The <*e!s +an %i&e in the apa!tment.

. The <*e!s +an se%% the apa!tment on% ith theag!eement o) the <ank - o! i) the p!epa the!emaining (a%an+e o) the mo!tgage %oan to the<ank.



. The <anks +an se+*!itie the mo!tgage poo% andse%% *nits o! mo!tgage (a+ked (onds to the p*(%i+.This means that the <anks +an se%% to the p*(%i+

passth!o*gh +e!ti)i+ates se+*!ities (a+ked ( an*nde!%ing poo% o) mo!tgages o) &a!io*s mat*!itiesand inte!est !ates. This a the <anks +an!ep%enish thei! +apita% sto+k and !eente! themo!tgage ma!ket.



Bull! at #ork

1nterview with 'im 2ield

B!: Dr. Sam "aknin

&lso published b! nited %ress 1nternational 4%15

In 1BB Tim @ie%d as (*%%ied o*t o) his #o( as aC*stome! Se!&i+es =anage! hi+h !es*%ted in a st!ess (!eakdon. T*!ning his eFpe!ien+e to good *se he set *p

the 4; Nationa% ?o!kp%a+e <*%%ing 'd&i+e "ine in 1BBHand his e( site <*%% On%ine in 1BB sin+e hi+h time hehas o!ked on o&e! 000 +ases o!%dide. 7e no%e+t*!es ide% as e%% as !iting and p*(%ishing (ooks on (*%%ing and ps+hiat!i+ in#*!. 7e ho%ds to hono!a!do+to!ates )o! his o!k on identi)ing and dea%ing ith (*%%ing. 7e is the ?e(maste! o) <*%% On%ine.

G: ?hat is o!kp%a+e (*%%ingA

@: ?o!kp%a+e (*%%ing is pe!sistent, *ne%+ome, int!*si&e (eha&io*! o) one o! mo!e indi&id*a%s hose a+tions p!e&ent othe!s )!om )*%)i%%ing thei! d*ties.

G: 7o is it di))e!ent to adopting dis+ip%ina!ian meas*!es,

maintaining st!i+t s*pe!&ision, o! o&e!sightA



http://www.upi.com/view.cfm?StoryID=25022002-100833-5315r

http://www.successunlimited.co.uk/


http://www.upi.com/view.cfm?StoryID=25022002-100833-5315r

http://www.successunlimited.co.uk/



G: ?hat is the p!o)i%e o) the tpi+a% (*%%A

@: O&e! B0J o) the +ases !epo!ted to the 4; Nationa%

?o!kp%a+e <*%%ing 'd&i+e "ine in&o%&e a se!ia% (*%%ho +an (e !e+ognised ( thei! (eha&io*! p!o)i%e hi+hin+%*des +omp*%si&e %ing, a 9ek%% and 7de nat*!e, an*n*s*a%% high &e!(a% )a+i%it, +ha!m and a +onside!a(%e+apa+it to de+ei&e, an a!!ested %e&e% o) emotiona%de&e%opment, and a +omp*%si&e need to +ont!o%. The se!ia% (*%% !a!e% +ommits a phsi+a% assa*%t o! an a!!esta(%eo))en+e, p!e)e!!ing instead to !emain ithin the !ea%ms o) ps+ho%ogi+a% &io%en+e and nona!!esta(%e o))en+es.

G: ?hat a!e (*%%ing3s tpi+a% o*t+omesA

@: In the ma#o!it o) +ases, the ta!get o) (*%%ing ise%iminated th!o*gh )o!+ed !esignation, *n)ai! dismissa%, o!ea!% o! i%% hea%th !eti!ement hi%st the (*%% is p!omoted.

')te! a sho!t inte!&a% o) (eteen 21 das, the (*%%se%e+ts anothe! ta!get and the ++%e !esta!ts. Sometimesanothe! ta!get is se%e+ted (e)o!e the +*!!ent ta!get ise%iminated.

G: Can o* p!o&ide *s ith some statisti+sA 7o o)tendoes (*%%ing o++*!A 7o man peop%e a!e a))e+tedA

@: S*!&es o) (*%%ing in the 4; indi+ate that (eteen120J o) the o!k)o!+e eFpe!ien+e (*%%ing. Statisti+s)!om the 4; Nationa% ?o!kp%a+e <*%%ing 'd&i+e "ine!e&ea% that a!o*nd 20J o) +ases a!e )!om the ed*+ationse+to!, 12J a!e )!om hea%th+a!e, 10J a!e )!om so+ia%se!&i+es, and a!o*nd HJ )!om the &o%*nta! +ha!it not)o!p!o)it se+to!.

')te! that, +a%%s +ome )!om a%% se+to!s (oth p*(%i+ and p!i&ate, ith )inan+e, media, po%i+e, posta% o!ke!s and



othe! go&e!nment emp%oees )eat*!ing p!ominent%.EnG*i!ies )!om o*tside the 4; 5nota(% 4S', Canada,'*st!a%ia and I!e%and6 sho simi%a! patte!ns ith the+a!ing p!o)essions topping the %ist o) (*%%ied o!ke!s.

G: Co*%d o* estimate the e+onomi+ e))e+ts o) o!kp%a+e (*%%ing +osts to emp%oe!s 5)i!ms6, emp%oees, %aen)o!+ement agen+ies, the +o*!ts, the go&e!nment, et+.A

@: <*%%ing is one o) the ma#o! +a*ses o) st!ess, and the+ost o) st!ess to 4; p%+ is tho*ght to (e (eteen R12

(i%%ion 54S1 (i%%ion6. ?hen a%% the di!e+t, indi!e+t and+onseG*entia% +osts o) (*%%ing a!e taken into a++o*nt, the+ost to 4; p%+ 5taFpae!s and sha!eho%de!s6 +o*%d (e ineF+ess o) R0 (i%%ion 54S (i%%ion6, eG*i&a%ent toa!o*nd R1,000 hidden taF pe! o!king ad*%t pe! ea!.Emp%oe!s do not a++o*nt )o! the +ost o) (*%%ing and its+onseG*en+es, the!e)o!e the )ig*!es ne&e! appea! on

(a%an+e sheets.Emp%oees ha&e to o!k ti+e as ha!d to o&e!+ome these!ia% (*%%3s ine))i+ien+ and ds)*n+tion hi+h +ansp!ead th!o*gh an o!ganisation %ike a +an+e!.

<e+a*se o) its s*(t%e nat*!e, (*%%ing +an (e di))i+*%t to!e+ognise, (*t the +onseG*en+es a!e eas to spot:

eF+essi&e o!k%oads, %a+k o) s*ppo!t, a +%imate o) )ea!,and high %e&e%s o) inse+*!it.

The e))e+ts on hea%th in+%*de, amongst othe! things,+h!oni+ )atig*e, damage to the imm*ne sstem, !ea+ti&edep!ession, and s*i+ide.

The indi!e+t +osts o) (*%%ing in+%*de highe!than a&e!age

sta)) t*!no&e! and si+kness a(sen+e. Ea+h o) these in+*!+onseG*entia% +osts o) sta)) +o&e!, administ!ation, %oss o) p!od*+tion and !ed*+ed p!od*+ti&it hi+h a!e !a!e%



!e+ognised and e&en mo!e !a!e% att!i(*ted to thei! +a*se.'(senteeism a%one +osts 4; p%+ o&e! R10 (i%%ion a ea!and st!ess is no o))i+ia%% the n*m(e! one +a*se o)si+kness a(sen+e ha&ing taken o&e! )!om the +ommon+o%d. 7oe&e!, s*!&es s*ggest that at %east 20J o)emp%oe!s sti%% do not !ega!d st!ess as a hea%th and sa)etiss*e, instead p!e)e!!ing to see it as ski&ing andma%inge!ing.

The <!isto% St!ess and 7ea%th at ?o!k St*d p*(%ished (the 7SE in 9*ne

2000 !e&ea%ed that 1 in 4; o!ke!s 5a!o*nd .m6!epo!ted )ee%ing eFt!eme% st!essed at o!k. The mainst!ess )a+to!s e!e ha&ing too m*+h o!k and not (eings*ppo!ted ( manage!s. In No&em(e! 2001 a st*d (P!o*d)oot Cons*%ting !e&ea%ed the +ost o) (admanagement, %o emp%oee mo!a%e and poo!%t!ained

sta)) to <!itish (*siness at 11 %ost o!king das a ea!.'t HJ, (ad management 5o)ten a e*phemism )o! (*%%ing6 a++o*nted )o! the (iggest s%i+e o) *np!od*+ti&edas ith %o mo!a%e a++o*nting )o! 1J. The st*d a%sos*ggested that in the 4; 2J o) a%% o!king time is spent*np!od*+ti&e% +ompa!ed to the E*!opean a&e!age o)J.



The !es*%ts o) a th!eeea! s*!&e o) <!itish o!ke!s (the a%%*p O!ganiation p*(%ished in O+to(e! 2001!e&ea%ed that man emp%oe!s a!e not getting the (est

)!om thei! emp%oees. The most +ommon !esponse toG*estions s*+h as /ho engaged a!e o*! emp%oeesA/and /ho e))e+ti&e is o*! %eade!ship and managementst%eA/ and /ho e%% a!e o* +apita%ising on the ta%ents,ski%%s and kno%edge o) o*! peop%eA/ as ano&e!he%ming /not &e! m*+h/. The s*!&e a%so )o*ndthat the %onge! an emp%oee staed, the %ess engaged the

(e+ame. The +ost to 4; p%+ o) %ost o!k das d*e to %a+ko) engagement as estimated to (e (eteen RBK (i%%ion a ea!.

G: ?hat +an (e done to !ed*+e o!kp%a+e (*%%ingA '!e)i!ms, the go&e!nment, %a en)o!+ement agen+ies, the+o*!ts aa!e o) the p!o(%em and its magnit*deA '!eed*+ationa% +ampaign e))e+ti&eA Did anti(*%%ing %as

p!o&e e))e+ti&eA

@: =ost (*%%ing is hie!a!+hi+a% and +an (e t!a+ed to thetop o! nea! the top. 's (*%%ing is o)ten the &isi(%e tip o)an i+e(e!g o) !ongdoing, denia% is the most +ommonst!ateg emp%oed ( toFi+ managements. On% Sedenhas a %a hi+h spe+i)i+a%% add!esses (*%%ing. ?he!e no

%a eFists, (*%%ies )ee% )!ee to (*%%. ?hi%st the %a is not aso%*tion, the p!esen+e o) a %a is an indi+ation that so+iethas made a #*dgement that the (eha&io*! is no %onge!a++epta(%e.

'a!eness o) (*%%ing, and espe+ia%% its se!io*sness, issti%% %o th!o*gho*t so+iet. <*%%ing is not #*st/something +hi%d!en do in the p%ag!o*nd/, it3s a %i)etime

(eha&io*! on the same %e&e% as domesti+ &io%en+e, seF*a%ha!assment, and !ape.



<*%%ing is a )o!m o) ps+ho%ogi+a% and emotiona% !ape (e+a*se o) its int!*si&e and &io%ationa% nat*!e.



1s m! Mone! Safe n the Soundness of ur Banks

B!: Dr. Sam "aknin

<anks a!e instit*tions he!e mi!a+%es happen !eg*%a!%.?e !a!e% ent!*st o*! mone to anone (*t o*!se%&es -and o*! (anks. Despite a &e! +heG*e!ed histo! o)mismanagement, +o!!*ption, )a%se p!omises and!ep!esentations, de%*sions and (eha&io*!a% in+onsisten+ -

(anks sti%% s*++eed to moti&ate *s to gi&e them o*! mone.Pa!t% it is the )ee%ing that the!e is sa)et in n*m(e!s. The)ashiona(%e te!m toda is /mo!a% haa!d/. The imp%i+itg*a!antees o) the state and o) othe! )inan+ia% instit*tionsmo&e *s to take !isks hi+h e o*%d, othe!ise, ha&ea&oided. Pa!t% it is the sophisti+ation o) the (anks inma!keting and p!omoting themse%&es and thei! p!od*+ts.

%oss (!o+h*!es, p!o)essiona% +omp*te! and &ideo p!esentations and &ast, sh!ine%ike, !ea% estate +omp%eFesa%% se!&e to enhan+e the image o) the (anks as the temp%eso) the ne !e%igion o) mone.

<*t hat is (ehind a%% thisA 7o +an e #*dge theso*ndness o) o*! (anksA In othe! o!ds, ho +an e te%%i) o*! mone is sa)e% t*+ked aa in a sa)e ha&enA

The !e)%eF is to go to the (ank3s (a%an+e sheets. <anks and (a%an+e sheets ha&e (een (oth in&ented in thei! mode!n)o!m in the 1th +ent*!. ' (a%an+e sheet, +o*p%ed ithothe! )inan+ia% statements is s*pposed to p!o&ide *s ith at!*e and )*%% pi+t*!e o) the hea%th o) the (ank, its past andits %ongte!m p!ospe+ts. The s*!p!ising thing is that -

despite +ommon opinion - it does.






<*t it is !athe! *se%ess *n%ess o* kno ho to !ead it.

@inan+ia% statements 5In+ome - o! P!o)it and "oss

Statement, Cash @%o Statement and <a%an+e Sheet6 +omein man )o!ms. Sometimes the +on)o!m to ?este!na++o*nting standa!ds 5the ene!a%% '++epted '++o*ntingP!in+ip%es, ''P, o! the %ess !igo!o*s and mo!e )*i%o!ded Inte!nationa% '++o*nting Standa!ds, I'S6.Othe!ise, the +on)o!m to %o+a% a++o*nting standa!ds,hi+h o)ten %ea&e a %ot to (e desi!ed. Sti%%, o* sho*%d%ook )o! (anks, hi+h make thei! *pdated )inan+ia% !epo!tsa&ai%a(%e to o*. The (est +hoi+e o*%d (e a (ank that isa*dited ( one o) the <ig @o*! ?este!n a++o*nting )i!msand makes its a*dit !epo!ts p*(%i+% a&ai%a(%e. S*+ha*dited )inan+ia% statements sho*%d +onso%idate the)inan+ia% !es*%ts o) the (ank ith the )inan+ia% !es*%ts o)its s*(sidia!ies o! asso+iated +ompanies. ' %ot o)ten hidesin those +o!ne!s o) +o!po!ate ho%dings.

<anks a!e !ated ( independent agen+ies. The most)amo*s and most !e%ia(%e o) the %ot is @it+h $atings.'nothe! one is =oods. These agen+ies assign %ette! andn*m(e! +om(inations to the (anks that !e)%e+t thei!sta(i%it. =ost agen+ies di))e!entiate the sho!t te!m )!omthe %ong te!m p!ospe+ts o) the (anking instit*tion !ated.

