Securitisation Techniques In Financial Markets Finance Essay - Free Essay Example

Sample details Pages: 9 Words: 2574 Downloads: 5 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? Introduction Securitisation is a structured finance technique that allows for credit to be provided directly to market processes rather than through financial intermediaries. Securitisation describes the process and the result of converting regular and classifiable cash flows from a diversified pool of illiquid existing or future assets of similar type, size and risk category into tradable, debt and equity obligations (liquidity transformation and asset diversification process). Securitisation was first started in United States after the housing market collapsed in early 1930s. Don’t waste time! Our writers will create an original "Securitisation Techniques In Financial Markets Finance Essay" essay for you Create order There are three government sponsored agencies which are involved in creation of mortgage back securities, known as Ginnie Mae (GNMA) Fannie Mae (FNMA) and Freddie Mac (FHLMC) (A.Saunders, M. Cornett, 2008 p.815) In simple securitisation is a process where pool of illiquid assets such as long term loans, mortgages, and other illiquid assets are transferred into liquid assets by selling them to outside investors. Securitisation has become very popular with the banks worldwide as it helps the financial institutes to write off the illiquid assets of their balance sheet, helps to reduce the taxes, frees the capital for further investments, and reduces risk. Different researchers have given different definitions to securitisation, (Y. Altunbas, et.al) defines Securitisation as the process whereby individual bank loans and other financial assets are bundled together into tradable securities, which are sold onto secondary market. The other definition given by (C. Cardone-Riportella, et.al ) is Securitisation is a financial technique that allows a batch of illiquid assets to be transformed into a liquid tradable instrument with a known flow of income payments. Whereas (S. Saunderson, 1997 p.359) defines securitisation as a framework in which some illiquid assets of a corporation or a financial institution are transformed into a package of securities backed by these assets, through careful packaging, credit enhancement, liquidity enhancement, and structuring. The other definition given by (Cox, 1990 p.2 and Kendall, 1996 p.1-2) securitisation is the process where pools of individual loans, receivables or debt instruments are packaged in the form of securities, the credit status or rating of the securities are enhanced and distributed to investors in simple we could explain securitisation as a mechanism of pooling of a group of loans and selling them to the investors in the secondary market. This paper aims to understand the process of securitisation, its advantages and disadvantages, and then we will look onto some cases on financial institutes which did failed for too much dependence on securitisation, Northern Rock Bank was one of the bank which collapsed in UK due to overdependence on Securitisation and short term funds. Until 2007 Securitisation was the most favourable process used by banks and different financial institutions but too much dependence on it lead many financial institutes to collapse. Process of Securitisation There are a number of participants in Securitisation process, firstly there is an Originator- which is usually a financial firm, or a bank, the assets of the originator such as mortgages, credit card receivables, automobile loans, etc are pooled together to securities for writing off those assets from the Originators Balance sheet. In second step there is an Issuer- often called as Special Purpose Vehicle (SPV). The SPV is a company or it can be another Bank which is specially set up for the purpose of securitisation. The SPV holds the securities, which are the sole owners of the securitised assets, the SPV issues the notes/bonds to the investors which are backed by the pool of assets, but before the notes/bonds been issued there are several other parties are involved during this process, such as the credit scoring companies, Trustees, Servicer. The rating agency advices the originator on assets, examines the credit quality of the pooled assets, and rates the assets to AAA, or AAB, etc. before the bonds been issued to investors. In some cases the underwriters are involved as well during this process. A servicer in many instances is an originator. The servicer is responsible to collect the interest/instalments on loans/mortgages deriving from the pooled assets and pays it to the Trustees. Servicer entitles for a fee for the timely collection of instalments. Trustees act on behalf of investors and looks onto the performance of the other parties involved in the process, reviews periodic information on the pooled assets and takes any legal action on defaults to protect the investors. The large purchasers of the securities are insurance companies and pension funds. These bonds issued are very much favourable to the investors as they are less risky compared to any other investments. These bonds are protected against the default risk. For e.g. a bond is issued by a mortgage backed security and the property price goes down or the buyer defaults then the bondholders w ould be at risk unless been insured by the external guarantor, or even if the originator went bankrupt then too the bonds