Evaluation Of Indonesias Market Export Of Sabah Tea Marketing Essay

Evaluation Of Indonesias Market Export Of Sabah Tea Marketing Essay 1.1 An overview of Malaysia and Indonesia Malaysia is a nation that situated in central of South-East Asia, bordering Thailand in the north with Singapore to the south and Indonesia to the south and west. The capital of Malaysia is Kuala Lumpur. The nation also includes Sabah and Sarawak on the island of Borneo to the east. Sarawak has an alluvial soil and swampy coastal plains with rivers penetrating the jungle-covered hills and mountains of the interior. This enriches the nation with great agricultural strength. Most of the area in Malaysia is covered by forest, with a mountain range running the length of the peninsula. Extensive forests provide ebony, sandalwood, teak and other wood. The nation is among of the worlds largest producers of computer disk drives, palm oil, rubber and timber. Nevertheless, it has a state controlled car maker, Proton and tourism has considerable room for expansion. Major agricultural products are rubber, palm oil, cocoa, rice, coconuts, timber, and pepper. Major trading partners of Malaysia are Singapore, China, Japan, Thailand Hong Kong and Indonesia. (CIA The World Factbook, 6 April 2011) The official language of Malaysia is Malay language (Bahasa Melayu) and population of 28 million over, 43th rank of populous in the world. There are three main ethnics groups in Malaysia, the Malays 60%, the Chinese 26% and Indians and the indigenous make up the rest. (BBC NEWS, 9 March 2011) The climate in Malaysia is tropical with high temperatures and humidity throughout the year. The temperature ranges between (89-72 degrees F). There are two seasons as well as Indonesia, the rainy monsoon and dry season. (World Travel Guide, n.d) Indonesia is a nation of islands consisting of 17,508 islands in the South East Asian Archipelago. The capital of Indonesia is Jakarta. Indonesia is known as the worlds largest archipelagic nation. With a population of 200 million over and it is the worlds most populous country. This strategic location has a significant influence towards its Culture, Social, Politics and Economy. Major agricultural products include palm oil, rice, tea, coffee, spices and rubber. Some big industries in Indonesia are petroleum and natural gas, textiles, apparel and mining. Indonesias major trading partners are Japan, the United States, Singapore, Malaysia and Australia. (PT Jakarta Setiabudi Internasional TBK, n.d) Indonesias population can be roughly divided into two groups, the west of the country is mostly occupied by Malay people, while the east is more Pacific. The official language of Indonesia is Indonesian (Bahasa Indonesia) and about 88% of the population is Muslim. An extimated of 10% of Chri stian and approximately 2% is Hindu and Buddhist. The climate in Indonesia is mostly equatorial. The temperature ranges between 16-35 degrees Celsius (61-91 degrees F) with humidity ranging from 60- 90 percent. There are two seasons which are the rainy monsoon season (November through May), followed by the dry season (June through October). (World Travel Guide, n.d) 1.1 History of Sabah Tea Sabah tea plantation is the first that nestled into the tropical wilderness of Malaysias first ever World Heritage Site, Mount Kinabalu, and a 6,200 acre (2,509 hectares) land at 2,272 feet above the sea level. It is surrounded by the worlds oldest rainforest of about 130 million years. Sabah Tea plantation is the largest single commercial tea plantation in Borneo with approximated area of 1,000 acres endowed with Camellia Sinensis, (an interesting plant and agriculture resources). 3 In 1976, the state government of Sabah had decided to alienate a total of 6,200 acres of land in Kampung Nalapak to Koperasi Desa (KPD). Then, Sabah Tea Sdn Bhd was then incorporated on April 26, 1978 as a subsididary of KPD to operate and manage the tea plantation. The Honorable Prime Minister, Datuk Seri Dr. Mahathir Mohammad officially opened the Sabah Tea Plantation on February 19, 1984. (Sabah Tea, n.d) Sabah Tea Sdn Bhd is now a member of Yee Lee Corporation bhd. Sabah Tea Sdn Bhd sold its entire shares to Yee Lee Corporation Bhd in the year 1997. Yee Lee Corporation is a well diversified company with active subsidiaries covering manufacturing, distributing and selling a wide array of Fast Moving Consumer Goods (FMCG) in both locally and Internationally. 1.2 Corporate Information Sabah Tea Plantation is an organic tea plantation in Ranau, Sabah and it is known for its 100% organic tea. On the production of its tea, Sabah Tea Garden is the sole producer of organic tea in Borneo. The company has exports 15% of its products throughout Australia, New Zealand, Canada, Britain and Singapore and 85% are the remaining for domestic consumption. Sabah Tea sdn bhds export has contributed about 10% to the companys income. Sabah tea has also expanded to become a popular holiday destination for both the locals and the foreign tourists around the world, while remaining to produce tea. Sabah tea Garden is the destination which is located in one of the oldest rainforests in the world, Mount Kinabalu. The Sabah Tea Garden has an area of 6,200 acre (2,509 hectares) and a total area of 485.6 hectares (1,200 acres) are been use for cultivation of tea and tourism activities while the rest remains a tropical forest rich with flora and fauna. 4 During the year under review, a drop of 2.4% of tourism in Sabah Tea Garden as compared to the previous year( 2008). The number of local visitors arrived to Sabah has an increased of 5.3% but a tremendous declined in International Visitors, 19.8%. However, this did not stop Sabah Tea Sdn Bhd from achieving 12.3% (RM0.73 million) of sales growth in 2008 to RM0.82 million in 2009. Sabah Tea is upgrading its facilities as well as creating more tourists to come, plus with aggressive marketing strategies, Sabah Tea is confident to increase in tourists. Nevertheless, the impact of the global financial crisis in 2008 flawed into 2009. As a result of the weak market demand, the revenue of Sabah Tea has dropped to 8.3%, from RM76.07 million, 2008 to Rm69.79 million, 2009. Various solutions were been taken to improve on the delivery efficiency, store coverage and working capital management to boast sales and profitability. This in the end has maintained its profitability. (Yee Lee Corporation 2009 annual report) 2.0 Environmental Analysis 2.1 Political and Legal factors Indonesia was a country that was being governed by Dutch, so the Indonesians legal system is closely related to the Dutchs systems. Indonesias new bankruptcy, capital market and company laws are now based on international best practice where initiatives aim to provide greater certainty to creditors and investors across the Indonesian corporate sector are implemented by the government. It is crucial for foreign investor to understand the importance of legal system of Indonesia as it plays an important role that may influences the business. Political change and reform did bring impact to Indonesia economy status. Indonesias president has stress on strong political will to reduce corruption, which is the key to solve Indonesias economic problems. 