Some o) them e&en st*d 5and !ate6 iss*es, s*+h as the%ega%it o) the ope!ations o) the (ank 5%ega% !ating6.Ostensi(%, a%% a +on+e!ned pe!son has to do, the!e)o!e, isto step *p to the (ank manage!, m*ste! +o*!age and ask)o! the (ank3s !ating. 4n)o!t*nate%, %i)e is mo!e+omp%i+ated than !ating agen+ies o*%d ha&e *s (e%ie&e.



The (ase themse%&es most% on the )inan+ia% !es*%ts o)the (ank !ated as a !e%ia(%e ga*ge o) its )inan+ia% st!engtho! )inan+ia% p!o)i%e. Nothing is )*!the! )!om the t!*th.

'dmitted%, the )inan+ia% !es*%ts do +ontain a )eimpo!tant )a+ts. <*t one has to %ook (eond the naked)ig*!es to get the !ea% - o)ten m*+h %ess en+o*!aging - pi+t*!e.

Conside! the tho!n iss*e o) eF+hange !ates. @inan+ia%statements a!e +a%+*%ated 5sometimes stated in 4SD in

addition to the %o+a% +*!!en+6 *sing the eF+hange !ate p!e&ai%ing on the 1st o) De+em(e! o) the )is+a% ea! 5tohi+h the statements !e)e!6. In a +o*nt! ith a &o%ati%edomesti+ +*!!en+ this o*%d tend to +omp%ete% disto!tthe t!*e pi+t*!e. This is espe+ia%% t!*e i) a (ig +h*nk o)the a+ti&it p!e+eded this a!(it!a! date. The same app%iesto )inan+ia% statements, hi+h e!e not in)%ationad#*sted

in high in)%ation +o*nt!ies. The statements i%% %ookin)%ated and e&en !e)%e+t p!o)its he!e hea& %osses e!ein+*!!ed. /'&e!age amo*nts/ a++o*nting 5hi+h makes*se o) a&e!age eF+hange !ates th!o*gho*t the ea!6 is e&enmo!e mis%eading. The on% a to t!*% !e)%e+t !ea%it is i)the (ank e!e to keep to sets o) a++o*nts: one in the%o+a% +*!!en+ and one in 4SD 5o! in some othe! +*!!en+

o) !e)e!en+e6. Othe!ise, )i+titio*s g!oth in the asset (ase 5d*e to in)%ation o! +*!!en+ )%*+t*ations6 +o*%d!es*%t.

'nothe! eFamp%e: in man +o*nt!ies, +hanges in!eg*%ations +an g!eat% e))e+t the )inan+ia% statements o) a (ank. In 1BBH, in $*ssia, )o! eFamp%e, the <ank o) $*ssia+hanged the a%go!ithm )o! +a%+*%ating an impo!tant

(anking !atio 5the +apita% to !isk eighted assets !atio6.



4n%ess a $*ssian (ank !estated its p!e&io*s )inan+ia%statements a++o!ding%, a sha!p +hange in p!o)ita(i%itappea!ed )!om nohe!e.

The net assets themse%&es a!e a%as misstated: the )ig*!e!e)e!s to the sit*ation on 112. ' Kho*! %oan gi&en to a+o%%a(o!ating +%ient +an in)%ate the asset (ase on the+!*+ia% date. This mis!ep!esentation is on% mi%d%ame%io!ated ( the int!od*+tion o) an /a&e!age assets/+a%+*%*s. =o!eo&e!, some o) the assets +an (e inte!estea!ning and pe!)o!ming - othe!s, nonpe!)o!ming. Themat*!it dist!i(*tion o) the assets is a%so o) p!imeimpo!tan+e. I) most o) the (ank3s assets +an (e ithd!an ( its +%ients on a &e! sho!t noti+e 5on demand6 - it +ansi)t% )ind itse%) in t!o*(%e ith a !*n on its assets%eading to inso%&en+.

'nothe! o)t*sed )ig*!e is the net in+ome o) the (ank. It is

impo!tant to disting*ish inte!est in+ome )!om noninte!estin+ome. In an open, sophisti+ated +!edit ma!ket, thein+ome )!om inte!est di))e!entia%s sho*%d (e minima% and!e)%e+t the !isk p%*s a !easona(%e +omponent o) in+ome tothe (ank. <*t in man +o*nt!ies 59apan, $*ssia6 thego&e!nment s*(sidies (anks ( %ending to them mone+heap% 5th!o*gh the Cent!a% <ank o! th!o*gh (onds6. The

(anks then p!o+eed to %end the +heap )*nds at eFo!(itant!ates to thei! +*stome!s, th*s !eaping eno!mo*s inte!estin+ome. In man +o*nt!ies the in+ome )!om go&e!nmentse+*!ities is taF )!ee, hi+h !ep!esents anothe! )o!m o)s*(sid. ' high in+ome )!om inte!est is a sign o)eakness, not o) hea%th, he!e toda, gone tomo!!o. The p!e)e!!ed indi+ato! sho*%d (e in+ome )!om ope!ations

5)ees, +ommissions and othe! +ha!ges6.The!e a!e a )e ke !atios to o(se!&e. ' !e%e&ant G*estion



is hethe! the (ank is a++!edited ith inte!nationa% (anking agen+ies. These iss*e !eg*%ato! +apita%!eG*i!ements and othe! mandato! !atios. Comp%ian+eith these demands is a minim*m in the a(sen+e o)hi+h, the (ank sho*%d (e !ega!ded as positi&e%dange!o*s.

The !et*!n on the (ank3s eG*it 5$OE6 is the net in+omedi&ided ( its a&e!age eG*it. The !et*!n on the (ank3sassets 5$O'6 is its net in+ome di&ided ( its a&e!ageassets. The 5tie! 1 o! tota%6 +apita% di&ided ( the (ank3s

!isk eighted assets - a meas*!e o) the (ank3s +apita%adeG*a+. =ost (anks )o%%o the p!o&isions o) the <ase%'++o!d as set ( the <ase% Committee o) <ankS*pe!&ision 5a%so knon as the 106. This +o*%d (emis%eading (e+a*se the '++o!d is i%% eG*ipped to dea% ith!isks asso+iated ith eme!ging ma!kets, he!e de)a*%t!ates o) J and mo!e a!e the no!m. @ina%%, the!e is the

+ommon sto+k to tota% assets !atio. <*t !atios a!e not +*!ea%%s. Inasm*+h as the G*antities that +omp!ise them +an (etoed ith - the +an (e s*(#e+t to manip*%ation anddisto!tion. It is t!*e that it is (ette! to ha&e high !atios than%o ones. 7igh !atios a!e indi+ati&e o) a (ank3s *nde!%ingst!ength, !ese!&es, and p!o&isions and, the!e)o!e, o) itsa(i%it to eFpand its (*siness. ' st!ong (ank +an a%so

pa!ti+ipate in &a!io*s p!og!ams, o))e!ings and a*+tions o)the Cent!a% <ank o! o) the =inist! o) @inan+e. The %a!ge!the sha!e o) the (ank3s ea!nings that is !etained in the (ankand not dist!i(*ted as p!o)its to its sha!eho%de!s - the (ette! these !atios and the (ank3s !esi%ien+e to +!edit !isks.



Sti%%, these !atios sho*%d (e taken ith mo!e than a g!aino) sa%t. Not e&en the (ank3s p!o)it ma!gin 5the !atio o) netin+ome to tota% in+ome6 o! its asset *ti%iation +oe))i+ient

5the !atio o) in+ome to a&e!age assets6 sho*%d (e !e%ied*pon. The +o*%d (e the !es*%t o) hidden s*(sidies ( thego&e!nment and management mis#*dgement o!*nde!statement o) +!edit !isks.

To e%a(o!ate on the %ast to points:

' (ank +an (o!!o +heap mone )!om the Cent!a% <ank

5o! pa %o inte!est to its deposito!s and sa&e!s6 andin&est it in se+*!e go&e!nment (onds, ea!ning a m*+hhighe! inte!est in+ome )!om the (onds3 +o*pon paments.The end !es*%t: a !ise in the (ank3s in+ome and p!o)ita(i%it d*e to a nonp!od*+ti&e, non%asting a!(it!ageope!ation. Othe!ise, the (ank3s management +an*nde!state the amo*nts o) (ad %oans +a!!ied on the (ank3s

(ooks, th*s de+!easing the ne+essa! setasides andin+!easing p!o)ita(i%it. The )inan+ia% statements o) (anks%a!ge% !e)%e+t the management3s app!aisa% o) the (*siness.This has p!o&en to (e a poo! g*ide.

In the main )inan+ia% !es*%ts page o) a (ank3s (ooks,spe+ia% attention sho*%d (e paid to p!o&isions )o! thede&a%*ation o) se+*!ities and to the *n!ea%ied di))e!en+ein the +*!!en+ position. This is espe+ia%% t!*e i) the (ankis ho%ding a ma#o! pa!t o) the assets 5in the )o!m o))inan+ia% in&estments o! o) %oans6 and the eG*it isin&ested in se+*!ities o! in )o!eign eF+hange denominatedinst!*ments.



Sepa!ate%, a (ank +an (e t!ading )o! its on position 5the Nost!o6, eithe! as a ma!ket make! o! as a t!ade!. The p!o)it5o! %oss6 on se+*!ities t!ading has to (e dis+o*nted (e+a*se

it is +on#e+t*!a% and in+identa% to the (ank3s maina+ti&ities: deposit taking and %oan making.

=ost (anks deposit some o) thei! assets ith othe! (anks.This is no!ma%% +onside!ed to (e a a o) sp!eading the!isk. <*t in high% &o%ati%e e+onomies ith si+k%,*nde!de&e%oped )inan+ia% se+to!s, a%% the instit*tions in these+to! a!e %ike% to mo&e in tandem 5a high% +o!!e%atedma!ket6. C!oss deposits among (anks on% se!&e toin+!ease the !isk o) the depositing (ank 5as the !e+enta))ai! ith Toko <ank in $*ssia and the (anking +!isis inSo*th ;o!ea ha&e demonst!ated6.

@*!the! +%ose! to the (ottom %ine a!e the (ank3s ope!atingeFpenses: sa%a!ies, dep!e+iation, )iFed o! +apita% assets

5!ea% estate and eG*ipment6 and administ!ati&e eFpenses.The !*%e o) th*m( is: the highe! these eFpenses, theeake! the (ank. The g!eat histo!ian Ton(ee on+e saidthat g!eat +i&i%iations +o%%apse immediate% a)te! the (eG*eath to *s the most imp!essi&e (*i%dings. This isdo*(% t!*e ith (anks. I) o* see a (ank )e!&ent%engaged in the +onst!*+tion o) pa%atia% (!an+hes - sta

aa )!om it.

<anks a!e !isk a!(it!age*!s. The %i&e o)) the mismat+h (eteen assets and %ia(i%ities. To the (est o) thei! a(i%it,the t! to se+ond g*ess the ma!kets and !ed*+e s*+h amismat+h ( ass*ming pa!t o) the !isks and ( engagingin po!t)o%io management. @o! this the +ha!ge )ees and+ommissions, inte!est and p!o)its - hi+h +onstit*te thei!

so*!+es o) in+ome.



I) an eFpe!tise is imp*ted to the (anking sstem, it is !iskmanagement. <anks a!e s*pposed to adeG*ate% assess,+ont!o% and minimie +!edit !isks. The a!e !eG*i!ed to

imp%ement +!edit !ating me+hanisms 5+!edit ana%sis and&a%*e at !isk - V'$ mode%s6, e))i+ient and eF+%*si&ein)o!mationgathe!ing sstems, and to p*t in p%a+e the!ight %ending po%i+ies and p!o+ed*!es.

9*st in +ase the mis!ead the ma!ket !isks and these t*!nedinto +!edit !isks 5hi+h happens on% too o)ten6, (anks a!es*pposed to p*t aside amo*nts o) mone hi+h +o*%d!ea%isti+a%% o))set %oans gone so*! o! )*t*!e non pe!)o!ming assets. These a!e the %oan %oss !ese!&es and p!o&isions. "oans a!e s*pposed to (e +onstant%monito!ed, !e+%assi)ied and +ha!ges made against them asapp%i+a(%e. I) o* see a (ank ith e!o !e+%assi)i+ations,+ha!ge o))s and !e+o&e!ies - eithe! the (ank is %ingth!o*gh its teeth, o! it is not taking the (*siness o)

(anking too se!io*s%, o! its management is no %ess thandi&ine in its p!es+ien+e. ?hat is impo!tant to %ook at is the!ate o) p!o&ision )o! %oan %osses as a pe!+entage o) the%oans o*tstanding. Then it sho*%d (e +ompa!ed to the pe!+entage o) nonpe!)o!ming %oans o*t o) the %oanso*tstanding. I) the to )ig*!es a!e o*t o) ki%te!, eithe!someone is p*%%ing o*! %eg - o! the management is

in+ompetent o! %ing to o*. The )i!st thing ne one!s o)a (ank do is, *s*a%%, imp!o&e the p%a+ed asset G*a%it 5a po%ite a o) saing that the get !id o) (ad, non pe!)o!ming %oans, hethe! de+%a!ed as s*+h o! not6. Thedo this ( +%assi)ing the %oans. =ost +ent!a% (anks in theo!%d ha&e in p%a+e !eg*%ations )o! %oan +%assi)i+ation andi) a+ted *pon, these ie%d !athe! mo!e !e%ia(%e !es*%ts than

an management3s /app!aisa%/, no matte! ho e%%intentioned.



aps 5espe+ia%% in the sho!t te!m +atego!6 (eteen the (ank3s assets and its %ia(i%ities a!e a &e! o!!isome sign.<*t the (ank3s ma+!oe+onomi+ en&i!onment is as

impo!tant to the dete!mination o) its )inan+ia% hea%th ando) its +!edito!thiness as an !atio o! mi+!oana%sis. Thestate o) the )inan+ia% ma!kets sometimes has a %a!ge! (ea!ing on the (ank3s so*ndness than othe! )a+to!s. ' )ineeFamp%e is the e))e+t that inte!est !ates o! a de&a%*ationha&e on a (ank3s p!o)ita(i%it and +apita%iation. Theimp%ied 5not to mention the eFp%i+it6 s*ppo!t o) the

a*tho!ities, o) othe! (anks and o) in&esto!s 5domesti+ ase%% as inte!nationa%6 sets the ps+ho%ogi+a% (a+kg!o*nd toan )*t*!e de&e%opments. This is on% too %ogi+a%. In an*nsta(%e )inan+ia% en&i!onment, kno+kon e))e+ts a!e mo!e%ike%. <anks deposit mone ith othe! (anks on ase+*!it (asis. Sti%%, the &a%*e o) se+*!ities and +o%%ate!a%sis as good as thei! %iG*idit and as the ma!ket itse%). The&e! a(i%it to do (*siness 5)o! instan+e, in the sndi+ated%oan ma!ket6 is in)%*en+ed ( the %a!ge! pi+t*!e. @a%%ingeG*it ma!kets he!a%d t!ading %osses and %oss o) in+ome)!om t!ading ope!ations and so on.