are safe, as the bonds are insured and are low on credit risk. Originator (e.g. Bank creates mortgages on Balance Sheet) Sale proceeds (payments) Asset Pool SPV Class A Notes Investors (life insurance, pension funds) Note issue Class B Notes Class C Notes The above chart demonstrates the process of securitisation in simplest mode. As we can see the originator pools the assets and transfers them to a SPV and then the notes/bonds are sold in the secondary market. The sale proceeds are transferred to the originator and can be reused to create new mortgages. (A. Teesdale, 2003, A. Sayman) Case Study To simplify the process of securitisation, we can take one case study of a ABC commercial bank established in the European union. ABC bank is involved in retail and corporate banking sector, and also provides loans to housing consumer sector, special financial services, and investment fund management. The main business of bank is to provide housing finance. ABC bank intends to expand, for which it requires additional finance but banks liability consist of long term B rated debt which it intends to replace with less expensive process and even wants to free a part of regulatory capital. So it could expand in to BB-rated country. The bank could achieve this by two processes. We will look at the initial position of Bank Balance sheet ASSET 1000 Housing Loans 605 Securities 245 Cash at hand 30 Interbank Placement 120 LIABILITIES 1000 Retail Deposits 662 Interbank Deposit 68 BB rated Loans 225 Shareholders Equity 45 The Bank has two option on funding first by taking a collateralised Loan or by Securitisation. Bank wishes to raise Euro 200 million in both the cases. Collateralised Loan: In this the Bank takes a collateralised loan of Euro 200 million whose interest rate is 9.5% which is less expensive then the B rated Bonds. By doing this the Banks asset side of the Balance sheet remains unchanged. A new liability is shown on the Banks Balance sheet. The net interest income is improved as cost of funding is decreased. The bonds proceeds are replaces by a loan. But this process is not that favourable compared to securitisation. The other method which Bank could take is securitisation. In this process the Bank pools the low risk housing loans together and sells them to XYZ company which is a special purpose vehicle (SPV). The ABC Bank has set up a XYZ SPV to implement the securitisation transaction. To min imise the initial capital and tax burden the SPV is registered in Lichtenstein. The borrowers of the loan continue to pay the loan instalments to the originator i.e., ABC company and ABC company then passes them to the SPV. SPV issues either Bonds/ Notes and sells them to investors in the secondary market. The SPV pays the sale proceedings to the originator. So now the Banks Balance sheet has changed. ASSETS 1000 Housing Loans 405 Securities 245 Cash at hand 230 Interbank Placement 120 LIABILITIES 1000 Retail Deposits 662 Interbank Deposit 68 BB rated Loans 225 Shareholders Equity 45 The Balance sheet of XYZ Company appears as; ASSETS 201 Housing Loan 200 Cash 1 LIABILITIES 201 Securities 200 Equity 1 So from the above procedure we could see Securitisation procedure is favourable as it takes off the long term assets from its Balance sheet and makes quick availability of cash and transfers risk to other parties. There are many more advantages to securitisation which are given below. Advantages of Securitisation Securitisation is very much favourable to many of the financial institutes and is accepted worldwide. Banks securitise their assets to free the long term investments and reduce risks. Different researchers have given different advantages to Securitisation, (A. Jobst, 2006, H. Shin, 2008, D. Barnes, N. Warman, 2000, www.rbnz.govt.nz, www.rbidocs.rbi.org.in) like securities which are issued by securitisation have a good credit rating as they are backed by assets and are scored by credit rating agencies, so these securities get sold quickly in the secondary market. The cost of raising fund via securitisation is a cheaper mode then borrowing money on interest, or depending on deposits. The other benefit to the Banks is it helps to reduce or pass on risk to other parties, Banks face many different risks on the loans, such as interest rate risk that the interest rate will move on diverse side and it will affect the Banks profitability or make loss. Liquidity risk that the Bank wont have enough cash to pay its depositors. Credit risk that the borrower will default and wont be able to pay the debt. So securitisation is preferred by the Banks as it helps to reduce or pass on risk to other parties. Securitisation helps Bank to covert the illiquid assets in to liquid funds very quickly which could be reinvested and helps to raise the turnover of the assets on Banks Balance sheet. It also gives regulatory advantage. As per the rules set by Basel II pillar I minimum Capital requirement Banks do need to hold minimum Capital to risk weighted asset ratio. (www.bis.com) By securitisation process the assets are taken off the Banks Balance sheet which helps to reduce the minimum Capital holding requirement which in turn improves the leverage ratio and further improves the Return on Equity. The Income of the Financial Institutes is improved as the Banks charges onetime fee on loans it processes and by retaining the responsibility to service them the Banks income of loan charges are unaffected by any change in interest