5 This will lead to newly strengthened independent auditors and greater central bank independence that could enhance the effectiveness of policy implementation and governance efficiency. (Perkins, 2000). Regarding the laws of share ownership, Indonesia Government Regulation No.20/1994, Article 6, the Indonesian partners shares shall be at least five percent (5%) of the total paid- up capital of the company upon its establishment, with that the company is not required to divest its shares to Indonesian parties within 15 years and this is also an advantage upon forming of Joint Ventures. This is a great advantage that Sabah Tea can consider in joining venture with other company, like for example BOH Tea and Kurnia Tea (Indonesias Tea Manufacturer) example, they had joint venture together. In this case, Kurnia Teas shares will stand approximately 50% of the total paid-up capital upon mutual agreement between both parties when establishing BKI (BOH and Kurnia Tea) for tea business. According to the legal system of Indonesia, company (in this case Sabah Tea) must submit a proof that they have paid the issued capital, if Sabah Tea would consider about joint venture with other tea company in Indonesia. Also, the funds being transferred have to be reported to the Indonesias Government. They have the right to draw taxes of 20% or royalties from the business since foreign direct investment companies must pay corporate income tax based upon Indonesian source revenues. (Introduction to the Indonesian Tax System) There are employment rules to oblige to as well according to the Employment act of Indonesia. Indonesia has one of the largest labour forces in the world which make it stand on 5th  rank. So, to protect the labour rights the government has made a law called Labour lawsArticle 28D (2). According to this law 7-hour workdays and 40-hour workweeks, with one 30-minute rest period 6 for each 4 hours of work is legal in Indonesia. One day of rest weekly also mandatory in Indonesia. In April 1992, the Government of Indonesia signed a Memorandum of Understanding with the International Labour Organization under the International Program for the Elimination of Child Labour (IPEC) where the minimum working age is 14 years. (Labour Social Protection in Indonesia, 2009). Principally, labor matters in Indonesia are regulated by some laws and regulations as below: Law Number 13 of 2003 concerning Manpower This law concerns on Manpower and includes matters of employees minimum wage, working hours, training programs, benefits and allowances. Law Number 21 of 2000 concerning Labor Unions Labor Union is formed if there are ten or more employees in a company joined the union. Besides, BKI has to ensure that their employee is joining the right Labor Union and cooperate with the respective Union to prevent the occurrence of disputes between the company with union. (Budiardjo et al., 2005) Law Number 1 of 1970 concerning Work Safety Work Safety concerns on workplace safety and the benefits or compensation due when an employee is injured while on duty. It is important for SKI to ensure the workplace safety of the company especially the company plantation and manufacturing workplace. Inspection on workplace safety has to be carried out for every certain period to ensure the workplace is safe and every employee is following the workplace rules and regulations. (Budiardjo et al., 2005) 7 Law Number 3 of 1992 concerning Worker Social Security In Indonesia, an employer with 10 employees or more or having a payroll of at least one million rupiah a month is obligated to ensure his or her employees are joining the Social Security for Manpower (Jaminan Sosial Tenaga Kerja), Jamsostek program that consists of employees occupational accident security, death coverage, old age security, and health maintenance security. 5. Law Number 11 of 1992 concerning Pension Funds. A company in Indonesia can provide a pension scheme for its employees by way of pension fund set up and controlled by the Employer, which also known as Employers Pension Fund. Besides, there is law concerning human rights which is Legislation Number 39 Of 1999 Concerning Human Rights Section Seven, Right to Welfare. Both men and women who works has the right for pay equilibrium to work, fair and adequate remuneration. In this case, Indonesia will exercise no discrimination among male or female who will performing equal workload and paid according to their job scope and provide adequate rewards and compensations for the entire employees to ensure it is sufficient for both own and family expenses. (Muladi, 1999) 2.2 Economical factor Indonesia is considered as a developing country. Developing country is a term generally used to describe a nation with a lower level of income. With the Government Policies and Treasure of National Resources, Indonesia GDP has been growing and increasing rapidly from last few years. Indonesia spends GDP of 23.5% to develop their nation. According to the last budget 8 announcement, Indonesia had revenues of $92.62 billion and expenditures of $98,88 billion in year 2008. It has been 23rd rank in Oil production and 8th position in natural gas production and export as well. (The World Bank, 2008) GDP:   Indonesia has made significant economic advances through last years. Indonesias debt-to- GDP ratio in recent years has declined because of increasingly robust GDP growth which was6.1% ($915.9 billion) in 2008 compare to 5.5% ($811.1 billion) in 2006 and compression to the world. They are on the 54th  position in GDP growth. Indonesias main GDP earning comes from Industry, 48.1%, service sector, 37.5% and lastly, 14.4% of GDP earning from agriculture. (The World Bank, 2009). Inflation rates: One of the major reasons of Indonesias economic downturn is the inflation rate. Inflation rate is still major but it has come down after a high of 20.7% in 1999. It was 9.9% in 2008 compare to 6.3% in 2006. (CIA, the world factbook, n.d) Import: Indonesias import and export trade are rapidly increasing every year. In 2008, the total import was $ 1 25 billion compare to 85.26 billion in 2007. The major import for Indonesia are chemicals, fuels, machinery and equipment. Import partners are Singapore 16.9%, China 11.8%, Japan 11.7%, Malaysia 6.9%, US 6.1%,South Korea 5.4%, Thailand 4.9% (2008). (CIA, the world factbook, n.d) 9 Export: In the same way due to economic growth improvement in productivity, government policies, export is also increasing rapidly. It was $93.3 billion in 2008 compare to $83 billion in2007. The major export are oil and gas, electrical appliances, plywood, and textiles. The major export partner of countries are Japan 20.2%, US 9.5%, Singapore 9.4%, China8.5%, South Korea 6.7%, India 5.2%, Malaysia 4.7%. (CIA, the world factbook, n.d) 2.3 Social Factors Indonesia is one of the large population nations in the world. It has a total of 240,271,522 populations and it is the 5th largest population all around the world. As we all know, Indonesia is a multi culture and multi ethnic country with different religious view. The majority of the religion in Indonesia is Muslim, as much as 86.1%. Protestants, 5.7%, Roman Catholic 3% and lastly, Hindu 1.8%. According to the (CIA, the world factbook, n.d), the age structure of Indonesia is as follow: Age structure: 0-14 years: 28.1% (male 34,337,341/female 33,162,207) 15-64 years: 66% (male 79,549,569/female 78,918,321) 65 years and over: 6% (male 6,335,208/female 7,968,876) Education:  If a country has good literacy rate then it has bright future. Same thing apply on Indonesia. 90.4% of its populations are literate in which male are 94% and female are 86.8%. 3.6% of their GDP is spent on education. Besides, Indonesia is also a collectivist society. It places higher importance on group than the 10 individual. The Indonesian counterparts will always place family and community concerns over that of the business or individuals. Other than that, a businesss welfare is important in Indonesians culture, so a business must demonstrate its contributions to the community to ensure the protection gained from the community to protect the business (Foss, 2009). A business that fulfills the obligation towards the living and community gets to enjoy few advantages. The advantages will be quicker bureaucratic processes such as obtaining a permit, resolving disputes through the musyawarah (an important process to solve conflict that involves all concerned parties with policeman intervention and the results are based on community consensus) and acts as surveillance of crime and information sharing (Perkins, 2000). Whats more, Sabah Tea can be used as beverages to create a family spirit in a working environment or even create a relaxing environment when families chill at home on a family day to spend some time together. Sabah tea can also always group employees in a company as a team as they bond through the tea sessions during work and this best fit a company when bonded employees comes together to operates the company together as one. 2.4 Environmental Factors Indonesia is an archipelagic island country in Southeast Asia, lying between the Indian Ocean and the Pacific Ocean. It is in a strategic location astride or along major sea lanes from Indian Ocean to Pacific Ocean. The countrys variations in culture have been shaped, although not specifically determined by centuries