Pe!haps the sing%e most impo!tant )a+to! is the gene!a%%e&e% o) inte!est !ates in the e+onom. It dete!mines the p!esent &a%*e o) )o!eign eF+hange and %o+a% +*!!en+

denominated go&e!nment de(t. It in)%*en+es the (a%an+e (eteen !ea%ied and *n!ea%ied %osses on %onge!te!m5+omme!+ia% o! othe!6 pape!. One o) the most impo!tant%iG*idit gene!ation inst!*ments is the !ep*!+haseag!eement 5!epo6. <anks se%% thei! po!t)o%ios o)go&e!nment de(t ith an o(%igation to (* it (a+k at a%ate! date. I) inte!est !ates shoot *p - the %osses on these

!epos +an t!igge! ma!gin +a%%s 5demands to immediate% pa the %osses o! e%se mate!ia%ie them ( (*ing these+*!ities (a+k6.



=a!gin +a%%s a!e a d!ain on %iG*idit. Th*s, in anen&i!onment o) !ising inte!est !ates, !epos +o*%d a(so!(%iG*idit )!om the (anks, de)%ate !athe! than in)%ate. The

same p!in+ip%e app%ies to %e&e!age in&estment &ehi+%es*sed ( the (ank to imp!o&e the !et*!ns o) its se+*!itiest!ading ope!ations. 7igh inte!est !ates he!e +an ha&e ane&en mo!e pain)*% o*t+ome. 's %iG*idit is +!*n+hed, the (anks a!e )o!+ed to mate!ia%ie thei! t!ading %osses. This is (o*nd to p*t added p!ess*!e on the p!i+es o) )inan+ia%assets, t!igge! mo!e ma!gin +a%%s and sG*eee %iG*idit

)*!the!. It is a &i+io*s +i!+%e o) a monst!o*s moment*mon+e +ommen+ed.

<*t high inte!est !ates, as e mentioned, a%so st!ain theasset side o) the (a%an+e sheet ( app%ing p!ess*!e to (o!!oe!s. The same goes )o! a de&a%*ation. "ia(i%ities+onne+ted to )o!eign eF+hange g!o ith a de&a%*ationith no 5immediate6 +o!!esponding in+!ease in %o+a%

p!i+es to +ompensate the (o!!oe!. =a!ket !isk is th*s!apid% t!ans)o!med to +!edit !isk. <o!!oe!s de)a*%t onthei! o(%igations. "oan %oss p!o&isions need to (ein+!eased, eating into the (ank3s %iG*idit 5and p!o)ita(i%it6 e&en )*!the!. <anks a!e then tempted to p%aith thei! !ese!&e +o&e!age %e&e%s in o!de! to in+!ease thei!!epo!ted p!o)its and this, in t*!n, !aises a !ea% +on+e!n

!ega!ding the adeG*a+ o) the %e&e%s o) %oan %oss !ese!&es.On% an in+!ease in the eG*it (ase +an then ass*age the5#*sti)ied6 )ea!s o) the ma!ket (*t s*+h an in+!ease +an+ome on% th!o*gh )o!eign in&estment, in most +ases. 'nd)o!eign in&estment is *s*a%% a %ast !eso!t, pa!iah, so%*tion5see So*theast 'sia and the Ce+h $ep*(%i+ )o! )!esheFamp%es in an end%ess s*pp% o) them. 9apan and China

a!e, p!o(a(%, neFt6.

In the past, the thinking as that some o) the !isk +o*%d (e



ame%io!ated ( hedging in )o!a!d ma!kets 5L( se%%ing itto i%%ing !isk (*e!s6. <*t a hedge is on% as good as the+o*nte!pa!t that p!o&ides it and in a ma!ket (esieged (kno+kon inso%&en+ies, the +om)o!t is d*(io*s. In mosteme!ging ma!kets, )o! instan+e, the!e a!e no nat*!a% se%%e!so) )o!eign eF+hange 5+ompanies p!e)e! to hoa!d the st*))6.So )o!a!ds a!e +onside!ed to (e a &a!iet o) gam(%ingith a de)a*%t in +ase o) s*(stantia% %osses a &e! p%a*si(%ea o*t.

<anks depend on %ending )o! thei! s*!&i&a%. The %ending

(ase, in t*!n, depends on the G*a%it o) %endingoppo!t*nities. In high!isk ma!kets, this depends on the possi(i%it o) +onne+ted %ending and on the G*a%it o) the+o%%ate!a%s o))e!ed ( the (o!!oe!s. ?hethe! the (o!!oe!s ha&e G*a%itati&e +o%%ate!a%s to o))e! is a di!e+to*t+ome o) the %iG*idit o) the ma!ket and on ho the*se the p!o+eeds o) the %ending. These to e%ements a!e

intimate% %inked ith the (anking sstem. 7en+e the pen*%timate &i+io*s +i!+%e: he!e no )*n+tioning and p!o)essiona% (anking sstem eFists - no good (o!!oe!si%% eme!ge.



&lice in Credit-Card (and

n Chargebacks

B!: Dr. Sam "aknin

>o*! +!edit +a!d is sto%en. >o* p%a+e a phone +a%% to then*m(e! p!o&ided in o*! to*!ist g*ide o! in the %o+a% dai% p!ess. >o* p!o&ide o*! detai%s and o* +an+e% o*! +a!d.>o* (%o+k it. In a )e min*tes, it sho*%d (e t!ans)e!!ed tothe stop%ist a&ai%a(%e to the a*tho!iation +ent!eso!%dide. @!om that moment on, no thie) i%% (e a(%e to)!a*d*%ent% *se o*! +a!d. >o* +an sigh in !e%ie). Thedange! is o&e!.

<*t is itA

It is de)inite% not. To *nde!stand h, e sho*%d )i!st

!e&ie the int!i+ate p!o+ed*!e in&o%&ed.

In p!in+ip%e, the (est and sa)est thing to do is +a%% thea*tho!iation +ent!e o) the (ank that iss*ed o*! +a!d 5theiss*e! (ank6. Ca%%ing the n*m(e! p*(%ished in the media isse+ond (est (e+a*se it +onne+ts the +a!dho%de! to a/&o%*ntee!/ (ank, hi+h +ate!s )o! the needs o) a%% theiss*e!s o) a gi&en +a!d. Some se!&i+e o!ganiations 5s*+h

as I'P' - the Inte!nationa% 'i! Passenge!s 'sso+iation6 p!o&ide a simi%a! se!&i+e.

The /+ate!ing (ank/ a++epts the +a%%, notes don thedetai%s o) the +a!dho%de! and p!epa!es a )aF +ontaining theinst!*+tion to +an+e% the +a!d. The +an+e%%ation )aF is thensent on to the iss*ing (ank.






The detai%s o) a%% the iss*ing (anks a!e )o*nd in spe+ia%man*a%s p*(%ished ( the +%ea!ing and pamentsasso+iations o) a%% the (anks that iss*e a spe+i)i+ +a!d. '%%

the )inan+ia% instit*tions that iss*e =aste!+a!ds, E*!o+a!dsand a )e othe! mo!e mino! +a!ds in E*!ope a!e mem(e!so) E*!opa Inte!nationa% 5EPI6. 7e!e %ies the )i!st snag:the +ate!ing (ank o)ten mistakes the identit o) the iss*e!.=an (anks sha!e the same name o! a!e (!an+hes o) aneto!k. <anks ith identi+a% names +an eFist in P!ag*e,<*dapest and @!ank)*!t, o! Vienna, )o! instan+e. Sho*%d a

)aF +an+e%%ing the +a!d (e sent to the !ong (ank - the+a!d i%% simp% not (e +an+e%%ed *nti% it is too %ate. < thetime the mistake is dis+o&e!ed, the +a!d is *s*a%%tho!o*gh% a(*sed and the )inan+ia% means o) the+a!dho%de! a!e eFha*sted.

'dditiona%%, going the indi!e+t !o*te 5+a%%ing aninte!media! (ank instead o) the iss*ing (ank6 t!ans%ates

into a de%a hi+h +o*%d p!o&e moneta!i% +!*+ia%. < thetime the )aF is sent, it might (e no %onge! ne+essa!.

I) the +a!d has (een a(*sed and )!a*d*%ent p*!+hases o!mone ithd!aa%s ha&e (een de(ited to the *n)o!t*nate+a!dho%de!s3 (ank o! +!edit +a!d a++o*nt - the +a!dho%de!+an !e+%aim these +ha!ges. 7e has to +%ea!% identi) them

and state in !iting that the e!e not e))e+ted ( him. ' p!o+ess +a%%ed /+ha!ge(a+k/ th*s is set in motion.

' +ha!ge(a+k is a t!ansa+tion disp*ted ithin the pamentsstem. ' disp*te +an (e initiated ( the +a!dho%de! henhe !e+ei&es his statement and !e#e+ts one o! mo!e items onit o! hen an iss*ing )inan+ia% instit*tion disp*tes at!ansa+tion )o! a te+hni+a% !eason 5*s*a%% at the (ehest o)

the +a!dho%de! o! i) his a++o*nt is o&e!d!an6.



' te+hni+a% !eason +o*%d (e the !ong o! no signat*!e,!ong o! no date, impo!tant detai%s missing in the sa%es&o*+he!s and so on. Despite the a!nings +a!!ied on man

a sa%es &o*+he! 5/No $e)*nd - No Can+e%%ation/6 (oth!e)*nds and +an+e%%ations a!e dai% o++*!!en+es.

To (e +onside!ed a +ha!ge(a+k, the +a!d iss*e! m*stinitiate a e%%de)ined disp*te p!o+ed*!e. This it +an doon% a)te! it has dete!mined the !easons in&a%idating thet!ansa+tion. ' +h!age(a+k +an on% (e initiated ( theiss*ing )inan+ia% instit*tion. The +a!dho%de! himse%) hasno standing in this matte! and the +ha!ge(a+k !*%es and!eg*%ations a!e not a++essi(%e to him. 7e is +on)ined to%odging a +omp%aint ith the iss*e!. This is an a(no!ma%sit*ation he!e( !*%es a))e+ting the (a%an+es andmandating ope!ations !es*%ting in de(its and +!edits in the (ank a++o*nt a!e not a&ai%a(%e to the a++o*nt name5one!6. The iss*e!, at its dis+!etion, ma de+ide that

iss*ing a +ha!ge(a+k is the (est a to !e+ti) the+omp%aint.

The )o%%oing seG*en+e o) e&ents is, th*s, )ai!% +ommon:

1. The +a!dho%de! p!esents his +a!d to a me!+hant5aka: an a++epto! o) pament sstem +a!ds6.

2. The me!+hant ma !eG*est an a*tho!iation )o! thet!ansa+tion, eithe! ( e%e+t!oni+ means 5a Point o)Sa%e E%e+t!oni+ @*nd T!ans)e! appa!at*s6 o! ( phone 5&oi+e a*tho!iation6. ' me!+hant is o(%igedto do so i) the &a%*e o) the t!ansa+tion eF+eeds p!ede)ined th!esho%ds. <*t the!e a!e othe! +ases inhi+h this might (e eithe! a !eG*i!ed o! a

!e+ommended po%i+.

. I) the t!ansa+tion is a*tho!ied, the me!+hant notes



don the a*tho!iation !e)e!en+e n*m(e! andgi&es the goods and se!&i+es to the +a!dho%de!. In a)a+eto)a+e t!ansa+tion 5as opposed to a phone o!inte!nete%e+t!oni+ t!ansa+tion6, the me!+hant m*st!eG*est the +a!dho%de! to sign the sa%e s%ip. 7em*st then +ompa!e the signat*!e p!o&ided ( the+a!dho%de! to the signat*!e spe+imen at the (a+k o)the +a!d. ' mismat+h o) the signat*!es 5o! thei!a(sen+e eithe! on the +a!d o! on the s%ip6 in&a%idatethe t!ansa+tion. The me!+hant i%% then p!o&ide the+a!dho%de! ith a !e+eipt, no!ma%% ith a +op o)

the signed &o*+he!.

. Pe!iodi+a%%, the me!+hant +o%%e+ts a%% thet!ansa+tion &o*+he!s and sends them to his (ank5the /a+G*i!ing/ (ank6.

. The a+G*i!ing (ank pas the me!+hant on )oot o)

the t!ansa+tion &o*+he!s min*s the +ommission paa(%e to the +!edit +a!d +ompan. Some (anks p!e)inan+e o! !e)inan+e +!edit +a!d sa%es&o*+he!s in the )o!m o) +!edit %ines 5+ash )%o o!!e+ei&a(%es )inan+ing6.

H. The a+G*i!ing (ank sends the t!ansa+tion to the paments sstem 5VIS' Inte!nationa% o! E*!opa

Inte!nationa%6 th!o*gh its +onne+tion to the!e%e&ant neto!k 5VisaNet, in the +ase o) Visa, )o!instan+e6.

. The +!edit +a!d +ompan 5Visa, =aste!+a!d,Dine!s C%*(6 +!edits the a+G*i!e! (ank.

K. The +!edit +a!d +ompan sends the t!ansa+tion tothe iss*ing (ank and a*tomati+a%% de(its theiss*e!.



Th*s, going the indi!e+t !o*te 5+a%%ing an inte!media! (ank instead o) the iss*ing (ank6 t!ans%ates into a de%ahi+h +o*%d p!o&e moneta!i% +!*+ia%. < the time the )aF

is sent, it might (e no %onge! ne+essa!. To (e on the sa)eside, standa!d +!edit +a!d +ont!a+ts in some +o*nt!iesapp% +o&e!age on% one ho*! a)te! the the)t hen mosto) the damage has a%!ead (een done. In the 4S' +!edit+a!d %ia(i%it in +ase o) )!a*d*%ent t!ansa+tions is %imitedto the )i!st 0.