rates. It even builds up confidence for the Financial Institutes in the financial market. It helps Financial Institutes to diversify to loans portfolio beyond few companies, industries, or geographical location and can increase their sources of fees and interest income. It also helps to invest in to different lines of business and avoid single type of credit risk. Further easy available of funds help the Financial Institutes to compete and even benefits the borrowers to borrow at low rate of interest. Disadvantages of Securitisation Along with the advantages given above there are some disadvantages as well which are given by many researchers. Until 2007 securitisation was the very much acceptable and favourable process used by many Financial Institutes worldwide (H.Shin, 2009) says there are two pieces of received wisdom concerning securitisation one old and one new. The old role emphasise a positive role played by securitisation but the subsequent credit crises has somewhat tarnished the positive image. Easy and cheap available money has motivated the borrowers and companies to borrow and lend more than they should. Many researchers as, (H Shin, 2009. D. Rakesh have argued that the main reason for the subprime crisis was the securitisation, over dependence on it has nailed the fianacial system in many countries. Securitisation is a very complex process with many different parties involved in it such as SPV, credit rating agencies, underwriters, Trustees, etc. So it is difficult for Banks to ensure that all risks arising from securitisation are appropriately managed. The Securitisation process is expensive when the assets to be securitised are not large. The other disadvantage is that Banks would securities all their best assets, thereby lowering the overall quality of assets on Balance sheet, Since the better quality of assets are more likely to be suitable for securitisation. Securitisation Failure Until 2007 Securitisation was the most preferred process used by financial institutes for their growth, but after 2007 due to the credit crunch and too much dependence on securitisation lead the financial institutes to collapse, we could see this from the figures in Europe the total volume of securitised assets grew from 78.2 billion Euros in 2000 to 711.3 billion Euros in 2008, but later it dropped to 414.1 billion euros in 2009, due to freezing of credit market and loss of confidence on asset backed securities. From the current sub-prime crisis we have learned the lesson that even too much dependence on securitisation could even lead the companies to failure, so was the case with northern Rock bank in U.K. it was the first bank in U.K. which experienced a bank run and had to rush to Bank of England as a lender of last resort. Securitisation was the central part of the Northern Rocks overall business strategy (D. Llewellyn, 2008) The main business of Northern Rock was to lend mort gages, and to fund these mortgages it depended heavily on securitisation and short term funding. Northern Rock pooled it mortgages and sold them in the secondary market in form of Mortgage Back Securities (MBS). These MBS were purchased by banks around the world. Securitisation and Colateralized Debt Obligation (CDO) were the two major instruments of the financial market turmoil. Easy availability of funds via securitisation motivated the financial institutes to lend money to sub-prime buyers with low income, credit ratings, etc. (H.Shin, 2009) says As Balance sheet expands new borrowers must be still need to expand, then Banks have to lower their lending standard in order to lend to subprime borrower. The seed of the subsequent downturn in the credit cycle are thus sown. When the interest rates went high almost 80% of the borrowers defaulted which led many banks go bankrupt, further led property markets go down and affected the whole economy. This is when the credit market freezed up especially for asset backed securities, MBS, CDOs. As a result of this there was a loss of confidence on asset backed securities throughout the globe. Although Northern Rock was not exposed to US sub-prime mortgage it become caught up in all this because of its business model: securitisation as a central strategy and reliance on short term money market funding. (D. Llewellyn, 2008) Due to loss of confidence on ABS and freeze in capital made Northern Rock to suffer, as it could not securities its mortgage loan in the funding market and had to hold the assets on its balance sheet. Majority of the assets of Northern Rock were long term residential mortgages so had little scope to reduce the Balance sheet in a flexible way once the crisis struck (H. Shin, 2008) like northern rock there were many different companies worldwide which did collapsed due to overdependence on Securitisation. Conclusion The aim of this article was to indicate how Securitisation process works, what are the advantages and disadvantages of securitisation. A case study is presented to better understand the securitisation process. The example of Northern Rock failure is been highlighted in this article to understand that overdependence of securitisation could lead to failure. From the current sub-prime crisis Basel committee has made some efforts to improve the banking capital structure by increasing the percentage of minimum capital requirement. Besides the current financial crisis Securitisation will continue to play a significant role in future for banks to grow.