of complex interactions with the physical environment. Although Indonesians are now less vulnerable to the effects of nature as a result of improved technology and social programs, to some extent their social diversity has emerged from 11 traditionally different patterns of adjustment to their physical circumstances the geographical resources of the Indonesian archipelago have been exploited in ways that fall into consistent social and historical patterns. Nevertheless, the weather in Indonesia is hot and humid. The landscape ranges from rainforests and steaming mangrove swamps to arid plains and snowcapped mountains. Also, Indonesias climate is almost entirely tropical. The uniformly warm waters that make up 81  % of Indonesias area ensure that temperatures on land remain fairly constant, with the coastal plains averaging 28 °C, the inland and mountain areas averaging 26  °C, and the higher mountain regions, 23  °C. Temperature varies little from season to season, and Indonesia experiences relatively little change in the length of daylight hours from one season to the next; the difference between the longest day and the shortest day of the year is only forty-eight minutes. This allows crops to be grown all ye ar round. (CIA, the world factbook, n.d), One of the most important factors is the natural or environmental disaster. Because of its geographic location, Indonesia has faced many natural disasters such as earthquakes and tsunami, for example in December 26, 2004, Indonesia has an earthquake of 9.0 magnitudes which as a result caused a tsunami in the Indian Ocean. These natural disasters had caused 155,000 people died. Nevertheless, deforestation, soil erosion and massive forest fires were quite a hit in Indonesia. In1983, a 3 million Ha (hectares) worth of US$ 10 Billion were destroyed in a fire and was caused due to piles of dead wood left behind by the timber industry. In the mid 1980s, Indonesia was rated as the highest deforestation in Southeast Asia. 12 3.0 Product Description 3.1 Sabah Teas Product Description Sabah Tea is produces in Mount Kinabalu, Ranau in Sabah. The location of cool hills of Ranau has bring advantages to Sabah tea. According to Sabah Teas tea plantation, Sabahs tea are been carefully harvest and are 100% free of pesticide which leave the tea untouched and pure. Sabah Teas POP (Point of Purchase) is that the tea is protect to ensure its quality of origin and unlike other tea companies, the leaves are pure and that is free from any substances of chemicals. Due to its location, the tea has preserved it natural flavor without any added colorings. Nevertheless, Sabah Tea has also has an interesting plant added in to their teas, which is Camellia Sinensis, whereby not many organic tea plantations are able to have. Sabah Teas plantation has also been certified for organic production by SKAL Internation B.V of the Netherlands, an internationally recognized organization that performs inspections and grants certification for organic production. (Trademall, Malaysias Leading Trade Portal, n.d). Tea lovers are able to enjoy pure and Borneo rainforest organic tea and Health researchers have even analyze that the Sabah Tea has the effect of lowering the risk of heart attack, lowering bad cholesterol (LDL) and promote circulation of blood as well. 13 4.0 Conclusion 4.1 Evaluation and Analysis of Indonesia According to the above environmental analysis, Indonesia is a great market to invest in Tea, Sabah Tea. One of the reasons is that Indonesias GDP growth has steadily risen, achieving real growth of 6.3% in 2007 and 6.1% growth in 2008. Although growth slowed to 4.5% in 2009 given reduced global demand, Indonesia was the third-fastest growing G-20 member, trailing only China and India. Growth has rebounded in 2010, with the forecast for growth of 6.0%. Nevertheless, Indonesias GDP earnings for agriculture has the 3rd highest earnings for Indonesia as stated by (The World Bank, 2009) as high as 14.4% of GDP, as follow by Industry, 48.1% and service sector, 37.5%. Poverty and unemployment have also declined despite the global financial crisis, with the poverty rate falling to 13.3% (March 2010) from 14.2% a year earlier and the unemployment rate falling to 7.4% (February 2010) from 7.87% (August 2009). This has a great effect on Sabah Tea, that the buying power of Indonesias customers or potential customers increased. Poverty rate decreased and GDP of Indonesias earning also comes from agriculture, Indonesia is no doubt a place to invest Sabah Tea. Although the competition in Indonesia is no question is high, Sabah Tea can take into consideration on joining venture with one of the Indonesias tea manufacturer, as what BOH tea has did, joining venture with Kurnia Tea (Indonesias tea company) to form BKI, BOH and Kurnia tea Industry. Indonesias overall macroeconomic picture has also stable. By 2004, real GDP per capita returned to pre-financial crisis levels and income levels are rising. In 2009, domestic 14 consumption continued to account for the largest portion of GDP, at 58.6%, followed by investment at 31.0%, government consumption at 9.6%, and net exports at 2.8%%. Investment realization had climbed in each of the past several years, until the global slowdown in 2009. It is again rebounding in 2010. (TDS, n.d). In the social factors, Indonesias culture and Malaysias culture have no much difference in terms of religions, demographic and geographical factors. To succeed in Indonesia, the first thing to achieve is to establish a face to face relationship, preferably with a person of similar age and status quote from (Perkins, 2000). This has not a problem as the religion in Malaysia is similar as well, Malaysia is able to send a mediator or translator. This is because Indonesians communicates in English or Bahasa Indonesian and Malaysia is able to present a well communicable Malay as a mediator, so that a message is transmitted clearly to every business partners or employees of the company. Also, a business that fulfills the obligation towards the living and community gets to enjoy few advantages. The advantages will be quicker bureaucratic processes such as obtaining a permit, resolving disputes through the musyawarah (an important process to solve conflict that involves all concerned parties . Environment of Indonesia has a slight difference compare to Malaysia, but overall, Indonesias climate and environment is a suitable place for growing teas and people tend to enjoy a warm cup of tea. The weather in Indonesia is hot and humid. The landscape ranges from rainforests and steaming mangrove swamps to arid plains and snowcapped mountains. Also, Indonesias climate is almost entirely tropical. The uniformly warm waters that make up 81  % of Indonesias area ensure that temperatures on land remain fairly constant. This allows crops to be grown all year 15 round. (CIA, the world factbook, n.d). Sabah Tea can even consider on start a tea plantation to avoid International trades limitation and policies imposed by Indonesias Government. 16 Executive Summary This report determines to evaluate the Indonesias market for export of Sabah Tea, Sabah Tea Sdn Bhd. It intends to determine the effective of market as a potential market for investing and exporting Sabah Tea over to Indonesia through the Environmental Analysis, which includes, Political and Legal, Economic, Social, and Environmental. The environmental analysis of Indonesia, shows that Political and Legal, Economic, Social and Environmental have great opportunities for Sabah Tea to invest and export to Indonesia: One, the economics of Indonesia has showed that Agriculture of Indonesia as the 3rd highest GDP earning. Secondly, Cultural factors have also showed that Indonesia and Malaysias cultural background is quite similar and they shared similarities. A business that fulfills the obligation towards the living and community gets to enjoy few advantages. The advantages will be quicker bureaucratic processes such as obtaining a permit, resolving disputes through the musyawarah (an imp ortant process to solve conflict that involves all concerned parties. Lastly, environment of Indonesia has not many differences as it is a suitable place for crops to grow. It is recommended that Indonesia is a potential market to invest and export over to.