The +a!dho%de! +an !e+%aim, in !iting, )!a*d*%ent +ha!gesand mone ithd!aa%s. This !it*a%isti+ disp*te p!o+ed*!eis +a%%ed /+ha!ge(a+k/. ' +ha!ge(a+k is a t!ansa+tiondisp*ted ithin the pament sstem ( the +a!dho%de!th!o*gh the +a!d iss*e!. It +an a%so (e initiated ( the +a!diss*e! on te+hni+a% g!o*nds, *s*a%% at the (ehest o) the+a!dho%de! o! i) his a++o*nt is o&e!d!an: !ong o! nosignat*!e, !ong o! no date, impo!tant detai%s missing in

the sa%es &o*+he!s and so on. Despite the a!nings +a!!iedon man a sa%es &o*+he! 5/No $e)*nd - NoCan+e%%ation/6 (oth !e)*nds and +an+e%%ations o++*! dai%.

The +a!dho%de! himse%) has no standing in the p!o+ess andis +on)ined to %odging a +omp%aint ith the iss*e!. The!*%es and !eg*%ations go&e!ning +ha!ge(a+ks a!e inte!na%

and ina++essi(%e to him tho*gh the o)ten !es*%t in de(itsand +!edits to his (ank a++o*nt. The iss*e!, at itsdis+!etion, ma de+ide that iss*ing a +ha!ge(a+k is the (est a to !e+ti) the +omp%aint.

The tpi+a% +!edit +a!d t!ansa+tion in&o%&es these steps:

1. The +a!dho%de! p!esents his +a!d to a me!+hant, the

a++epto!.

2. The me!+hant ma !eG*est an a*tho!iation )o! the



t!ansa+tion, eithe! ( e%e+t!oni+ means 5a Point o)Sa%e E%e+t!oni+ @*nd T!ans)e! appa!at*s6 o! ( phone 5&oi+e a*tho!iation6. ' me!+hant is o(%igedto do so i) the &a%*e o) the t!ansa+tion eF+eeds p!ede)ined th!esho%ds. <*t the!e a!e othe! +ases inhi+h this might (e a po%i+ eithe! !eG*i!ed o!!e+ommended ( iss*e!s, +a!d +ompanies, o!+%ea!ingho*ses.

. I) a*tho!ied, the me!+hant notes don thet!ansa+tion a*tho!iation +ode and gi&es, o! ships,

the goods, o! se!&i+es to the +a!dho%de!. I) the+a!dho%de! is p!esent, he m*st sign the sa%e s%ip5&o*+he!6 and the me!+hant &a%idates the signat*!e ( +ompa!ing it to the spe+imen at the (a+k o) the+a!d. The t!ansa+tion goes th!o*gh on% i) thesignat*!es mat+h. The me!+hant then p!o&ides the+a!dho%de! ith a !e+eipt, no!ma%% ith a +op o)

the signed &o*+he!.

. The me!+hant +o%%e+ts a%% the t!ansa+tion &o*+he!s pe!iodi+a%% and gi&es them to his (ank 5the/a+G*i!ing/ (ank6.

. The a+G*i!ing (ank +!edits the me!+hant3s (anka++o*nt ith the di))e!en+e (eteen the tota%

amo*nt o) the t!ansa+tions and the +ommissionsand )ees paa(%e to the +!edit +a!d +ompan. Some (anks p!e)inan+e o! !e)inan+e +!edit +a!d sa%es&o*+he!s 5!e+ei&a(%es )inan+ing6 i.e., the %endagainst )*t*!e +!edit +a!d !e&en*es.



H. The a+G*i!ing (ank )o!a!ds the s%ips o! ane%e+t!oni+ %edge! to the paments sstem 5VIS'Inte!nationa%, o! E*!opa Inte!nationa%6 th!o*gh its

+onne+tion to the !e%e&ant neto!k 5VisaNet, in the+ase o) Visa, )o! instan+e6.

. The +!edit +a!d +ompan 5Visa, =aste!Ca!d,Dine!s C%*(6 +!edits the a+G*i!ing (ank.

K. The +!edit +a!d +ompan sends the t!ansa+tions tothe iss*ing (ank and a*tomati+a%% de(its it.

B. The iss*ing (ank a*tomati+a%% de(its the+a!dho%de!3s a++o*nt. It iss*es month% o!t!ansa+tion !e%ated statements to the +a!dho%de!.

In some +o*nt!ies main% in Cent!a% and Easte!n E*!ope,the =idd%e East, ')!i+a, and 'sia +!edit +a!d +ompaniessometimes o!k di!e+t% ith thei! +a!dho%de!s ho pathe +ompanies &ia mone o!de! o! (ank t!ans)e!. The+a!dho%de! is o)ten !eG*i!ed to p!o&ide a se+*!it to the+!edit +a!d +ompan and his spending %imits a!e tight%s*pe!&ised. C!edit histo!, +o%%ate!a%, and (a+kg!o*nd+he+ks a!e !igo!o*s. E&en then, the ma#o!it o) the +a!dsiss*ed a!e de(it !athe! than +!edit +a!ds.

'nd!e !eenstein3s Inte!net (*siness so%d %ast ea! did a g!eat &o%*me o) +!edit +a!d t!ansa+tions andeFpe!ien+ed +ha!ge(a+ks o) (eteen 0. to pe!+ent.Despite its positi&e +ash)%o and good standing ith the (ank, it as )ined ( Visa, p%a+ed in its /=e!+hant ?at+h/%ist and )o!+ed to set aside 12,000 in a !ese!&e a++o*nt.Its )ee pe! +ha!ge(a+k shot )!om ni% to 2 on %o+a% +a!ds

and 0 pe! )o!eign +ha!ge(a+k.

!eenstein sas:



/O&e! the ea!s, I eFpe!ien+ed (ank !enegotiations, (anksit+hes, *sed &a!io*s on%ine +!edit +a!d p!o+essingso)ta!e. I s*++ess)*%% negotiated o*! a o*t o)additiona% !ese!&e a++o*nts, set *p a%te!nate me!+hanta++o*nts ith %oe! sometimes &i!t*a%% no )ees, andhe%ped the +ompan s+a%e don its +ha!ge(a+k pi+t*!e+onside!a(%. It as a%as )!*st!ating tho*gh that e&enhen e3d sho =e!+hant Se!&i+es U Visa d!amati+a%%!ed*+ed +ha!ge(a+ks, in+!eased !e&en*e, a %a!ge positi&e+ash)%o, ea!s o) s*++ess, %ette!s )!om a++o*ntants, et+. the3d +ontin*e to )ine *s o&e! and o&e! again, insisting

that e&en 1.J as 3too high )o! an Inte!net (*siness.3

/It a%as seemed as tho*gh the e!e doing it to p!o)it knoing )*%% e%% that the +ompan I !an had one o) the!osiest +ha!ge(a+k pi+t*!es o) a%% and one o) the +%eanest!ep*tations a!o*nd. Sti%%, )o! ea!s the +ompan +ontin*edto s*))e! ni+ks and #a(s at the him o) eithe! =e!+hant

Se!&i+es o! Visa. = ea!s o) eFpe!ien+es getting nea++o*nts, +hanging a++o*nts, o))setting !ese!&es, andmo!e %ed me to +!eate Cha!ge(a+kP!e&ention.Com tohe%p %ess kno%edgea(%e me!+hants (ene)it )!om m ea!so) 3ed*+ation3 in the )ie%d3./

. Eow bad is the problem of 1nternet credit card fraud

'. 7a&ing no medi*mide statisti+s, I3d sa that theamo*nt o) +ha!ge(a+ks)!a*d*%ent o!de!s is on%in+!easing as mo!e peop%e take to the Inte!net and as mo!e p!ankste!s !ea%ie that the odds o) /getting (*sted/ a!e p!ett %o.



Tho*gh )!*st!ating to (*sinesses, I (e%ie&e that most!easona(%a++omp%ished o*t)its +an s*!&i&e ith a+e!tain n*m(e! o) +ha!ge(a+ks e&en i) it amo*nts to o!

J. The p!o(%em a!ises hen the /poe!sthat(e/ addins*%t to in#*! ( demanding a !ese!&e a++o*nt, o! (a!(it!a!i% /)ining/ me!+hants )o! (eing /(ad (os./ That3shen Inte!net +!edit +a!d )!a*d (e+omes a the seed thatspans a ho%e ga!den o) t!o*(%e.

. Chargebacks allow consumers to protect themselves

against fraud7 fault! products7 and breach of salescontracts. #ould !ou sa! that consumers are abusing

this protection 1f so7 how would !ou restructure the

chargeback process to balance the rights and obligations

of all parties

'. '(*se eFists in an s+ena!io. I) o* ask mostme!+hants, those )e +ases o) to!ment hen the kne

the e!e (eing taken ad&antage o) p!o(a(% st*+k in thei!memo! and thei! !esponse o*%d (e /es, +ons*me!s a!ea(*sing this p!ote+tion8/.

Indeed, I +an3t he%p (*t !e+a%% those indi&id*a% +ases o)o(&io*s a(*se. Sti%%, I3d ha&e to sa that the n*m(e! o) peop%e intentiona%% doing +ha!ge(a+ks to get mone (a+k

is G*ite %o. I a%so (e%ie&e that the ONE thingVisa=aste!Ca!d does !ight is to %imit peop%e in G*a%itdisp*te +ha!ge(a+ks. ?hen the see someone doing iteF+essi&e%, the )%ag thei! a++o*nt. I don3t think the!e3s a (ig p!o(%em o) peop%e doing it !eg*%a!%, (*t the!e is a p!o(%em hen +ons*me!s !ead a!ti+%es %ike this one and!ea%ie, in the (a+k o) thei! minds, that the +an

+ha!ge(a+k. Then e&e! s%ight p!o(%em ith a me!+hantgets (%on o*t o) p!opo!tion and the t! to get the p!od*+tse!&i+e )o! )!ee.



In m eFpe!ien+e, hoe&e!, G*a%it disp*te +ha!ge(a+ksa!e gene!a%% &e! eas to !e&e!se o! (eat andCha!ge(a+kP!e&ention.Com spends a g!eat dea% o) time onthis and o))e!s man pages o) in)o!mation and e&eneFamp%es o) s*++ess)*% !e(*tta% %ette!s tea+hingme!+hants ho to di))*se this so!t o) +ha!ge(a+k.

In s*m, I o*%d sa that hi%e the!e a!e some a(*ses thisis the one a!ea =CVIS' has /don pat/ !easona(% e%%.The!e a!e as the +o*%d imp!o&e the ta+k%ing o) )!a*d (*t I +an3t see man as the +an imp!o&e the t!eatment

o) G*a%it disp*tes. E&e!thing is e%%mediated. E&e!on+e in a hi%e o* +ome a+!oss a g!*mp antime!+hantso!t o) +ha!ge(a+k hand%e! (*!nt o*t and ti!ed o) his o! he! #o( !e&ieing +ha!ge(a+ks a%% da. <*t s*+h +ases a!e )eand )a! (eteen. Take it )!om someone ho hass*++ess)*%% !e&e!sed o! (een in&o%&ed in the !e&e!sa% o)h*nd!eds o) these8

. #hat percentage of sales goes towards pa!ing credit

card-related ependitures: processing fees7 chargebacks7

fines7 and reserve accounts 4please eplain each of these

terms5

P!o+essing dis+o*nt !ates !ight no )o! phonemai% o!de!s

seem to ha&e (ottomed o*t a!o*nd 2.22. pe!+entdepending on the &a!ia(%es in&o%&ed. =an nee!me!+hants pa as m*+h as 2. and e&en pe!+ent,tho*gh the +an de)inite% negotiate a %oe! !ate. =ostme!+hants pa 101 pe! +ha!ge(a+k (*t some pa ashigh as 2. ' )e me!+hants e&en pa a (og*s 101)ee pe! ti+ket !et!ie&a% !eG*est.



Th*s, i) o* ha&e a 0 sa%e and the +*stome! has a g!ipe,o* ma (e s%apped ith a 1 )ee )o! the s%ip !eG*est,anothe! 2 )o! the +ha!ge(a+k.. and then e&en i) o*

!e&e!se the +ha!ge(a+k some (anks +ha!ge anothe! 2to do it. I) the +*stome! does a se+ond +ha!ge(a+k, that3sanothe! 2. So o* +an %ose o*! 0 p%*s pa anothe!B0 ( the time o*3!e done in the o!st +ase s+ena!ioith the o!st me!+hant a++o*nt +on+ei&a(%e8

=e!+hants +an negotiate dea%s ith no +ha!ge(a+k )ees tho*gh, gene!a%%, this in+!eases the p!o+essing dis+o*nt!ate a (it so me!+hants need to +!*n+h n*m(e!s to )ig*!eo*t he!e the sa&e the most mone ith %oe! dis+o*nt)ees o! ith %oe! o! no +ha!ge(a+k )ees.

In s*m, )ig*!e an a&e!age o) 2.J paid )o! p!o+essingdis+o*nt !ates, 10 +ents pe! t!ansa+tion 5*n%ess o*negotiate a no )ee pe! t!ansa+tion dea%6, and 02 pe!

+ha!ge(a+k. Cha!ge(a+k and !ese!&e a++o*nts happenon% to /se%e+t/ me!+hants, o) +o*!se8 <*t additiona% )eessometimes seen a!e:

EFt!a +ha!ges i) the me!+hant3s (at+h isn3t sett%ed e&e!2 ho*!s 'dditiona% )ees ando! a*gmented !ates )o! inte!nationa%t!ansa+tions Spe+i)i+ pe! t!ansa+tion )ees )o! the tpe o) so)ta!e (eing *sed o! to ha&e /the p!i&i%ege/ o) +he+king 'VS o!CVV2 =onth% statement )ees *n%ess othe!ise negotiated.



. %rocessing agents seem to benefit greatl! from

chargeback fees7 reserve accounts7 and related fines. Do

the! contribute to the proliferation of chargebacks

#ouldnFt !ou sa! that the relationship between financialintermediaries 4banks7 processing agents7 credit card

companies5 are incestuous and that the problem is

structural

In m opinion, tho*gh gene!a%% &ieed as (eing no(%eand %egitimate it3s one o) the most +o!!*pt (*sinesses o*tthe!e. I +o*%d ne&e! )*%% *nde!stand ho a +o!po!ateentit is a%%oed to /)ine/ its +*stome!s. It3s no onde! it3sso di))i+*%t to get o*t o) the /=e!+hant ?at+h P!og!am/.Visa +e!tain% has no in+enti&e to !e%ease the me!+hants onthe %ist hen the +an get aa ith )ining them 10,000o! mo!e a%most at him.

$ese!&e a++o*nts at %east make a %itt%e (it o) sense )o!