Toxicity of Compound in the Zebrafish Bioassay Lab Report - 1

Essays on Toxicity of Compound in the Zebrafish Bioassay Lab Report The paper "Toxicity of Compound in the Zebrafish Bioassay" is a good example of a lab report on chemistry. For Dr. Pack, our UPenn gastroenterologist collaborator, to test the toxicity of compound 2 in the zebrafish bioassay, we provided Dr. Porter with the compound. At the end of the chemical reaction session, a certain research grouped challenged that they were in a position to isoflavone using AlCl3in dioxane. In this case, the group did not state any conditions for this reaction to take place. As such, I decided to optimize the reaction conditions starting with the model compound Chromanone. In this case, I mixed chromanone and AlCl3 in dioxane and then refluxed the content for 3 hours. Unfortunately, I did not obtain positive results and hence I was prompted to repeat the procedure. In this attempt, I decreased dioxane’s volume from 50 ml to 20 ml, used 10% of AlCl3, and I prolonged the reaction time from 3 hours to 12 hours. During the reaction, I monitored the proceeding using TLC. However, I did not obtain the intended products after several tests. In the third attempt, I changed most of the conditions and measured used in the first two trials. In this case, I used 0.500 gm of chromanone in 20 ml dioxane and 0.40 mg of AlCl3 which represents 10% of the starting material. I also reduced the frequency of monitoring to 2 hours. After the first two hours, the starting materials had completely disappeared. This indicated that I had optimized the TLC condition, by using different ratios of ethyl acetate and hexane. Then, I ran prep-TLC and I realized 4 different compounds. I then separated these 4 new products and conducted tests by NMR. However, the 4 compounds did not match the expected NMR spectrum of the desired product.My failure in these experiments prompted me to carry out research in journals and other materials. In this case, I came across some work discussing ring opining reaction on isoflavanones. The source has indicated all the conditions and the details about the experiment. However, the source suggests that I should use LiAlH4 which is a hazardous chemical. We had training with Dr. West on pyrophoric materials and now we are fully prepared to do the reaction.