Consumer Protection Law of Uae

Consumer Protection Law of UAE In United Arab Emirates; a new federal consumer protection law has been promulgated. Under which a consumer protection committee formed to monitor the prices of consumer goods. The provisions of the laws advocate the principle of healthy competition and fighting monopoly and commercial fraudulence. The new legislation is complementing other laws concerning civil procedures, commercial fraudulence, commercial agencies, industry organization and trading in precious gems and metals.Disregarding any provisions of these laws could lead to violation of other related laws and this itself is enough to ensure strict enforcements. The law No: 6 of 2006 covers and tackles issues relating to the rights of consumer, responsibilities and liabilities and specifying penalties to be imposed on people for selling substandard goods. Under the law, a consumer protection higher committee will be constituted under the chairmanship of the Minister of Economy. The Committee wi ll also comprise of representative of the Consumer Protection Societies.The Committee formation and determination of its powers will be decided by a resolution of the cabinet. In case of a crisis or extraordinary circumstances in the market leading to price hikes, the minister will recommend procedures to curb such price increases and protect consumer’s interests. A new Consumer Protection Department (CPD) will also established at the Ministry of Economy (MOE) with a mandate to supervise the execution of the general policy for the protection of consumer in cooperation with the authorities.The Key responsibilities of CPD includes; 1. To supervise the implementation of policies designed to protect Consumers in cooperation with the concerned authorities in the State. 2. To coordinate with the concerned authorities in the State in order to cope with the unlawful commercial practices detrimental to the Consumer. 3. To coordinate with the concerned authorities to heighten Consumer awareness in the State about the commodities and Services, along with having the Consumers acquainted with their rights and the methods of the claims thereof. 4.To monitor Price movements and curb Price increases. 5. To achieve the principle of the honest competition and fight monopoly. 6. To receive complaints from Consumers and refer them to the concerned authorities or otherwise take the necessary action(s) prescribed in the Department’s mandate. A Complaint may be filled directly by the Consumer or through the consumer protection association, when such acts as the representative of the particular Consumer. 7. To publish and distribute the decision and recommendations designed to raise Consumer awareness.The key responsibilities of the (CPD) includes increasing the consumer’s awareness, monitor the movement of prices and control their increase, combat monopoly, to receive consumers complaints and adopt appropriate action. The law states that the Provider shall upon offering any commodity to consumers shall prominently display in the cover of the commodity or on the packet a label the particulars of the product including date of production,or packing, net weight, country of origin, expiry date, compnents and specifications of product etc.The Provider shall also prominently display the price of the product either in the label or at the place where the commodity is displayed. The consumer shall also have the right to receive a dated bill for the product with paticlulars such as price, type etc. The laws warrants the conformity of the product or the service provided to the consumer with the declared and approved standardized specifications. As per the law, the supplier is prohibited to display or promote counterfeited commodities that would inflict damages or losses on consumers.According to the new law, a consumer will be entitled to be indemnified against personal or financial damages in accordance with the general rules in force. Any agreement in contravention therewith be null and void. Concerning commercial and trade agencies, the law says that each commercial agent or distributor shall honour all guidance provided by the manufacturer or the trade agent of the commodity. The law also obliges the provider to provide for repair, maintain or provide service to the product after sales and to replace a product if a defect is found in the product within a specific time period.The law also confer legal capcity to CPD to represent the Consumers before the Courts and any other body prescribed by law. Without prejudicing the rights of the parties to go to the Court, the department can also proceed with any settlement to protect the consumers’ interest. According to law, those found guilty of violating the provision will face a fine of not les than Dhs. 1,000/-. In case a supplier or a distributor fails to unequivocally warn against the hazards associated with use of the commodity or the service causing damages penalty will be not less than Dhs. 0,000/-. The new law is a milestone in serving the interests of the consumers in protecting their basic rights against unfair trade practices, unscrupulous exploitation etc and their right to seek redressal against such practices. The law guarantee the consumers right to be heard and to be assured that consumers interests will receive due consideration at the appropriate forum. Environmental Law in the UAE The body of Environmental Law in the UAE comprises Federal Laws and Local Orders issued at municipal level within certain of the Emirates.The UAE also recognises certain international conventions and protocols. A list of the Laws is provided in the appendix to this article. In this article we deal broadly with the provisions of Federal Law No. (24) of 1999 for the Protection and Development of the Environment (â€Å"Law No. 24†) which forms the backbone of the Environmental Law within the UAE. We also deal more specifically with Environmental Impact A ssessments, the procedure relating thereto and the institutions charged with the responsibility for implementing the Law. Law No. 24The objectives and general principles of this Law are the following: Protection and conservation of the quality and natural balance of the environment. Control of all forms of pollution and avoidance of any immediate or long-term harmful effects resulting from planning for economic, agricultural or industrial development or other programs aimed at improving life standards. Co-ordination among the FEA, competent authorities and parties concerned with the protection of the environment and conservation and consolidation of environmental awareness and principles of pollution control.Development of natural resources and conservation of biological diversity in the UAE and exploitation of such resources with consideration of present and future generations. Protection of society, the health of human beings and other living creatures from any activities and acts which are environmentally harmful or impede authorised use of the environmental setting. Protection of the UAE environment from the harmful effects of activities undertaken outside the region of the UAE.Compliance with international and regional conventions ratified or approved by the UAE regarding environmental protection, control of pollution and conservation of natural resources. Law No. 24 and the Executive Order published pursuant to Cabinet Resolution No. (37) of 2001 deals comprehensively with all aspects of environmental protection relating to projects; the marine environment and pollution thereof; liability and compensation for environmental damage; rotection of drinking and underground water; air pollution; disposal of hazardous waste; disposal of medical waste, pesticides, agricultural fixers and fertilisers; nature reserves; the protection of wildlife, as well as the penalties imposed for contravention of any provisions of the aforesaid. The Environmental Impact Assessm ent (EIA) According to Law No. 24, any entity that wishes to undertake a project within the UAE which may have an impact upon the environment must apply to the Federal Environmental Agency (FEA) or the relevant competent local authority for a license.The FEA in co-ordination with the competent authority undertake the evaluation of the environmental impact of projects. The procedure is as follows: The applicant shall attach with his application a complete statement on the project or activity intended to be undertaken including all information required in accordance with the Executive Order and forms included therein. The FEA in coordination with the competent authority shall decide on the application within a period not