(anks to p!ote+t themse%&es. <*t g!a((ing 100k o! mo!e)!om so man me!+hants and ho%ding it )o! H months o!%onge! +an on% (e in+!easing (ank p!o)its e&e! som*+h. Some me!+hant !ep!esentati&es seem moti&ated toset !ese!&e a++o*nts and a!e p!o(a(% paid (ased on someso!t o) in+enti&e p!og!am. The!e appea! to (e emp%oeesat @i!stData 5hi+h no has a &i!t*a% monopo%6 ho do

nothing e%se (*t anse! +a%%s )!om me!+hants g!ipinga(o*t !ese!&e a++o*nts and it3s &e! di))i+*%t 5(*t, )!omo*! eFpe!ien+e, not impossi(%e6 to get them to a+t in theme!+hant3s )a&o!.

In the +ase o) the e(*siness I de&e%oped and oned )o! soman ea!s, I )o*nd the /%oss p!e&ention/ peop%e to (e&indi+ti&e and sense%ess ith %itt%e +on+e!n )o! anthing

othe! than thei! on agenda.



?hen one %oss p!e&ention agent as shon in detai% ( ateam o) a++o*ntants that the +ompan on% makes mone,t*!ns p!o)its, has ne&e! )ai%ed to pa a +ha!ge(a+k, has a

positi&e +ash )%o and so on he! !esponse as simp%:/?e don3t +a!e a(o*t making mone, e on% +a!e a(o*t%oss p!e&ention./ 'nd that as a management%e&e%emp%oee.

'n e&en (ette! eFamp%e +omes to mind. @i!stData has the/!ight/ to *se the %ette!head o) an (ank the !ep!esentand to a+t /on thei! (eha%)/, so nee! me!+hants tend tothink the3!e dea%ing thei! on me!+hant (ank di!e+t%.<*t !ea%% the to inte!ests +o*%dn3t (e mo!e +ont!a!8

In one +ase, o*! +o!po!ate +he+king a++o*nt had an open100,000 %ine o) +!edit. >et @i!stData a+ting in the nameo) the (ank3s me!+hant se!&i+es de+%a!ed a)te! 2 ea!sthat a 100,000ish !ese!&e as ne+essa! to o))set

+ha!ge(a+ks. @i!stData didn3t kno o! !ea%ie that o*! (ank ga&e *s 100,000 o!th o) open +!edit e&en as@i!stData3s /mid%e&e% !isk %oss p!e&ention/ depa!tmentas te%%ing *s that e3!e a /!isk (*siness/ and need to post 100,000 immediate% to o))set potentia% %osses to the (ank )!om +ha!ge(a+ks8

?e had the P!esident o) o*! (ank +a%% @i!stData di!e+t%and te%% them not to ho%d an o) the +ompan3s moneWin)o!ming them hat a g!eat +%ient e e!e and hat ag!eat (anking !e%ationship e had. @i!stData *ses that (ank3s %ette!head and +%aims to !ep!esent it (*t it !e)*sedto !e%ease o*! )*nds despite the eFp%i+it !eG*est o) the (ank hose me!+hant se!&i+es the3!e +ont!a+ted to!ep!esent8

. *ive us one tip or techni+ue on how to avoid



chargebacks and describe the most widespread frauds

'. E&en tho*gh it adds a (it o) time and eFpense, the onete+hniG*e that o!ks (est (ette! than CVV2 &e!i)i+ation

o! an othe! gene!i+ te+hniG*e to*ted ( =CVisa is to&e!(a%% &e!i) ea+h o!de!. 9*st pi+k *p the phone and +a%%ea+h +*stome!. Inte!net )!a*ds en#o thei! anonmit anda!e s+a!ed sense%ess a(o*t a+t*a%% p%aing thei! a+t o*to&e! the te%ephone. =ost o) them a!en3t /!ea%/ thie&es inthe sense that the o*%d shop%i)t )!om !etai% sto!es o! pe!pet!ate )!a*d in a none%e+t!oni+ s+ena!io. >o*3%% )ind

o*t ho is !ea% and ho is )!a*d*%ent i) o* pi+k *p the phone and sta!t +a%%ing the phone n*m(e!s on o*!in+oming o!de! )o!ms. 't Cha!ge(a+kP!e&ention.Com, etea+h *se!s p!e+ise% hat to %ook )o!, hat to sa, hatG*estions to ask o&e! the te%ephone, et+.

. Can !ou comment on the current antitrust

investigation against "isa and MasterCard and its potential implications &dditionall!7 do !ou believe that

the aggressive marketing drives of credit card issuers7

involving little or no background checks7 contribute to

an increase in credit card fraud

'. So!!, no +omment on this aspe+t8

. Can !ou compare the advantages and disadvantages

of card not present and card present sales 1s e-

commerce hobbled b! some of the procedures and

safeguards re+uired b! credit card companies and

clearinghouses

'. O(&io*s%, /+a!d p!esent/ t!ansa+tions a!e sa)e! )o!

me!+hants.



I) on% e&e! +omp*te! te!mina% +o*%d ha&e its onmagneti+ siping de&i+e8 I +an3t he%p (*t onde! i)+%ea!ingho*ses a!e #*st seeing e+omme!+e as a /hipping

(o/ +onstant% +!ing o%) te%%ing me!+hants that theha&e too man +ha!ge(a+ks and hitting them ith p!o)ita(%e )ines.

$etai%e!s *s*a%% don3t ha&e the same +ha!ge(a+k p!o(%ems as Etai%e!s hen it +omes to )!a*d. <*t Etai%e!sgene!a%% don3t ha&e the same o&e!head that !etai%e!s do so e3!e a(%e to +om)o!ta(% s*!&i&e ith , , pe!+ent+ha!ge(a+ks. <*t +%ea!ing ho*ses a!e too g*ngho in thei!sea!+h )o! /!ed )%ags./ The simp% need to stop app%ingthe same )%ags to e&e! (*siness in e&e! +ase.

' +ompan that de%i&e!s in)o!mation e%e+t!oni+a%% isgoing to ha&e mo!e +ha!ge(a+ks than one ho ships to ahome add!ess. <*t a +ompan ith a negati&e +ash)%o is

going to (e mo!e o) a !isk than a +ompan ith a positi&eone. The sho*%d !ea%% e&a%*ate +ompanies mo!e deep% (e)o!e +ha!ging them ith so man )ines and )ees. =osto) the ad&i+e gi&en ( +%ea!ingho*ses is gene!i+ andempt and that3s one o) the main !easons+ha!ge(a+kp!e&ention.+om +ame to (e.

Te%%ing e&e!one: ship to the (i%%ing add!ess on%, *se'VS, and *se CVV2 ma (e )ine and dand (*t (i%%ingadd!esses don3t app% to in)o!mationon% me!+hants, 'VS+an +a*se p!o(%ems o) its on and CVV2 sti%% +on)o*nds+*stome!s and %oses %egitimate sa%es hen the )ai% to!e+ite thei! +!edit +a!d n*m(e! ( hea!t.



Cha!ge(a+kP!e&ention.Com t!ies to +!eate mo!e o) a3happ thi!d a3 (eteen !ed*+ing +ha!ge(a+ks andmaintaining sa%es &o%*me something that the poe!s

that(e seem to +a!e &e! %itt%e a(o*t. ?hen the get+ha!ge(a+ks don, the !ea!d themse%&es, the patthemse%&es on the (a+k, the att!i(*te it to thei! )ines andst!onga!med !ese!&e a++o*nts itho*t de%&ing deepe!.?e t! to tea+h the me!+hant to p!oa+ti&e% a&oid )!a*d,!ese!&e a++o*nts, and )ines and to !ea+ti&e% dea% iththese iss*es e))e+ti&e% hen the do o++*!.

. Eow will smart wallets7 e-cash7 %a!%al and other

debit/credit mone! substitutes affect the credit card

industr!

I ha&en3t seen m*+h o!th eFpe!imenting ith. The!eG*i!e the +*stome! to go th!o*gh eFt!a steps. So manon%ine (*e!s a!e sti%% /ne to it/. Some a!e making

imp*%se p*!+hases and some a!e #*st (a!e% +on&in+ed to (*. $eG*i!ing them to go sign *p )o! an a++o*nt ithPaPa% and so )o!th is asking )o! eFt!a steps, inst!*+tions,and +an p*%% them o*t o) /the ethe!/, o! make them (a+kaa )!om sa%es.

On% the netsa&& !ea%% kno a(o*t +ompanies %ike PaPa% and t!*st them. The tpi+a% o++asiona% *se! a(o*t to

make a p*!+hase at o*! site is t!*sting eno*gh to gi&eo* thei! in)o!mation. oing o&e! to PaPa% adds anothe! pa!t, one the ha&en3t e&en a%as hea!d o) as o)ten aso* o! I. I o*%d ne&e! !isk +%iente%e ( asking them tosign *p.



#orkaholism7 (eisure and %leasure

B!: Dr. Sam "aknin

&lso 0ead:

)ntrepreneurship and #orkaholism

The o))i+ia% o!king eek has (een !ed*+ed to ho*!s a

eek in @!an+e. In most +o*nt!ies in the o!%d, it is%imited to ho*!s a eek. The t!end d*!ing the %ast+ent*! seems to (e *neG*i&o+a%: %ess o!k, mo!e p%a.

>et, hat ma (e t!*e )o! (%*e +o%%a! o!ke!s o! stateemp%oees - is not ne+essa!i% so )o! hite +o%%a!mem(e!s o) the %i(e!a% p!o)essions. It is not !a!e )o! these peop%e - %ae!s, a++o*ntants, +ons*%tants, manage!s,

a+ademi+s - to p*t in K0 ho*! eeks.

The phenomenon is so idesp!ead and its so+ia%+onseG*en+es so damaging that it has a+G*i!ed the*n)%atte!ing ni+kname o!kaho%ism, a +om(ination o) theo!ds /o!k/ and /a%+oho%ism/. @ami% %i)e is dis!*pted,inte%%e+t*a% ho!ions na!!o, the +onseG*en+es to the

o!kaho%i+3s hea%th a!e se&e!e: )at, %a+k o) eFe!+ise, st!ess a%% take thei! %etha% to%%. C%assi)ied as /a%pha/ tpes,o!kaho%i+s s*))e! th!ee times as man hea!t atta+ks asthei! pee!s.

<*t hat a!e the so+ia% and e+onomi+ !oots o) this phenomenonA

P*t s*++in+t%, it is the o*t+ome o) the (%*!!ing o) (o*nda!ies (eteen o!k and %eis*!e. This distin+tion (eteen time dedi+ated to %a(o*! and time spent in the








p*!s*it o) one3s ho((ies - as so +%ea! )o! tho*sands o)ea!s that its g!ad*a% disappea!an+e is one o) the mostimpo!tant and p!o)o*nd so+ia% +hanges in h*man histo!.

' host o) othe! shi)ts in the +ha!a+te! o) o!k anddomesti+ en&i!onments o) h*mans +on&e!ged to p!od*+ethis momento*s +hange. '!g*a(% the most impo!tant asthe in+!ease in %a(o*! mo(i%it and the )%*id nat*!e o) the&e! +on+ept o) o!k and the o!kp%a+e.

The t!ansitions )!om ag!i+*%t*!e to ind*st!, then to

se!&i+es, and no to the kno%edge so+iet, in+!eased themo(i%it o) the o!k)o!+e. ' )a!me! is the %east mo(i%e.7is means o) p!od*+tion a!e )iFed, his p!od*+e most%+ons*med %o+a%% espe+ia%% in p%a+es hi+h %a+k p!ope!!e)!ige!ation, )ood p!ese!&ation, and t!anspo!tation.

' ma!gina% g!o*p o) peop%e (e+ame nomadt!ade!s. Thisg!o*p eFp%oded in sie ith the ad&ent o) the ind*st!ia%

!e&o%*tion. T!*e, the (*%k o) the o!k)o!+e as sti%%immo(i%e and a))iFed to the p!od*+tion )%oo!. <*t !amate!ia%s and )inished p!od*+ts t!a&e%%ed %ong distan+es to)a!aa ma!kets. P!o)essiona% se!&i+es e!e needed andthe p!o)essiona% manage!, the %ae!, the a++o*ntant, the+ons*%tant, the t!ade!, the (!oke! - a%% eme!ged as (oth pa!asites )eeding o)) the p!od*+tion p!o+esses and the

indispensa(%e oi% on its +ogs.



The p!otagonists o) the se!&i+es so+iet e!e no %onge!geog!aphi+a%% dependent. The !ende!ed thei! se!&i+es toa host o) geog!aphi+a%% dist!i(*ted /emp%oe!s/ in a

&a!iet o) as. This t!end a++e%e!ated toda, ith thead&ent o) the in)o!mation and kno%edge !e&o%*tion.

;no%edge is not geog!aphdependent. It is easi%t!ans)e!a(%e a+!oss (o*nda!ies. It is +heap% !ep!od*+ed.Its epheme!a% G*a%it gi&es it nontempo!a% and nonspatia% G*a%ities. The %o+ations o) the pa!ti+ipants in thee+onomi+ inte!a+tions o) this ne age a!e t!anspa!ent andimmate!ia%.

These t!ends +on&e!ged ith in+!eased mo(i%it o) peop%e,goods and data 5&oi+e, &is*a%, teFt*a% and othe!6. The tin!e&o%*tions o) t!anspo!tation and te%e+omm*ni+ations!ea%% !ed*+ed the o!%d to a g%o(a% &i%%age. Phenomena%ike +omm*ting to o!k and m*%tinationa%s e!e )i!st

made possi(%e.

@a+simi%e messages, e%e+t!oni+ mai%, othe! )o!ms o) digita%data, the Inte!net (!oke not on% phsi+a% (a!!ie!s (*ta%so tempo!a% ones. Toda, &i!t*a% o))i+es a!e not on%spatia%% &i!t*a% - (*t a%so tempo!a%% so. This means thato!ke!s +an +o%%a(o!ate not on% a+!oss +ontinents (*ta%so a+!oss time ones. The +an %ea&e thei! o!k )o!someone e%se to +ontin*e in an e%e+t!oni+ mai%(oF, )o!instan+e.

These te+hno%ogi+a% ad&an+es p!e+ipitated thet!ansm*tation o) the &e! +on+epts o) /o!k/ and/o!kp%a+e/. The th!ee '!istote%ian d!amati+ *nities no%onge! app%ied. ?o!k +o*%d (e pe!)o!med in di))e!ent

p%a+es, not sim*%taneo*s%, ( o!ke!s ho o!ked pa!ttime hene&e! it s*ited them (est.



@%eFtime and o!k )!om home !ep%a+ed +omm*ting 5m*+hmo!e so in the 'ng%oSaFon +o*nt!ies, (*t the ha&ea%as (een the ha!(inge!s o) +hange6. This )ittedsG*a!e% into the so+ia% )!agmentation hi+h +ha!a+te!iestoda3s o!%d: the disinteg!ation o) p!e&io*s% +ohesi&eso+ia% st!*+t*!es, s*+h as the n*+%ea! 5not to mention theeFtended6 )ami%.