Leonardo Pisano was the first great mathematician Essay Example For Students

Leonardo Pisano was the first great mathematician Essay of medievalChristian Europe. He played an important role in revivingancient mathematics and made great contributions of his own. After his death in 1240, Leonardo Pisano became known as LeonardoFibonacci. Leonardo Fibonacci was born in Pisa in about 1180, the son of a member of the government of the Republic of Pisa. When he was 12 years old, his father was made administer of Pisas trading colony in Algeria. It was in Algeria that he was taught the art of calculating. His teacher, who remains completely unknown seemed to have imparted to him not only an excellently practical and well-rounded foundation in mathematics, but also a true scientific curiosity. In 1202, two years after finally settling in Pisa, Fibonacciproduced his most famous book, Liber abaci (the book of theCalculator). The book consisted of four parts, and was revised byhim a quarter of a century later (in 1228). It was a thoroughtreatise on algebraic methods and problems which stronglyemphasized and advocated the int roduction of the Indo-Arabicnumeral system, comprising the figures one to nine, and theinnovation of the zephirum the figure zero. Dealing withoperations in whole numbers systematically, he also proposed theidea of the bar (solidus) for fractions, and went on to developrules for converting fraction factors into the sum of unitfactors. We will write a custom essay on Leonardo Pisano was the first great mathematician specifically for you for only $16.38 $13.9/page Order now At the end of the first part of the book, he presentedtables for multiplication, prime numbers and factor numbers. Inthe second part he demonstrated mathematical applications tocommercial transactions. In part three he gave many examples of recreationalmathematical problems, much like the type which are enjoyedtoday. Next he prepared a thesis on series from which was derived what is now called the Fibonnaci series. The FibonacciSequence is also named after Fibonacci. The Fibonacci sequenceis a sequence in which each term is the sum of two termsimmediately preceding it. The Fibonacci Sequence that has one asits first term is 1, 1, 2, 3, 5, 8, 13, 21, 34, 55. . . . Thenumbers may also be referred to as Fibonacci numbers. Fibonaccisequences have proven useful in number theory, geometry, thetheory of continued fractions, and genetics. They also arise inmany unrelated phenomena, for example, the Golden Section, (whosevalue is 1.6180) a shape valued in art and architecture becauseof its pleasing proportions, and spiral arrangement of petals andbranches on certain types of flowers and plants. In the final part of the book Fibonnaci, a student of Euclid, applied the algebraic method. Fibon accis book, the Liberabaci remained a standard text for the next two centuries. In 1220 he published Practica geometriae, a book on geometrythat was very significant to future studies of the subject. In ithe uses algebraic methods to solve many arithmetical andgeometrical problems. He also published Flos (flowers) in 1224. In this work he combined Euclidean methodology with techniques ofChinese and Arabic origin in solving determinate problems. Liber quadratorum was published in 1225(Book of SquareNumbers) was dedicated to the Holy Roman emperor, Frederick II. This book was devoted entirely to Diophantine equations of thesecond degree (i.e., containing squares). The Liber quadratorummay be considered Fibonaccis masterpiece. It is a systematicallyarranged collection of theorems, many invented by the author, whoused his own proofs to work out general solutions. Probably hismost creative work was in congruent numbers- numbers that givethe same remainder when divided by a given number. He worked outan original solution for finding a number that, when added to orsubtracted from a square number, leaves a square number. .u64193097a518662e3a49bc1a1fa9125e , .u64193097a518662e3a49bc1a1fa9125e .postImageUrl , .u64193097a518662e3a49bc1a1fa9125e .centered-text-area { min-height: 80px; position: relative; } .u64193097a518662e3a49bc1a1fa9125e , .u64193097a518662e3a49bc1a1fa9125e:hover , .u64193097a518662e3a49bc1a1fa9125e:visited , .u64193097a518662e3a49bc1a1fa9125e:active { border:0!important; } .u64193097a518662e3a49bc1a1fa9125e .clearfix:after { content: ""; display: table; clear: both; } .u64193097a518662e3a49bc1a1fa9125e { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .u64193097a518662e3a49bc1a1fa9125e:active , .u64193097a518662e3a49bc1a1fa9125e:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .u64193097a518662e3a49bc1a1fa9125e .centered-text-area { width: 100%; position: relative ; } .u64193097a518662e3a49bc1a1fa9125e .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .u64193097a518662e3a49bc1a1fa9125e .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .u64193097a518662e3a49bc1a1fa9125e .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .u64193097a518662e3a49bc1a1fa9125e:hover .ctaButton { background-color: #34495E!important; } .u64193097a518662e3a49bc1a1fa9125e .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .u64193097a518662e3a49bc1a1fa9125e .u64193097a518662e3a49bc1a1fa9125e-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .u64193097a518662e3a49bc1a1fa9125e:after { content: ""; display: block; clear: both; } READ: Is Humanity Suicidal EssayLeonardos statement that X + Y and X Y could not both besquares was of great importance to the detemination of the areaof rational right triangles. Although the Liber abaci was moreinfluential and broader in scope, the Liber quadratorum aloneranks its author as the major contributor to number theorybetween Diophantus and Pierre de Fermat, the 17th-century Frenchmathematician. Except for his roll of spreading the use of the Hindu-Arabicnumerals, Fibonaccis contribution to mathematics has beenlargely overlooked. His name is known to modern mathematiciansmainly because of the Fibonacci Sequence dervived from a problemin the Liber abaci:A certain man puts a pair of rabbits in a place surrounded onall sides by a wall. How many pairs of rabbits can be produced from that pair in a year, if it is supposed that every montheach pair begets a new pair which from the second month onbecomes productive?The resulting number sequence, 1,1,2,3,5,8,13,21,35,55(Leonardo himself omitted the first term), in which each numberis the sum of the two preceding numbers, is the first recursivenumber sequence (in which the relation between two or moresuccesive terms can be expressed by a formula) known in Europe. Fibonacci died in around 1240 and despite Fibonaccisimportance as the most orginal and capable mathematician of the medieval world, none of his work has been translated intoEnglish. In the 19th century, the term Fibonacci Sequence wascoined by the French mathematician, Edouard Lucas, and since thenscientists began to discover the numbers in nature which broughtabout a new interest in the topic. Although still relativelyunknown in the United States, there is a Fibonacci Associationin California. The purpose of that association is to encourageresearch in the topics that this great man once mastered.