exceeding one month from the date of submission of the application.The applicant shall be notified of the decision and reasons for rejection of his application if rejected. The period stated above may be extended by one month if the need arises. Owners of projects or establishments approved by license shall undertake the regular analysis of waste and monitor the properties of discharge and pollutants generated from such projects, including degradable materials and keep monitoring records as well as send reports with the results to the FEA and the competent authorities. Federal Environmental Agency (FEA) The Federal Environmental Agency was established pursuant to Federal Law No. 7) of 1993 for the Establishment of the Federal Environmental Agency.The Law sets out the objectives of the FEA being inter alia: To protect and develop the environment: To determine the necessary plans and policies to safeguard it from damaging activities, particularly  Ã‚   Appendix The Environmental Laws in the UAE and International Protocols Federal Laws Federal Law No. 7 of 1993 for the Establishment of the Federal Environmental Agency (as amended by Federal Law No. 30 of 2001). Federal Law No. 24 of 1999 for the Protection and Development of the Environment and i ts Executive Order. Federal Law No. 3 of 1999 concerning Exploitation, Conservation and Development of Living Aquatic Resources. Federal Law No. 1 of 2002 for the Regulation and Control of the Use of Radiation Sources and Against Their Hazards Federal Law No. 11 of 2002 for Regulating and Controlling the International Trade in Species of Wild Fauna & Flora. Abu Dhabi Local Environmental Laws Law No. 16 of 2005 pertaining to the Reorganisation of the Abu Dhabi Environment Agency. Law No. 21 of 2005 for Waste Management in the Emirate of Abu Dhabi. Law No. 28 of 2005 which is a Law Establishing the Abu Dhabi Authority for Culture & Heritage.The above local laws, reference to the federal laws and the protocols can be found on http://www. ead. ae/en Dubai Environmental Laws Local Order No. 61 of 1991, a local order issued by the Municipal Council still governs environmental law at a local level. Federal Law will prevail in the event of conflict and contradiction. Local Order No. 11 of 2 003 regarding Public Health and Safety of Society has replaced the specific provisions in Local Order 61 of 1991 relating to public health. Local Order No. 11 of 2003 supersedes Local Order No. 1 of 1991 in parts only (with the exception of specific provisions relating to public health and safety). We were informed by the Head of the Environment section in Dubai Municipality that a new Local Order will be issued soon. This local order will complement Local Order No. 11 of 2003 and replace Local Order 61 of 1991 in its entirety. The above local orders can be found on the below link: http://vgn. dm. gov. ae/DMEGOV/dm-legislation-localorder-a; and http://vgn. dm. gov. ae/DMEGOV/dm-legislation-order2004-a There were also amendments issued in 2004 to the Local Order No. 11 of 2003.This Local Order and its amendments can be found on Dubai Municipality ‘s website in Arabic. Please see the above links. The Municipality is currently finalizing the Executive Regulations for Local Order No. 11 of 2003 as well as a separate Local Order to be drafted for Occupational Health and Safety in Dubai . Local Order No. 7 for the year 2002 on Management of Waste Disposal Sites in the Emirate of Dubai. Local Order No. 8 of 2002 regarding Sewerage, Irrigation and Water Drainage in the Emirate of Dubai. The DM's technical guidelines and circulars can be found on the DM's website.Sharjah Environmental Laws Sharjah has issued Environmental guidelines pursuant to Law No. 24 of 1999 relating to specific industries, which are as follows; Environmental Guidelines for the Paint and Varnishes Related Industries. Environmental Guidelines for the Aluminium Industry. Environmental Guidelines for the Plastic and Melamine Industry Environmental Guidelines for Laundries. Environmental Guidelines for the Jewellery Industry. Environmental Guidelines for the Electroplating Industry. Environmental Guidelines for Garages and Car Wash Facilities.

Amazon vs. Barnes & Noble Essay

The qualitative services department was hired to provide an in depth analysis of two leaders in their industry, Barnes & Noble and Amazon. The purpose of this report is to provide all the necessary data in an unbiased manner, so that the accounting partners may make their investment decision knowing all the facts and figures about both companies. Our report was developed as a result of conducting independent and group research about each company’s background, competitors, philosophical differences in management, success stories, challenges (past and future), strategic moves, as well as key comparative statistics. Our research was compiled using a variety of online sources. The analysis of these key areas will provide greater understanding as to which company to invest in, Barnes & Noble or Amazon.com. Background Barnes & Noble was founded in 1893 in Wheaton, IL as a printing business but has developed into the largest book retailer in the United States today. Headquartered in New York, Barnes & Noble has 675 stores worldwide and partners with 686 collegiate bookstores. It is traded on the New York Stock Exchange and employs more than 30,000 employees. Barnes & Noble has a significant presence in the United States as a physical retailer of books and magazines. Amazon was founded in 1994 and is headquartered in Seattle, Washington. It is traded on the NASDAQ, and as a strong historical performer, is a component of the NASDAW 100 and the S&P 500. Amazon was founded initially as an online bookstore but soon into seemingly every segment of consumer goods. Amazon is heavily involved in the Internet as an online retailer and producer of various applications linked to its tablet products. Amazon does a significant amount of business in books, both online and print, but differs from other book retailers in that it is a selling platform for seemingly anything you could think to purchase on the Internet. Competitive Strategy Barnes & Noble has a significant competitive advantage over Amazon and a number of other book retailers in that they have a physical location. While online shopping is a significant competitive force, it is very difficult to beat a physical store. Barnes & Noble goes to great lengths to ensure that their customers are comfortable in their stores, outfitting them with plush couches and chairs. In addition, Barnes & Noble often has cafes in their store locations. The goal is to keep customers in store as long as possible, even if they spend most of the day reading a magazine or a book, to ensure that they are making some kind of purchase. The store locations serve a two-fold purpose; they act as a physical showcase for books that can be purchased online and have environment that fosters community. The college textbook business is a very profitable segment of Barnes & Noble’s business. There is a great degree of markup on college textbooks that is deflected to students, and when students sell books back to colleges, it is at a greatly reduced price. Books repurchased by Barnes & Noble are repackaged and resold for a price greater than cost. Barnes & Noble is set apart from competition in this regard because no other retailer has a similarly structure partnership. The simple model that Amazon operates under is its key to success. Amazon uses little more than a bare bones online platform to sell its products meaning a minimal cost structure. At the same time, this business model requires no asset investment in physical store locations. Through an online platform, Amazon can offer products from a variety of sellers on a global scale, allowing them to mitigate expensive shipping costs. This online platform also means increased transferability to mobile devices, meaning they can offer the same services through application stores and exchanges. Amazon’s Kindle product line is a competitive advantage because it was first to market for handheld book readers. Since releasing the first Kindle, Amazon has only increased the Kindle’s capabilities to match that of the iPad, Nook, and Galaxy tablets. Amazon’s distribution process is a work of art. Amazon has been working very  hard to revolutionize the distribution process, from creating futuristic technology to developing basic processes that would increase efficiency of distribution channels. Currently, Amazon’s distribution channels are almost entirely automated. When a product is ordered, a â€Å"robot† processes the order and searches out the