'%% this as neat% !apped in the ideo%og o)indi&id*a%ism, p!esented as a p!i&ate +ase o) +apita%ismand %i(e!a%ism. Peop%e e!e en+o*!aged to )ee% and

(eha&e as distin+t, a*tonomo*s *nits. The pe!+eption o)indi&id*a%s as is%ands !ep%a+ed the )o!me! pe!+eption o)h*mans as +e%%s in an o!ganism.

This t!end as +o*p%ed ith - and enhan+ed ( -*np!e+edented s*++essi&e m*%tiann*a% !ises in p!od*+ti&it and in+!eases in o!%d t!ade. Ne

management te+hniG*es, imp!o&ed p!od*+tionte+hno%ogies, inno&ati&e in&ento! +ont!o% methods,a*tomatiation, !o(otiation, p%ant mode!niation,te%e+omm*ni+ations 5hi+h )a+i%itates mo!e e))i+ientt!ans)e!s o) in)o!mation6, e&en ne design +on+epts a%%he%ped (!ing this a(o*t.

<*t p!od*+ti&it gains made h*mans !ed*ndant. No

amo*nt o) !et!aining +o*%d +ope ith the in+!edi(%e !ate o)te+hno%ogi+a% +hange. The mo!e te+hno%ogi+a%%ad&an+ed the +o*nt! - the highe! its st!*+t*!a%*nemp%oment 5i.e., the %e&e% o) *nemp%omentatt!i(*ta(%e to +hanges in the &e! st!*+t*!e o) thema!ket6.



In ?este!n E*!ope, it shot *p )!om HJ o) the o!k)o!+eto BJ in one de+ade. One a to manage this )%ood o)e#e+ted h*mans as to +*t the o!keek. 'nothe! as to

s*ppo!t a %a!ge pop*%ation o) *nemp%oed. The thi!d, mo!eta+it, a as to %egitimie %eis*!e time. ?he!eas the9eish and P!otestant o!k ethi+s +ondemned id%eness inthe past - the +*!!ent ethos en+o*!aged peop%e to+ont!i(*te to the e+onom th!o*gh /se%) !ea%iation/, to p*!s*e thei! ho((ies and nono!k !e%ated inte!ests, and toeFp!ess the enti!e !ange o) thei! pe!sona%it and potentia%.

This se!&ed to (%*! the histo!i+a% di))e!en+es (eteeno!k and %eis*!e. The a!e (oth +ommended no. ?o!k,%ike %eis*!e, (e+ame %ess and %ess st!*+t*!ed and !igid. It iso)ten p*!s*ed )!om home. The te!!ito!ia% sepa!ation (eteen /o!kp%a+e/ and /home t*!)/ as essentia%%e%iminated.

The emotiona% %eap as on% a G*estion o) time.7isto!i+a%%, peop%e ent to o!k (e+a*se the had to.?hat the did a)te! o!k as designated as /p%eas*!e/. No, (oth o!k and %eis*!e e!e p%eas*!a(%e - o!to!t*!o*s - o! (oth. Some peop%e (egan to en#o thei!o!k so m*+h that it )*%)i%%ed the )*n+tions no!ma%%!ese!&ed to %eis*!e time. The a!e the o!kaho%i+s. Othe!s

+ontin*ed to hate o!k - (*t )e%t diso!ientated in the ne,%eis*!e%ike en&i!onment. The e!e not ta*ght to dea%ith too m*+h )!ee time, a %a+k o) )!ameo!k, no +%ea!inst!*+tions hat to do, hen, ith hom and to hatend.



So+ia%iation p!o+esses and so+ia%iation agents 5the State, pa!ents, ed*+ato!s, emp%oe!s6 e!e not gea!ed - no! didthe !ega!d it as thei! !esponsi(i%it - to t!ain the

pop*%ation to +ope ith )!ee time and ith the (a))%ingand da%ing &a!iet o) options on o))e!.

?e +an +%assi) e+onomies and ma!kets *sing the o!k%eis*!e aFis. Those that maintain the o%d distin+tion (eteen 5hated6 o!k and 5%i(e!ating6 %eis*!e - a!edoomed to pe!ish o!, at (est, !adi+a%% %ag (ehind. This is (e+a*se the i%% not ha&e de&e%oped a +%ass o)o!kaho%i+s (ig eno*gh to mo&e the e+onom ahead.

It takes o!kaho%i+s to +!eate, maintain and eFpand+apita%ism. 's opposed to +ommon opinion, peop%e,most%, do not do (*siness (e+a*se the a!e inte!ested inmone 5the +%assi+ p!o)it moti&e6. The do hat the do (e+a*se the %ike the ame o) <*siness, its tists and

t*!ns, the (!ainsto!ming, the (att%e o) (!ains, s*(#*gatingma!kets, the *ps and dons, the eF+itement. '%% this hasnothing to do ith mone. It has e&e!thing to do ith ps+ho%og. T!*e, mone se!&es to meas*!e s*++ess - (*tit is an a(st!a+t mete!, akin to monopo% mone. It is p!oo)sh!edness, it, )o!esight, stamina, and insight.

?o!kaho%i+s identi) (*siness ith p%eas*!e. The a!ehedonisti+ and na!+issisti+. The a!e ent!ep!ene*!ia%. Thea!e the manage!s and the (*sinessmen and the s+ientistsand the #o*!na%ists. The a!e the mo&e!s, the shake!s, the p*she!s, the ene!g.

?itho*t o!kaho%i+s, e o*%d ha&e ended *p ith/so+ia%/ e+onomies, ith st!ong disin+enti&es to o!k. In

these e+onomies o) /+o%%e+ti&e one!ship/ peop%e go too!k (e+a*se the ha&e to.



Thei! main p!eo++*pation is ho to a&oid it and tosa(otage the o!kp%a+e. The ha!(o*! negati&e )ee%ings.S%o%, the ithe! and die 5p!o)essiona%%6 - (e+a*se no

one +an %i&e %ong in hat!ed and de+eit. 9o is an essentia%ing!edient o) s*!&i&a%.

'nd this is the t!*e meaning o) +apita%ism: the a(o%ition o)the a!ti)i+ia% distin+tion (eteen o!k and %eis*!e and the p*!s*it o) (oth ith the same ea% and satis)a+tion. '(o&ea%%, the 5in+!easing6 %i(e!t to do it hene&e!, he!e&e!,ith home&e! o* +hoose.

4n%ess and *nti% 7omo East E*!opeansis +hanges his stateo) mind - the!e i%% (e no !ea% t!ansition. <e+a*set!ansition happens in the h*man mind m*+h (e)o!e it takes)o!m in !ea%it. It is no *se to di+tate, to %egis%ate, to)inan+e, to +a#o%e, o! to (!i(e. It as =a!F 5a de&o*t non+apita%ist6 ho said: it is +ons+io*sness that dete!mines

!ea%it. 7o !ight as he. ?itness the p!ospe!o*s 4S'and +ompa!e it to the mise!a(%e )ai%*!e that as+omm*nism.

=RO> @N INTERHIE# I R@NTE?

M. In o*! a!ti+%e, ?o!kaho%ism, "eis*!e and P%eas*!e,o* des+!i(e ho the %ine (eteen %eis*!e and o!k has

(%*!!ed o&e! time. ?hat has a%%oed this to happenA ?hate))e+t does this (%*!!ing ha&e on the st!*gg%e to a+hie&e ao!k%i)e (a%an+eA

'. The distin+tion (eteen o!k and %eis*!e times is ano&e%t. E&en 0 ea!s ago, peop%e sti%% o!ked 1H ho*!s ada and, man o) them, p*t in das a eek.



=o!e than K0J o) the o!%d3s pop*%ation sti%% %i&e thisa. To the ma#o!it o) peop%e in the de&e%oping+o*nt!ies, o!k as and is %i)e. The o*%d pe!+ei&e the

+ont!ast (eteen /o!k/ and /%i)e/ to (e (oth a!ti)i+ia%and pe!p%eFing. S*!e, the dedi+ate time to thei! )ami%iesand +omm*nities. <*t the!e is %itt%e %eis*!e %e)t to !ead,n*!t*!e one3s ho((ies, int!ospe+t, o! attend +%asses.

"eis*!e time eme!ged as a so+ia% phenomenon in thetentieth +ent*! and main% in the ind*st!ia%ied, !i+h,

+o*nt!ies.

?o!kaho%ism the (%*!!ing o) (o*nda!ies (eteen %eis*!etime and time dedi+ated to o!k is, the!e)o!e, simp%ha!king (a+k to the !e+ent past. It is the ine&ita(%eo*t+ome o) a +on)%*en+e o) a )e de&e%opments:

I. La0o(r o0ili!/ in+!eased. ' )a!me! is atta+hed to his%and. 7is means o) p!od*+tion a!e )iFed. 7is ma!kets a!e%a!ge% %o+a%. 'n ind*st!ia% o!ke! is atta+hed to his)a+to!. 7is means o) p!od*+tion a!e )iFed. ?o!ke!s in these!&i+es o!, mo!e so, in the kno%edge ind*st!ies a!eatta+hed on% to thei! %aptops. The a!e m*+h mo!eitine!ant. The !ende! thei! se!&i+es to a host o)geog!aphi+a%% dist!i(*ted /emp%oe!s/ in a &a!iet o)

as.

II. The ad&ent o) the inora!ion and knoledge

revol(!ions %essened the o!ke!3s dependen+e on a /(!i+kand mo!ta!/ o!kp%a+e and a /)%esh and (%ood/ emp%oe!.C(e!spa+e !ep%a+es !ea% spa+e and tempo!a! o!+ont!a+t*a% o!k a!e p!e)e!!ed to ten*!e and +o!po!ate

/%oa%t/.

;no%edge is not geog!aphdependent. It is po!ta(%e and



+heap% !ep!od*+ed. The geog!aphi+a% %o+ations o) the pa!ti+ipants in the e+onomi+ inte!a+tions o) this ne agea!e t!anspa!ent and immate!ia%.

III. The o0ili!/ o goods and da!a 5&oi+e, &is*a%,teFt*a% and othe!6 in+!eased eFponentia%%. The tin!e&o%*tions o) t!anspo!tation and te%e+omm*ni+ations!ed*+ed the o!%d to a g%o(a% &i%%age. Phenomena %ike+omm*ting to o!k and g%o(est!add%ing m*%tinationa%se!e )i!st made possi(%e. The +a!, the ai!p%ane, )a+simi%emessages, e%e+t!oni+ mai%, othe! )o!ms o) digita% data, the

Inte!net demo%ished man phsi+a% and tempo!a% (a!!ie!s. ?o!ke!s toda o)ten +o%%a(o!ate in &i!t*a% o))i+esa+!oss +ontinents and time ones. @%eFtime and o!k )!omhome !ep%a+ed +omm*ting. The &e! +on+epts o)/o!kp%a+e/ and /o!k/ e!e !ende!ed )%*id, i) noto(so%ete.

IV. The dissol(!ion o !$e %lassi% ork&la%e is pa!t o) a%a!ge! and a%%pe!&asi&e disinteg!ation o) othe! so+ia%st!*+t*!es, s*+h as the n*+%ea! )ami%. Th*s, hi%e the+hoi+e o) o!k!e%ated &en*es and p*!s*its in+!eased then*m(e! o) so+ia% a%te!nati&es to o!k de+%ined.

The eFtended and n*+%ea! )ami% as den*ded o) most o)

its t!aditiona% )*n+tions. =ost +omm*nities a!e ten*o*sand in +onstant )%*F. ?o!k is the on% !e)*ge )!om anin+ohe!ent, )!a+tio*s, and ds)*n+tiona% o!%d. So+iet isanomi+ and o!k has (e+ome a !o*te o) es+apism.



V. The ideolog/ o individ(alis is in+!easing% p!esented as a p!i&ate +ase o) +apita%ism and %i(e!a%ism.Peop%e a!e en+o*!aged to )ee% and (eha&e as distin+t,

a*tonomo*s *nits. The metapho! o) indi&id*a%s as is%andss*(stit*ted )o! the pe!+eption o) h*mans as +e%%s in ano!ganism. =a%ignant indi&id*a%ism !ep%a+ed+omm*nita!ianism. Patho%ogi+a% na!+issism !ep%a+ed se%)%o&e and empath.

VI. The %ast )e de+ades itnessed *np!e+edented

s*++essi&e rises in &rod(%!ivi!/ and an e;&ansion oorld !rade. Ne management te+hniG*es, imp!o&ed p!od*+tion te+hno%ogies, inno&ati&e in&ento! +ont!o%methods, a*tomatiation, !o(otiation, p%antmode!niation, te%e+omm*ni+ations 5hi+h )a+i%itatesmo!e e))i+ient t!ans)e!s o) in)o!mation6, e&en ne design+on+epts a%% he%ped (!ing o!kaho%ism a(o*t ( p%a+inge+onomi+ &a%*es in the )o!e)!ont. The P!otestant o!kethi+ !an amok. Instead o) o!king in o!de! to %i&e peop%e (egan %i&ing in o!de! to o!k.

?o!kaho%i+s a!e !ea!ded ith )aste! p!omotion andhighe! in+ome. ?o!kaho%ism is o)ten mistaken% identi)ied ith ent!ep!ene*!ship, am(ition, and e))i+ien+.>et, !ea%% it is me!e% an addi+tion.

The a(s*!d is that o!kaho%ism is a di!e+t !es*%t o) the+*%t*!e o) %eis*!e.

's o!ke!s a!e made !ed*ndant ( te+hno%ogd!i&en p!od*+ti&it gains the a!e en+o*!aged to engage in%eis*!e a+ti&ities. "eis*!e s*(stit*tes )o! o!k. The

histo!i+a% dema!+ation (eteen o!k and %eis*!e is %ost.<oth a!e +ommended )o! thei! +ont!i(*tion to thee+onom.

http://samvak.tripod.com/






?o!k, %ike %eis*!e, is %ess and %ess st!*+t*!ed and !igid.<oth o!k and %eis*!e a!e o)ten p*!s*ed )!om home anda!e o)ten eFpe!ien+ed as p%eas*!a(%e.

The te!!ito!ia% sepa!ation (eteen /o!kp%a+e/ and/home t*!)/ is essentia%% e%iminated.

Some peop%e en#o thei! o!k so m*+h that it )*%)i%s the)*n+tions no!ma%% !ese!&ed to %eis*!e time. The a!e theo!kaho%i+s. Othe!s +ontin*e to hate o!k (*t )ee%diso!ientated in the ne %eis*!e!i+h en&i!onment. Thea!e not ta*ght to dea% ith too m*+h )!ee and *nst!*+t*!edtime, ith a %a+k o) +%ea!% de%ineated )!ameo!k, itho*t+%ea! inst!*+tions as to hat to do, hen, ith hom, andto hat end.