Market-Driven Job Evaluation and Job-Worth Systems Sample

Question: Discuss the similarities and differences between market-driven job evaluation and job-worth systems of job evaluation. Describe an example of each approach and provide the rationale for why it is the best approach for the situation described. Answer: Introduction Due to the evolution of the contemporary business world, companies are continuously searching for specialised ways for constructing a workforce, which actually helps them to deal with the changing economic perceptions. Edwards (2012) proposed that job creation and inflation related to various goods and services are mainly responsible for developing a climate requiring the useful involvement of a suitable human resource plan in the right place for the majority of corporations of modern day. In this particular scenario, it is constructive for the human resource managers to determine the job worth, which can be performed by conducting a job evaluation based on the current market needs (Day, 2012). It is observed that the certain implication of the process encourages the organization to achieve success along with the other potential contributions from the information documented through the extensive research. In order to achieve the organizational aims productively, the management must n eed to adopt a market-driven approach for luring the talents from the market, recruiting them to the company, and retaining them with the workforce (Kinyili, Karanja, Namusonge, 2015). However, there is a significant level of difference between the market-driven job evaluation and job worth system regardless of their mutual connection with the workforce development. Therefore, this paper is formed with the aim of developing a suitable discussion regarding the Market-driven Job Evaluation vs. Job Worth for elaborating critical understanding on what the organizations should need to exercise internally or externally. Similarities and Differences between Market-driven Job Evaluation and Job-worth System of Job Evaluation As dictated by day (2012), companies from the modern day environment are always looking for a sustainable niche, which might contribute to their survival in the respective marketplaces. By the investigation regarding the historical timeframe, it is observed that the organizations are going through an ever changing redesigning process from both internally and externally for countering the risks associated with the market settings (). With reference to the identified fact, often the organizations can be seen designing new jobs, placements, and classifications in accordance to the needs of its customers or organizational strategies. Furthermore, companies may create an entirely innovative division for just in place for addressing the new trends, technologic needs, and development requirements for the corporation. From the above understanding, it can be assumed that the job evaluation techniques are followed for brewing a more personalised product or service and offering them to the customers for enriching their buying experience (Effort, 2013). Here, Kinyi and Karanja (2015) have indicated the suggestion provided by the talent management experts Susan Cantrell and David Smith to ensure the introduction of a revolutionary new system for managing people within the organization adeptly. The particular system exerted by the experts was known as Workforce of One eliminating the generic approaches for responding to the workforce requirements while leveraging more on the development of a highly nuanced and customised system for every employee (Edwards, 2012). The result of the study reflects the formation of a new relationship between the employees and the organizations. Kinyi and Karanja (2015) has further investigated the fundamental outcomes of such process and come up with the findings that the core application of the modified approach lowers the rate of employee turnover, maximiss the productivity, and enhances profit margin across the organizations. The job-worth evaluation sufficiently contributes the the achievement of proposed goals of the identified system. On the other hand, a market-driven evaluation is principally performed by the team responsible for managing performance of the workforce (Bamberger, Biron, Meshoulam, 2014). As part of the process, a systematic methodology is organised by the team with the intention of overseeing the primary requirements for each department and unit within the corporation. Effort (2013) has indicated some unique factors regarding the roles played by the performance management team. According to the investigation of the identified literature, performance management system is responsible for creating job reports according to the evaluation standards when they notice the need of another department or position for supporting the alleviation of the assessed burden faced by the other divisions. The same process is applied for engendering resolutions for the complaints raised by the