product on the warehouse shelves. The robot packages the product and returns it to the front of the warehouse, while dozens of other machines are operating simultaneously. Amazon’s extensive distribution network is far superior to any other competitors. Vision for the Future It’s clear that both companies understand the importance of e-commerce and accessibility to consumer goods on the online realm. Amazons’ chief business model is Internet commerce, but Barnes & Noble is moving towards this realm of commerce with the creation of the Nook. Both companies see business via handheld tablets becoming more prevalent, evident in the ever-increasing capabilities of the Nook (B&N) and Kindle Fire (Amazon). Barnes & Noble has beefed up their online presence while reducing their number of stores as well. Amazon’s vision of the future has more to do with distribution than anything else. Amazon is doing everything in their power to create a shopping experience similar to going to an actual store; including the instant gratification of receiving your purchased goods right as your purchase them. Amazon is moving towards an incredibly automated distribution channel that will reduce time to consumer through revolutionary technology. One of these te chnologies is drones that will fly purchased goods to a consumer’s home and drops them on the front step. Both companies understand the profit potential of the industry and are taking steps to capitalize on profit opportunities. Company Success Stories Both Barnes & Noble and Amazon.com have experienced great success in their years in business. Barnes & Noble originated in 1873 and opened its first bookstore in New York City in 1917. In the 1970’s they became the first bookstore to advertise on television, as well as the first bookstore to discount New York Times bestsellers at 40% off. From 1992 through 2003, Barnes & Noble released a series of classics for adults and children under the imprint Barnes & Noble Classics Collection. Barnes & Noble stores are also known for their Starbucks cafes, where people often sit and relax with a cup of coffee or a snack. Undoubtedly, Barnes & Noble’s greatest success comes from the NOOK, their electronic book reader, introduced in November 2009. The NOOK’s biggest competition for the tablet market comes from the Amazon Kindle Fire, and Apple’s iBooks for iPhone, iPad and iTouch. Although only in business 17 years, Amazon.com has experienced great success and is now the world’s largest retailer. Amazon has separate retail websites for the following countries: United States, Canada, United Kingdom, France, Germany, Italy, Spain, Japan, and China, with international shipping to certain other countries for some of its products. Amazon.com sells a variety of retail goods online including books, jewelry, baby items, tools, software, toys, and is a huge third party reseller. Amazon Prime membership is very popular and for an annual fee, a user can join, which entitles them to free two-day shipping on eligible purchases. Amazon Prime also provides Amazon Instant Video and access to the Kindle Owner’s Lending Library. Amazon’s greatest success to date is the introduction of its e-reader, Kindle, in November 2007 and the Kindle Fire in September 2011. Since 2007, Amazon has released multiple versions of the Kindle e-reader and two versions of the Kindle Fire. Its biggest competitors in the tablet market are the Barnes & Noble NOOK and the Apple iPad being used in conjunction with the Kindle app. Past Challenges The challenges that these two companies have faced, and continue to face, are the digital landscape and competition. Barnes & Noble became the last hope for bookstores after the collapse of Borders. Barnes & Noble is now the last major bookstore chain standing. The company is in constant competition with e-commerce sites, e-readers and tablets. It is safe to say that Barnes & Noble’s primary competitor is Amazon. Barnes & Noble began to utilize their website, offering more titles and including free shipping for members. After Amazon launched its tablet, the Kindle, Barnes & Noble was forced to step up in the digital landscape. It created the NOOK and the NOOK Bookstore. Several generations later, the NOOK has come a long way in its  evolution. Now it has become a tablet with color, a built in light, Internet searching and application capabilities. Its newest tablet comes in high definition. While the NOOK looks more appealing than it did in previous years, one thing stands i n its way of success, which is price. Amazon’s Kindle, is priced anywhere from $69-$100 cheaper than the NOOK. This is not to say Amazon doesn’t have its challenges either. Amazon has made a name for itself globally, however it still has competition with other e-commerce sites like e-Bay. EBay allows individual sellers to auction essentially anything they want for a fee. Amazon has limitations on what individual sellers can sell due to competition with other retailer partnerships with Amazon. However, according to a recent Forrester report, 30 percent of all online shoppers start at Amazon to research products as opposed to Google or eBay (Savitz, 2012). Another competitor Amazon faces is Apple. The highly coveted Apple iPad is in fierce competition with Amazon’s Kindle. While the iPad is more expensive than the Kindle, Apple fans might point out that the iPad has far more tablet-optimized apps, options for 4GLTE connectivity, and is the thinner and lighter device of the two. However, Amazon’s Kindle is a cheaper alternative for those who cannot afford an iPad or even the NOOK. Future challenges Any company trying to survive in today’s economy will undoubtedly face challenges. The key to success lays in predicting these challenges and implementing strategies to overcome them. The places where Amazon finds opportunity seem to be the same places where Barnes & Noble faces challenges. Firstly, Amazon continues to make it very attractive for authors to self-publish their titles with their publishing services including, the Kindle Direct Publishing option for online books, and the CreateSpace option for print books. Barnes & Noble does offer its own self-publishing service, PubIt, but its services are only offered for e-books, not print. In fact, 28% of the top-selling titles on Kindle are not even available on the NOOK (McIlroy, 2012). If Barnes & Noble wants to compete it will have to expand  its self-publishing services and offer better incentives to authors. Another challenge that Barnes & Noble faces is its lack of an international presence. The fact that Amazon operates in so many countries worldwide is a serious challenge for Barnes & Noble. The Kindle is available internationally, but the NOOK is not. The NOOK is one of Barnes & Noble’s most successful products. Therefore, it would seem logical to expand the number of locations where this product can be purchased. However, it still remains unclear as to when and if Barnes & Noble plans to expand to international markets. One challenge that Amazon could face may be the law. Since it allows an unlimited number of people to sell on the site, from all over the world, it is difficult to monitor every single product that is sold under the Amazon.com brand. In order to prevent future lawsuits it is crucial that Amazon.com employs a highly skilled legal team, and closely monitors its sellers and their products. Recommendation We have found that Barnes & Noble and Amazon may appear to rivals but this appearance is only visible on the surface. With further examination of the facts, it is evident that one company is far more successful than the other. We have concluded that Amazon.com is that company. These are the main factors that have contributed to our conclusions: †¢Amazon has more appealing future growth with the implementation of drone shipping. †¢Amazon’s success of the Kindle compared to Barnes & Noble’s NOOK. †¢Amazon sells internationally. Barnes & Noble only operates in the US. †¢Amazon allows an unlimited number of sellers to do business on its site. Barnes & Noble restricts its number of sellers to 200. †¢Amazon.com is more attractive and rewarding for self-publishing which is set to play a leading role in the future of industry. †¢Amazon has the capital to sell its products cheaper than Barnes & Noble. Therefore, with the evidence provided in this re port, we have determined that the most secure investment opportunity of these two companies is Amazon.com. Based on current performance, and the opportunities for future success that were outlined in this report, it is now clear that Barnes & Noble simply cannot compete with Amazon.com’s current success and future potential. Works Cited Amazon.com. (2011, October). Retrieved from http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-mediaKit Barnes and noble booksellers. (2011). Retrieved from http://www.barnesandnobleinc.com/for_investors/for_investors.html barnesandnobleinc.com . (2012). Retrieved from http://www.barnesandnobleinc.com/our_company/our_company.html McIlroy, Thad, (2012), Four Disadvantages for Barnes & Noble in the Bookseller Wars Retrieved from http://www.digitalbookworld.com/2012/four-disadvantages-for-barnes-noble-in-the-bookseller-wars/ Savitz, Eric. (2012, October 29). Amazon’s Hidden Weak Spot: Lack Of Local Leverage. Retrieved from http://www.forbes.com/sites/ciocentral/2012/10/29/amazons-hidden-weak-spot-lack-of-local-leverage