The state, pa!ents, ed*+ato!s, emp%oe!s a%% )ai%ed tot!ain the pop*%ation to +ope ith )!ee time and ith

+hoi+e. <oth tpes the o!kaho%i+ and the /no!ma%/ pe!son (a))%ed ( too m*+h %eis*!e end *p sa+!i)i+ingthei! %eis*!e time to thei! o!k!e%ated a+ti&ities.

'%as, it takes o!kaho%i+s to +!eate, maintain and eFpand+apita%ism. Peop%e don3t o!k o! +ond*+t (*siness on% (e+a*se the a!e a)te! the mone. The en#o thei! o!k

o! thei! (*siness. The )ind p%eas*!e in it. 'nd this is thet!*e meaning o) +apita%ism: the a(o%ition o) the a!ti)i+ia%distin+tion (eteen o!k and %eis*!e and the p*!s*it o) (oth ith the same ea% and satis)a+tion. '(o&e a%%, the5in+!easing6 %i(e!t to do so hene&e!, he!e&e!, ithhome&e! o* +hoose.



'he 0evolt of the %oor 'he Demise of 1ntellectual %ropert!

B!: Dr. Sam "aknin

&lso 0ead

Contracting for 'ransition

'he Case of the Compressed 1mage

'he Disruptive )ngine - 1nnovation and the Capitalist Dream

Th!ee ea!s ago I p*(%ished a (ook o) sho!t sto!ies inIs!ae%. The p*(%ishing ho*se (e%ongs to Is!ae%3s %eading5and eF+eeding% ea%th6 nespape!. I signed a +ont!a+thi+h stated that I am entit%ed to !e+ei&e KJ o) thein+ome )!om the sa%es o) the (ook a)te! +ommissions paa(%e to dist!i(*to!s, shops, et+. ' )e months %ate!

51BB6, I on the +o&eted P!ie o) the =inist! o)Ed*+ation 5)o! sho!t p!ose6. The p!ie mone 5a )etho*sand D=s6 as snat+hed ( the p*(%ishing ho*se onthe %ega% g!o*nds that a%% the mone gene!ated ( the (ook (e%ongs to them (e+a*se the on the +op!ight.

In the mtho%og gene!ated ( +apita%ism to pa+i) the

masses, the mth o) inte%%e+t*a% p!ope!t stands o*t. Itgoes %ike this : i) the !ights to inte%%e+t*a% p!ope!t e!enot de)ined and en)o!+ed, +omme!+ia% ent!ep!ene*!so*%d not ha&e taken on the !isks asso+iated ith p*(%ishing (ooks, !e+o!ding !e+o!ds, and p!epa!ingm*%timedia p!od*+ts. 's a !es*%t, +!eati&e peop%e i%%ha&e s*))e!ed (e+a*se the i%% ha&e )o*nd no a tomake thei! o!ks a++essi(%e to the p*(%i+. 4%timate%, it isthe p*(%i+ hi+h pas the p!i+e o) pi!a+, goes the !e)!ain.




http://samvak.tripod.com/busiweb33.html




http://samvak.tripod.com/busiweb33.html




<*t this is )a+t*a%% *nt!*e. In the 4S' the!e is a &e!%imited g!o*p o) a*tho!s ho a+t*a%% %i&e ( thei! pen.On% se%e+t m*si+ians eke o*t a %i&ing )!om thei! nois

&o+ation 5most o) them !o+k sta!s ho on thei! %a(e%s eo!ge =i+hae% had to )ight Son to do #*st that6 and &e!)e a+to!s +ome +%ose to de!i&ing s*(sisten+e %e&e%in+ome )!om thei! p!o)ession. '%% these +an no %onge! (etho*ght o) as most% +!eati&e peop%e. @o!+ed to de)endthei! inte%%e+t*a% p!ope!t !ights and the inte!ests o) <ig=one, =adonna, =i+hae% 9a+kson, S+ha!enegge! and

!isham a!e (*sinessmen at %east as m*+h as the a!ea!tists.

E+onomi+a%% and !ationa%%, e sho*%d eFpe+t that the+ost%ie! a o!k o) a!t is to p!od*+e and the na!!oe! itsma!ket the mo!e emphasied its inte%%e+t*a% p!ope!t!ights.

Conside! a p*(%ishing ho*se.

' (ook hi+h +osts 0,000 D= to p!od*+e ith a potentia% a*dien+e o) 1000 p*!+hase!s 5+e!tain a+ademi+teFts a!e %ike this6 o*%d ha&e to (e p!i+ed at a minim*mo) 100 D= to !e+o*p on% the di!e+t +osts. I) i%%ega%%+opied 5the!e( sh!inking the potentia% ma!ket as some peop%e i%% p!e)e! to (* the +heape! i%%ega% +opies6 its p!i+e o*%d ha&e to go *p p!ohi(iti&e% to !e+o*p +osts,th*s d!i&ing o*t potentia% (*e!s. The sto! is di))e!ent i) a (ook +osts 10,000 D= to p!od*+e and is p!i+ed at 20 D=a +op ith a potentia% !eade!ship o) 1,000,000 !eade!s.Pi!a+ 5i%%ega% +oping6 sho*%d in this +ase (e mo!e!eadi% to%e!ated as a ma!gina% phenomenon.



This is the theo!. <*t the )a+ts a!e te%%ing% di))e!ent. The%ess the +ost o) p!od*+tion 5(!o*ght don ( digita%te+hno%ogies6 the )ie!+e! the (att%e against pi!a+. The

(igge! the ma!ket the mo!e p!ess*!e is app%ied to +%ampdon on samidat ent!ep!ene*!s.

o&e!nments, )!om China to =a+edonia, a!e int!od*+inginte%%e+t*a% p!ope!t %as 5*nde! p!ess*!e )!om !i+h o!%d+o*nt!ies6 and en)o!+ing them (e%ated%. <*t he!e one)a+to! is +%osed on sho!e 5as has (een the +ase inmain%and China6 to sp!o*t o)) sho!e 5as is the +ase in7ong ;ong and in <*%ga!ia6.

<*t this de)ies %ogi+ : the ma!ket toda is g%o(a%, the +ostso) p!od*+tion a!e %oe! 5ith the eF+eption o) the m*si+and )i%m ind*st!ies6, the ma!keting +hanne%s mo!en*me!o*s 5ha%) o) the in+ome o) mo&ie st*dios emanates)!om &ideo +assette sa%es6, the speed !e+o*ping o) the

in&estment &i!t*a%% g*a!anteed. =o!eo&e!, pi!a+ th!i&esin &e! poo! ma!kets in hi+h the pop*%ation o*%danho not ha&e paid the %ega% p!i+e. The i%%ega% p!od*+tis in)e!io! to the %ega% +op 5it +omes ith no %ite!at*!e,a!!anties o! s*ppo!t6. So h sho*%d the (igman*)a+t*!e!s, p*(%ishing ho*ses, !e+o!d +ompanies,so)ta!e +ompanies and )ashion ho*ses o!!A

The anse! %*!ks in histo!. Inte%%e+t*a% p!ope!t is a!e%ati&e% ne notion. In the nea! past, no one +onside!edkno%edge o! the )!*its o) +!eati&it 5a!t, design6 as3patenta(%e3, o! as someone3s 3p!ope!t3. The a!tist as (*ta me!e +hanne% th!o*gh hi+h di&ine g!a+e )%oed. TeFts,dis+o&e!ies, in&entions, o!ks o) a!t and m*si+, designs a%% (e%onged to the +omm*nit and +o*%d (e !ep%i+ated

)!ee%. T!*e, the +hosen ones, the +ond*its, e!e hono*!ed (*t e!e !a!e% )inan+ia%% !ea!ded.



The e!e +ommissioned to p!od*+e thei! o!ks o) a!tand e!e sa%a!ied, in most +ases. On% ith the ad&ent o)the Ind*st!ia% $e&o%*tion e!e the em(!oni+ p!e+*!so!s

o) inte%%e+t*a% p!ope!t int!od*+ed (*t the e!e sti%%%imited to ind*st!ia% designs and p!o+esses, main% asem(edded in ma+hine!. The patent as (o!n. The mo!emassi&e the ma!ket, the mo!e sophisti+ated the sa%es andma!keting te+hniG*es, the (igge! the )inan+ia% stakes the%a!ge! %oomed the iss*e o) inte%%e+t*a% p!ope!t. It sp!ead)!om ma+hine! to designs, p!o+esses, (ooks, nespape!s,

an p!inted matte!, o!ks o) a!t and m*si+, )i%ms 5hi+h,at thei! (eginning e!e not +onside!ed a!t6, so)ta!e,so)ta!e em(edded in ha!da!e, p!o+esses, (*sinessmethods, and e&en *nto geneti+ mate!ia%.

Inte%%e+t*a% p!ope!t !ights despite thei! no(%e tit%e a!e%ess a(o*t the inte%%e+t and mo!e a(o*t p!ope!t. This is<ig =one : the ma!kets in inte%%e+t*a% p!ope!t o*teigh

the tota% ind*st!ia% p!od*+tion in the o!%d. The aim is tose+*!e a monopo% on a spe+i)i+ o!k. This is anespe+ia%% g!a&e matte! in a+ademi+ p*(%ishing he!esma%% +i!+*%ation magaines do not a%%o thei! +ontent to (e G*oted o! p*(%ished e&en )o! non+omme!+ia% p*!poses. The monopo%ists o) kno%edge and inte%%e+t*a% p!od*+ts +annot a%%o +ompetition anhe!e in the o!%d

(e+a*se thei!s is a o!%d ma!ket. ' pi!ate in Skop#e is indi!e+t +ompetition ith <i%% ates. ?hen he se%%s a pi!ated=i+!oso)t p!od*+t he is dep!i&ing =i+!oso)t not on% o)its in+ome, (*t o) a +%ient 5L)*t*!e in+ome6, o) itsmonopo%isti+ stat*s 5+heap +opies +an (e sm*gg%ed intoothe! ma!kets6, and o) its +ompetitiondete!!ing image 5ama#o! monopo% p!ese!&ing asset6. This is a th!eat hi+h

=i+!oso)t +annot to%e!ate. 7en+e its e))o!ts to e!adi+ate pi!a+ s*++ess)*% in China and an *tte! )ai%*!e in %ega%%!e%aFed $*ssia.



The )*%% teFt o) e%e+t!oni+ magaines, t!ade #o*!na%s, (i%%(oa!ds, p!o)essiona% p*(%i+ations, and tho*sands o) (ooks is a&ai%a(%e on%ine. 7a+ke!s e&en made sites

a&ai%a(%e )!om hi+h it is possi(%e to don%oad ho%eso)ta!e and m*%timedia p!od*+ts. It is &e! eas and+heap to p*(%ish on the Inte!net, the (a!!ie!s to ent! a!e&i!t*a%% ni%. ?e( pages a!e hosted )!ee o) +ha!ge, anda*tho!ing and p*(%ishing so)ta!e too%s a!e in+o!po!atedin most o!d p!o+esso!s and (!ose! app%i+ations. 's theInte!net a+G*i!es mo!e imp!essi&e so*nd and &ideo

+apa(i%ities it i%% p!o+eed to th!eaten the monopo% o) the!e+o!d +ompanies, the mo&ie st*dios and so on.

The se+ond de&e%opment is a%so te+hno%ogi+a%. The o)t&indi+ated =oo!e3s %a p!edi+ts the do*(%ing o) +omp*te!memo! +apa+it e&e! 1K months. <*t memo! is on%one aspe+t o) +omp*ting poe!. 'nothe! is the !apidsim*%taneo*s ad&an+e on a%% te+hno%ogi+a% )!onts.

=iniat*!iation and +on+*!!ent empoe!ment ( so)ta!etoo%s ha&e made it possi(%e )o! indi&id*a%s to em*%atem*+h %a!ge! s+a%e o!ganiations s*++ess)*%%. ' sing%e pe!son, sitting at home ith 000 4SD o!th o)eG*ipment +an )*%% +ompete ith the (est p!od*+ts o) the (est p!inting ho*ses anhe!e. CD$O=s +an (e !ittenon, stamped and +opied in ho*se. ' +omp%ete m*si+ st*dio

ith the %atest in digita% te+hno%og has (een +ondensed tothe dimensions o) a sing%e +hip. This i%% %ead to pe!sona% p*(%ishing, pe!sona% m*si+ !e+o!ding, and the to thedigitiation o) p%asti+ a!t. <*t this is on% one side o) thesto!.



The !e%ati&e ad&antage o) the inte%%e+t*a% p!ope!t+o!po!ation does not +onsist eF+%*si&e% in itste+hno%ogi+a% p!oess. $athe! it %ies in its &ast poo% o)

+apita%, its ma!keting +%o*t, ma!ket positioning, sa%eso!ganiation, and dist!i(*tion neto!k.

Noadas, anone +an p!int a &is*a%% imp!essi&e (ook,*sing the a(o&ementioned +heap eG*ipment. <*t in anage o) in)o!mation g%*t, it is the ma!keting, the media+ampaign, the dist!i(*tion, and the sa%es that dete!minethe e+onomi+ o*t+ome.

This ad&antage, hoe&e!, is a%so (eing e!oded.

@i!st, the!e is a ps+ho%ogi+a% shi)t, a !ea+tion to the+omme!+ia%iation o) inte%%e+t and spi!it. C!eati&e peop%ea!e !epe%%ed ( hat the !ega!d as an o%iga!+hi+esta(%ishment o) instit*tiona%ied, %oest +ommon

denominato! a!t and the a!e )ighting (a+k.

Se+ond%, the Inte!net is a h*ge 5200 mi%%ion peop%e6, t!*%+osmopo%itan ma!ket, ith its on ma!keting +hanne%s)!ee% a&ai%a(%e to a%%. E&en ( de)a*%t, ith a minim*min&estment, the %ike%ihood o) (eing seen ( s*!p!ising%%a!ge n*m(e!s o) +ons*me!s is high.

I p*(%ished one (ook the t!aditiona% a and anothe! onthe Inte!net. In 0 months, I ha&e !e+ei&ed H00 !itten!esponses !ega!ding m e%e+t!oni+ (ook . ?e%% o&e!00,000 peop%e !ead it 5m "ink EF+hange mete!!egiste!ed +. 2,000,000 imp!essions sin+e No&em(e!1BBK6.


http://samvak.tripod.com/thebook.html









It is a teFt(ook 5in ps+hopatho%og6 and 00,000!eade!s is a %ot )o! this kind o) p*(%i+ation. I am sosatis)ied that I am not s*!e that I i%% e&e! +onside! a

t!aditiona% p*(%ishe! again. Indeed, m %ast (ook as p*(%ished in the &e! same a.