customers as well (Kerzner, 2013). Therefore, the identified scenarios give rise to the job evaluation process by setting the standard criteria, which are ultimately submitted at the annual conference held by the company. Most importantly, it is worthy enough to mention that job assessment done by following the job worth system deals with the specific worth of an employees position while determining quantity of compensations for acquiring the identified position (Ulrich, 2013). Hence, job worth is momentously important for the companies to follow for providing a justifiable position to the employees during the lines of inflation, pay rates, and cost of living. Edwards (2012) has explained that a regular supervision by the performance management department helps them to determine whether there is a need for increase within the hired position of a certain department. From the overall analysis, the fundamental similarity between Market-driven and job-worth is improving the capabilities of the organization for satisfying the differing needs of customers as well as employees. However, the major difference between the two systems is that internal equity is maintained by job-worth, where market-driven approach reflects how external environment is affecting the organizational position (Purce, 2014). Example of Each Approach and their Rationale The significant rise of job-worth is caused due to the volatility of the current business environment influenced by exchange rate fluctuations or inflation of products or services (Tyson, 2014). Different industries from the global platform may it be retail, information technology, or food and beverage sectors are all continuously devoted to achieving the prominent share of growth from their target market. According to Kerzner (2013), the growth objectives of different firms are largely dependent on considering an evaluation for determining the necessity of employee growth, pay rises, and workforce retention. The rationale behind the process is simply based on defining and developing a balance supply and demand where the prominence is provided to the implementation and development (Goetsch Davis, 2014). On the other hand, listening minutely and fulfilling the requirements of consumers should be the foremost priority of a business irrespective of its operations under a small and medium enterprise or the major corporate guidelines. Such a scenario cause the application of a market-driven approach, as the process encourages the company to use a Consumer Price Index (CPI) for scrutinizing the needs of market consumers and supporting the measurements associated with the different areas of the company (Mathis, et al., 2016). For example, the need for modifications to the specific product, service, or department can be categorised as the market-driven approaches. The overall explanation of the two different concepts can be suitably clarified through an example. In the short run, monetary policy highly influences inflation and the nation-wide demand for the product and service. The given situation raises demand for the capable employees who can deliver quality products and services to the c ustomers while drives the organization to undertake the job-worth evaluation to attract those talents and satisfy the complicated demands for promoting the financial standing of the business (Tyson, 2014). Conclusion From the rationale obtained through the typical arguments and comparisons rendered throughout the paper, it can be determined that consumers and employees are two principal factors that the company should leverage upon to ensure the smoothness in whole business functionality. Consumers determine the market-driven approach for the companies whereas employees represent the job-worth evaluation. Consumers are the ones setting the bar for enterprises regarding its future operations like the ways it will induct to hire employees and the type of goods and services produced for consumption. On the other hand, the corporation needs to stress on its internal environment to improve the job positions for its employees for continuously meeting the diverse needs of customers. It is vital for the firms to take suggestions from the performance management experts to satisfy the consumer demands alongside the employee concerns prosperously. The simultaneous presence of both types of job evaluation ul timately leads the organization to provide assistance on analysing and creating jobs. References Bamberger, P. A., Biron, M., Meshoulam, I. (2014).Human resource strategy: Formulation, implementation, and impact. Routledge. Day, N. E. (2012). Pay equity as a mediator of the relationships among attitudes and communication about pay level determination and pay secrecy.Journal of Leadership Organizational Studies,19(4), 462-476. Edwards, M. R. (2012). Employer branding: developments and challenges.Managing Human Resources: Human Resource Management in Transition,5. Effort, D. (2013). 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