Malaysia banking system - Free Essay Example

Sample details Pages: 26 Words: 7814 Downloads: 1 Date added: 2017/06/26 Category Statistics Essay Did you like this example? Introduction 1.0 Introduction According to Bank Negara Malaysia, Malaysia banking system is divided into 3 main groups which are; 1) monetary institution comprising the Central Bank (Bank Negara), commercial and Islamic financial institutions; 2) non- monetary institutions namely merchant banks, credit and insurance companies, and development banks; and 3) foreign banks representative offices and offshore banks. Prior to the 1997 financial crisis, Malaysia had thirty seven commercial banks, forty finance companies and twelve merchant banks. However, after the financial crisis 1997, most of the banks has consolidation through mergers and acquisitions to strengthening of these financial institutions has result in thirty five licensed commercial banks, thirty one finance banks and twelve merchant banks. Don’t waste time! Our writers will create an original "Malaysia banking system" essay for you Create order As to date, there are only twenty two licensed commercial banks and fourteen merchant banks in Malaysia. (Shanthi Kandiah, 2009) (Table 1) Financial Institutions 1997 1998 2009 Commercial banks 37 35 22 Finance Companies 40 31 0 Merchant banks/Investment banks 12 12 14 Table 1 : Number of Financial Institutions However, among the twenty two licensed commercial banks only nine of the commercial banks are local bank and the rest of thirteen commercial banks are foreign banks. From the nine local commercial banks out of eight banks listed in Bursa Malaysia are: Malayan Banking Berhad, Hong Long Bank Berhad, Public Bank Berhad, Affin Bank Berhad (under Affin Holding Group), Alliance Bank Berhad (under Alliance Financial Group Berhad),Ambank Berhad ( under AMMB Holding Berhad), Eon Bank Berhad (under Eon Capital Berhad) and lastly CIMB Bank Berhad. (under Bumiputra- Commerce Holdings Berhad) while Rhb Bank Berhad, is currently not listed in the Bursa Malaysia. (Table 2) NO NAME Listed Non-Listed 1. Affin Bank Berhad (under Affin Holding Group) x 2. Alliance Bank Malaysia Berhad (under Alliance Group Berhad) x 3. AmBank (M) Berhad (under AMMB Holding Berhad) x 4. CIMB Bank Berhad (under Bumiputra-Commerce Holding Berhad) x 5. EON Bank Berhad (under Eon Capital Berhad) x 6. Hong Leong Bank Berhad x 7. Malayan Banking Berhad x 8. Public Bank Berhad x 9. RHB Bank Berhad x Table 2: List of Local Commercial Banks in Malaysia After the financial crisis 1997, significant numbers of bank had bankrupt or were merged with other financial institutions, which proven that, the failure of bank is due to their failure in managing their liquidity risk properly. In other words, during the financial crisis a lot of banks were incapable to provided sufficient amount of money to meet the current need of their investors. As thus, banks had said as to failure to managing their risk properly because do not have enough money liquidity in banks to meet the demand of their investors. From another perspective, big bank may not always be better because increase in organisation may present more problems than it. Bank have found that to survive it is more necessary to have a leading market share in a variety of businesses rather than just having a lot of assets or a huge capital. Thus, proper management of risk related to assets and capital market among bank is crucial. If the bank was able to assess the risk at an early stage, then the bank may be able to plan for appropriate action to be taken to reduce risk before it occurred. 1.1 Risk Management in Banking Sector Driven by the increasing complexity of doing business, risk management has become an important and integral part of the companys internal control and governance in order to achieve its plans and objectives. In other words, risk management refers to the methods and processes used by organizations to manage risks (or seize opportunities) related to the achievement of their objectives. ( Azlan Amran, Abdul Manaf Rosli Bin and Bin Che Haat Mohd Hassan, 2009) Risk management in general involves identifying; assessing, responding, prioritizing then risk followed by minimization of risk and control the probability of risk. Risk management is entering into many aspects of banking business such as increased attention and concern must be given to ensure the risk under control. Ideally, risk management in the banking sector is to reduce the risk to the minimum. For example, credit approval, the officer can reduce this risk through measure the ability to pay back by customer before approved the credit. In facing the challenge of global financial environment, banking sector is required to implement integrated risk management systems. (Rajna, 1999) They are required to identify their current risk exposure such as market risk. It is a necessary risk-reducing tool to promote long-term profitability and stability of the banks and enhance the competitive advantage of banks. If a bank has right risk management systems that can effectively capture the risk exposures, there is an opportunity for them to lower their capital charges. As a result, proper risk management practice is essential for banks to maintain competitiveness over the long run. Lastly, to manage the risk in banking sector, first the banks need to identify the risk. The risk related to banking consists of credit risk, market risk; interest rate risk, foreign risk, liquidity risk and operation risk. Risk identification is the first stage of risk management. This mean that, banks need to correctly identify the risk such as market risk of the risk expose because it helps to develop basis for next steps analysis and control of risk management. (Lubka Tchankova, 2002) 1.2 Risk Management Disclosure in Banking Sector The purpose of risk management disclosure is to allow financial analysts, shareholders, creditors, clients and any interested parties to rely on minimal standards of quality and consistency in the risk management policies of financial firms. Greater promote transparency of risk management could benefit investors. Increased transparency is considered in the numerous explanations offered in the finance literature for the willingness of firms to voluntarily disclosure complete and timely information. This is said to be benefit investors as they need comprehensive risk information if they are to completely understand the banks risk profile. Risk is an unavoidable element of any business venture, especially for banking sector. In addition to financial risk, a company is also susceptible to business risk or changes in the overall economic climate that can adversely affect the price of its securities. Hence, it is in the stakeholders best interest that risk be disclosed in a timely manner. (Azlan Amran, Abdul Manaf Rosli Bin and Bin Che Haat Mohd Hassan, 2009) Disclosure of risk management is to promote a more robust financial system. Moreover, can help to promote and maintain a sound financial system by strengthening the incentives for sound risk management within financial institutions and by improving the information which financial institutions use to make credit allocation decisions to the corporate sector. (Rajna Gibson, 1999) Normally, those banks with better disclosure will tend to attract more investor to invest, or clients more willing to place their money in the bank. Besides that, the disclosure of risk management helps to reduces information asymmetry. Investors and shareholder would be able to justify the risk position of the bank through the disclosure of respective financial information. This also can help them to justify whether the manager is acting on the interests of the company. Besides that, disclosure of risk facilitates supervision and reduces monitoring costs. Public disclosures of risk in banks annual report enable