The demise o) inte%%e+t*a% p!ope!t has %ate% (e+omea(*ndant% +%ea!. The o%d inte%%e+t*a% p!ope!t ind*st!iesa!e )ighting tooth and nai% to p!ese!&e thei! monopo%ies5patents, t!adema!ks, +op!ight6 and thei! +ost ad&antagesin man*)a+t*!ing and ma!keting.

<*t the a!e )a+ed ith th!ee ineFo!a(%e p!o+esses hi+ha!e %ike% to !ende! thei! e))o!ts &ain:

T$e Nes&a&er 1a%kaging

P!int nespape!s o))e! pa+kage dea%s o) +heap +ontents*(sidied ( ad&e!tising. In othe! o!ds, the ad&e!tise!s pa )o! +ontent )o!mation and gene!ation and the !eade!has no +hoi+e (*t (e eFposed to +omme!+ia% messages ashe o! she st*dies the +ontent.

This mode% adopted ea!%ie! ( !adio and te%e&ision !*%es the inte!net no and i%% !*%e the i!e%ess inte!net inthe )*t*!e. Content i%% (e made a&ai%a(%e )!ee o) a%%

pe+*nia! +ha!ges. The +ons*me! i%% pa ( p!o&idinghis pe!sona% data 5demog!aphi+ data, +ons*mption patte!ns and p!e)e!en+es and so on6 and ( (eing eFposedto ad&e!tising. S*(s+!iption (ased mode%s a!e (o*nd to)ai%.








Th*s, +ontent +!eato!s i%% (ene)it on% ( sha!ing in thead&e!tising +ake. The i%% )ind it in+!easing% di))i+*%t toimp%ement the o%d mode%s o) !oa%ties paid )o! a++ess o!

o) one!ship o) inte%%e+t*a% p!ope!t.

?isin!eredia!ion

' %ot o) ink has (een spi%t !ega!ding this impo!tant t!end.The !emo&a% o) %ae!s o) (!oke!ing and inte!mediation main% on the man*)a+t*!ing and ma!keting %e&e%s is ahisto!i+ de&e%opment 5tho*gh the +ontin*ation o) a %ong

te!m t!end6.

Conside! m*si+ )o! instan+e. St!eaming a*dio on theinte!net o! don%oada(%e =P )i%es i%% !ende! the CDo(so%ete. The inte!net a%so p!o&ides a &en*e )o! thema!keting o) ni+he p!od*+ts and !ed*+es the (a!!ie!s toent! p!e&io*s% imposed ( the need to engage in +ost%

ma!keting 5/(!anding/6 +ampaigns and man*)a+t*!inga+ti&ities.

This t!end is a%so %ike% to !esto!e the (a%an+e (eteena!tist and the +omme!+ia% eFp%oite!s o) his p!od*+t. The&e! de)inition o) /a!tist/ i%% eFpand to in+%*de a%%+!eati&e peop%e. One i%% seek to disting*ish onese%), to/(!and/ onese%) and to a*+tion o)) one3s se!&i+es, ideas,

p!od*+ts, designs, eFpe!ien+e, et+. This is a !et*!n to p!eind*st!ia% times hen a!tisans !*%ed the e+onomi+ s+ene.?o!k sta(i%it i%% &anish and o!k mo(i%it i%% in+!easein a %ands+ape o) shi)ting a%%egian+es, head h*nting,!emote +o%%a(o!ation and simi%a! %a(o*! ma!ket t!ends.



>arke! =ragen!a!ion

In a )!agmented ma!ket ith a m!iad o) m*t*a%%

eF+%*si&e ma!ket ni+hes, +ons*me! p!e)e!en+es andma!keting and sa%es +hanne%s e+onomies o) s+a%e inman*)a+t*!ing and dist!i(*tion a!e meaning%ess. Na!!o+asting !ep%a+es (!oad+asting, mass +*stomiation!ep%a+es mass p!od*+tion, a neto!k o) shi)tinga))i%iations !ep%a+es the !igid oned(!an+h sstem. Thede+ent!a%ied, int!ap!ene*!ship(ased +o!po!ation is a %ate!esponse to these t!ends. The mega+o!po!ation o) the)*t*!e is mo!e %ike% to a+t as a +o%%e+ti&e o) sta!t*ps thanas a homogeneo*s, *ni)o!m 5and, to +onspi!a+ theo!ists,siniste!6 #*gge!na*t it on+e as.



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S.>7EL S@>5 H@DNIN

C(rri%(l( Hi!ae

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<o!n in 1BH1 in Mi!at>am, Is!ae%.Se!&ed in the Is!ae%i De)en+e @o!+e 51BB1BK26 int!aining and ed*+ation *nits.

Ed(%a!ion

!ad*ated a )e semeste!s in the Te+hnion Is!ae%Instit*te o) Te+hno%og, 7ai)a.

Ph.D. in Phi%osoph 5ma#o! : Phi%osoph o) Phsi+s6 Pa+i)i+ ?este!n 4ni&e!sit, Ca%i)o!nia.

!ad*ate o) n*me!o*s +o*!ses in @inan+e Theo! andInte!nationa% T!ading.

Ce!ti)ied EComme!+e Con+epts 'na%st.

Ce!ti)ied in Ps+ho%ogi+a% Co*nse%%ing Te+hniG*es.

@*%% p!o)i+ien+ in 7e(!e and in Eng%ish.

B(siness E;&erien%e

6A@ to 6A@;

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6A@@ to 6AA

Co)o*nde! and Di!e+to! o) /=ik(ats Tes*ah/, a po!t)o%io management )i!m (ased in Te%'&i&.'+ti&ities in+%*ded %a!ges+a%e po!t)o%io management,*nde!!iting, )o!eF t!ading and gene!a% )inan+ia% ad&iso!se!&i+es.

6AA to %resent

@!ee%an+e +ons*%tant to man o) Is!ae%s <%*eChip )i!ms,main% on iss*es !e%ated to the +apita% ma!kets in Is!ae%,Canada, the 4; and the 4S'.

Cons*%tant to )o!eign $ND &ent*!es and to o&e!nmentson ma+!oe+onomi+ matte!s.

P!esident o) the Is!ae% +hapte! o) the P!o)esso!s ?o!%dPea+e '+adem 5P?P'6 and 5(!ie)%6 Is!ae%!ep!esentati&e o) the ?ashington TimesQ.

6AA; to 6AA<

Coone! and Di!e+to! o) man (*siness ente!p!ises:

The Omega and Ene!g 'i!Conditioning Con+e!n 'VP @inan+ia% Cons*%tants 7andiman "ega% Se!&i+es Tota% ann*a% t*!no&e! o) the g!o*p: 10 mi%%ion 4SD.



Coone!, Di!e+to! and @inan+e =anage! o) COSTI "td.

Is!ae%s %a!gest +omp*te!ied in)o!mation &endo! andde&e%ope!. $aised )*nds th!o*gh a se!ies o) p!i&ate p%a+ements %o+a%%, in the 4S', Canada and "ondon.

6AA; to 6AA>

P*(%ishe! and Edito! o) a Capita% =a!kets Nes%ette!dist!i(*ted ( s*(s+!iption on% to doens o) s*(s+!i(e!s

+o*nt!ide.

In a %ega% p!e+edent in 1BB st*died in (*siness s+hoo%sand %a )a+*%ties a+!oss Is!ae% as t!ied )o! his !o%e in anattempted takeo&e! o) Is!ae%3s 'g!i+*%t*!e <ank.

?as inte!ned in the State S+hoo% o) P!ison ?a!dens.

=anaged the Cent!a% S+hoo% "i(!a!, !ote, p*(%ished and%e+t*!ed on &a!io*s o++asions.

=anaged the Inte!net and Inte!nationa% Nes Depa!tmento) an Is!ae%i mass media g!o*p, /7aTiksho!et and Name!/.

'ssistant in the "a @a+*%t in Te%'&i& 4ni&e!sit 5to

P!o). S.. Shoham6.

6AA> to 6AAA

@inan+ia% +ons*%tant to %eading (*sinesses in De&e%oping+o*nt!ies, $*ssia and the Ce+h $ep*(%i+.

Co%%a(o!ated ith the 'gen+ o) T!ans)o!mation o)

<*siness ith So+ia% Capita%.

E+onomi+ +ommentato! in /No&a =akedoni#a/,

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/Dne&nik/, /I&estia/, /'!g*menti i @akti/, /The =idd%eEast Times/, /=akedoni#a Denes/, /The Ne P!esen+e/,/Cent!a% E*!ope $e&ie/ , and othe! pe!iodi+a%s and inthe e+onomi+ p!og!ams on &a!io*s +hanne%s o)De&e%oping +o*nt!iesn Te%e&ision.

Chie) "e+t*!e! in +o*!ses o!ganied ( the 'gen+ o)T!ans)o!mation, ( the De&e%oping +o*nt!iesn Sto+kEF+hange and ( the =inist! o) T!ade.

6AAA to 99

E+onomi+ 'd&iso! to the o&e!nment o) the $ep*(%i+ o)De&e%oping +o*nt!ies and to the =inist! o) @inan+e.

96 to present

Senio! <*siness Co!!espondent )o! 4nited P!essInte!nationa% 54PI6

#e0 and o(rnalis!i% @%!ivi!ies

'*tho! o) eFtensi&e ?e(sites in Ps+ho%og 5/=a%ignantSe%) "o&e/6 'n Open Di!e+to! Coo% Site

Phi%osoph 5/Phi%osophi+a% =*sings/6

E+onomi+s and eopo%iti+s 5/?o!%d in Con)%i+t andT!ansition/6

One! o) the Na!+issisti+ '(*se 'nno*n+ement andSt*d "ist and the Na!+issism $e&isited mai%ing %ist 5mo!ethan B00 mem(e!s6

One! o) the E+onomies in Con)%i+t and T!ansition St*d

%ist.

Edito! o) menta% hea%th diso!de!s and Cent!a% and Easte!n

http://www.dnevnik.com.mk/

http://www.pritomnost.cz/index.php?fulltext=vaknin







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E*!ope +atego!ies in e( di!e+to!ies 5Open Di!e+to!,S*ite 101, Sea!+h E*!ope6.

Co%*mnist and +ommentato! in /The Ne P!esen+e/,

4nited P!ess Inte!nationa% 54PI6, Inte!netContent,e<ook?e( and /Cent!a% E*!ope $e&ie/.

1(0li%a!ions and @ards

/=anaging In&estment Po!t)o%ios in states o)

4n+e!taint/, "imon P*(%ishe!s, Te%'&i&, 1BKK/The am(%ing Ind*st!/, "imon P*(%ishe!s., Te%'&i&,1BB0

/$eG*esting m "o&ed One Sho!t Sto!ies/, >edioth'ha!onot, Te%'&i&, 1BB

/The De&e%oping +o*nt!iesn E+onom at a C!oss!oads On the a to a 7ea%thie! E+onom/ 5ith Niko%a!*e&ski6, Skop#e, 1BBK

/=a%ignant Se%) "o&e Na!+issism $e&isited/, Na!+iss*sP*(%i+ations, P!ag*e and Skop#e, 1BBB, 2001, 2002

The Na!+issism Se!ies e(ooks !ega!ding !e%ationships

ith a(*si&e na!+issists 5Skop#e, 1BBB20026

/The EFpo!te!s3 Po+ket(ook/, =inist! o) T!ade, $ep*(%i+o) De&e%oping +o*nt!ies, Skop#e, 1BBB

/The S*))e!ing o) <eing ;a)ka/ 5e%e+t!oni+ (ook o)7e(!e Sho!t @i+tion, P!ag*e, 1BBK6

/')te! the $ain 7o the ?est "ost the East/, Na!+iss*sP*(%i+ations in asso+iation ith Cent!a% E*!ope$e&ieCEEN=I, P!ag*e and Skop#e, 2000

http://dmoz.org/Health/Mental_Health/Disorders/

http://www.suite101.com/welcome.cfm/npd


http://www.searcheurope.com/






http://www.internetcontent.net/AuthorProfile.asp?AuthorID=14

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http://dmoz.org/Health/Mental_Health/Disorders/


http://www.searcheurope.com/



http://www.internetcontent.net/AuthorProfile.asp?AuthorID=14



http://www.dbook.co.il/ssearch.asp?LookBy=Author&Search=%E5%E0%F7%F0%E9%EF&durl=DAPEYRESHETVK&[email protected]





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?inne! o) n*me!o*s aa!ds, among them the Is!ae%iEd*+ation =inist! P!ie 5"ite!at*!e6 1BB, The $ota!C%*( 'a!d )o! So+ia% St*dies 51BH6 and the <i%ate!a%$e%ations St*dies 'a!d o) the 'me!i+an Em(ass inIs!ae% 51BK6.

7*nd!eds o) p!o)essiona% a!ti+%es in a%% )ie%ds o) )inan+esand the e+onom and n*me!o*s a!ti+%es dea%ing ithgeopo%iti+a% and po%iti+a% e+onomi+ iss*es p*(%ished in (oth p!int and e( pe!iodi+a%s in man +o*nt!ies.

=an appea!an+es in the e%e+t!oni+ media on s*(#e+ts in phi%osoph and the S+ien+es and +on+e!ning e+onomi+matte!s.

Con!a%! ?e!ails:

pa%ma*net.+om.mk

&aknin%ink.+om.mk







>/ #e0 Si!es:

)conom! / %olitics:

http:+eeand(a%kan.t!ipod.+om

%s!cholog!:

http:sam&ak.t!ipod.+omindeF.htm%

%hilosoph!:

http:phi%osophos.t!ipod.+om

%oetr!:

http:sam&ak.t!ipod.+om+ontents.htm%

$et*!n


http://samvak.tripod.com/index.html

http://samvak.tripod.com/contents.html


http://samvak.tripod.com/index.html

http://samvak.tripod.com/contents.html



T$e @(!$or

Sam )aknin is t!e aut!or o% =a%ignant Se%) "o&e Na!+issism $e&isited and ')te! the $ain 7o the ?est"ost the East. *e is a columnist %or Cent!a% E*!ope$e&ie and e+ookeb , a 4nited P!ess Inte!nationa%54PI6 Senio! <*siness Co!!espondent, and t!e editor o%mental !ealt! and -entral .ast .urope categories in /!e

pen 1irector" and Suite0 (

#ntil recentl", !e served as t!e .conomic Advisor to t!eovernment o% 1eveloping countries(

)isit Sam4s eb site at !ttp566samvak(tripod(com















http://dmoz.org/













http://dmoz.org/



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