the management to foresee the potential problems; therefore can plan to reduce risk in advance, thus it save the monitoring cost indirectly. (Philip, 2005) It is argued that banks that disclose greater amounts of useful risk information would benefit from a reduction in their cost of finance as the providers of funds will be in better position to judge the banks risk level and this will remove the need for them to incorporate a risk premium within the cost of capital. (Linsey and Shrives, 2005) 1.3 Types of Risk in Banking Sector Risk of the banking sector can be varied and widely difference across the banking institution. Generally the risk for banks business can classified into five popular categories: credit risk, interest rate risk, foreign exchange risk, liquidity risk, and operating risk. 1. Credit risk Credit risks the most important risk categories in banking. Risk that due to the borrower unable to repay back to the banks. In order word, credit risk is the bank borrower fail to meet its obligations in accordance with agreed terms and conditions. The aim of credit risk management is to maximize a banks risk- adjusted rate of return by maintaining credit risk exposure within acceptable boundary. (Catherine Soke Fun Ho, 2009) Bank Negara Malaysia (2009), credit risk continues to remain the largest source of risk for banking institutions in Malaysia. This is due to the fact that a banking institutions loan portfolio is typically the largest asset and the major source of revenue. 2. Interest rate risk Interest rate risk is one of the market risks. It is the effect of changes in market interest rate levels on the profitability of the bank. Increases in interest rates may lead to higher profits, lower profits, or no change in bank profiles. While the risk due to changes in interest rates has always been a possibility, this source of risk was not considered to be serious as long as interest rates were stable. Changes in interest rates can damage the banks profitability by increasing its cost of funds, lowering its returns on earning assets, and reducing the value of the owners investment. 3. Foreign exchange risk (Forex) Risk associate with the loss in the exchange of the currency. Foreign exchange risk is the loss being incurred because of being party to a foreign currency transaction or holding a foreign currency changes. For extreme cases, it may involve blocking of convertibility. 4. Liquidity risk Liquidity, or the ability to fund increases in assets and meet obligations as they come due, is crucial to the ongoing viability of any banking organization. Therefore, managing liquidity is among the most important activities conducted by banks. Sound liquidity management can reduce the probability of serious problems. Indeed, the importance of liquidity transcends the individual bank, since a liquidity shortfall at a single institution can have system-wide repercussions. (Basel, Feb 2000) 5. Operating risk This is refers to the risk of losses or unexpected expenses associated with fraud, check kiting, and litigation. According to Bank Negara 2009, large corporate experience of the failures due to fraud and lapses in internal controls has focused greater attention on improving operational risk management in banking institutions. 1.4 Problem Statements Driven by increase competitive in business environment today, risk management is required to be disclosed in financial statements of the companies in complying with FRS 132. However, there is an issue where a lot of companies are not willing to disclose additional voluntary information in the financial statements. As they worry valuable information is available to their rivals and creates competitive disadvantages. Radiah Otman (2009), firm may not like to disclose extensive information that might have future repercussions for their bare existence due to sensitivity of such information. This is one of the problem which investors or others interested parties do not have extensive information to evaluate banks financial performance. Apart from it, he also said that interest rate disclosure was favored as compared to credit risk among the market risks categories. 1.5 Research Question The purpose of this study is to determine the extent to which commercial banks are providing risk management disclosure (qualitative information) suggested under FRS 132. Thus, the specific research questions are: Research question 1: Which type of risk more likely to be disclosed by commercial banks in Malaysia? Research question 2: Do commercial banks provided additional voluntary disclosure? Research question 3: Do the commercial banks in Malaysia disclose financial risk management objectives and policies? 1.5 Objective of the Study The general objective of this study is to examine whether the commercial bank in Malaysia complying with the general risk management guideline that provide by the FRS 132. However, the objective is broken down as below; a) To examine which type of risks are more likely to disclosed by the commercial banks in Malaysia. b) To make the comparison among commercial banks to the extent of the information disclosed in the financial statement. Whether information disclosed is voluntary information or mandatory information. c) To examine whether the commercial banks in Malaysia disclosure financial risk management objectives and policies. d) To examine whether the commercial banks in Malaysia comply with Financial Reporting Standards in Malaysian. 1.6 Conclusion After the financial crisis 1997 and also Enron scandals, it is increased need for the demand of more risk management disclosure. Risk management plays an important role in the global financial sector. Banking sector is inherently involved in risks and these risks need to be managed. Inherent risks are the risk that due by economic environment. Bank is highly exposed to this risk, as so the effective risk management is crucial. It is important for banks to release risk information to the marketplace that enables stakeholders to assess its risk profile. Disclosure of risk in financial statement able to help investors have a better understanding on how firm value is affect by risk exposure, this also can help to reduce information asymmetry between banks, investors and other stakeholders. One of the major problems here is that some companies are not willing to disclose more extensive information in their annual reports as they worry that the information is quantifiable to their competitors. Besides that, when the cost of disclosure is higher than the benefit, they will choose not to disclose the risk information. Thus, this study is to undertake which type of risk is most likely to be disclosed by commercial banks in Malaysia and examine whether the information disclosed is moderately or voluntary disclosed additional information. This study also evaluates the level of compliance among banks in Malaysia, and whether the banks disclosed financial risk management objectives and policies. 2.0 Introduction Prior to British colonial in Malaysia, accounting in Malaysia more emphasis on the recognize expenditure and revenue rather than recognize income. As after the British colonial and the accounting development and structure change over time there is increasing important for the issue such as recognition, measurement, and accountability. However, the accountants prepare the accounting reports is more emphasis on the shareholder needs. This mean they tend to alter the reports to the amount of income at which their shareholder desired in order to attract more investors. Therefore, sometime the annual reports do not actually reflect the fact of the financial position of the company. As for this reason, accounting standards play important roles to ensure that the annual report of the company is complying with the standard that are required. Companies registered in Malaysia must comply with the Company Act 1965. The Act prescribes the preparation of general purpose financial reports by certain categories of companies, and this preparation is subject to regulations from several sources. The provision of information is essential for decision maker such as investors, creditors and interested parties. However, there is a need for regulations and monitoring to ensure that the information provided to such users is reliable and unbiased. As for financial institution in Malaysia the key players in the financial reporting environment consist of Companies Commission of Malaysia; Central Bank; Securities Commission, and Malaysia Accounting Standards board (MASB). 2.1.0 Companies Commission of Malaysia All companies that incorporated under Company Act 1965 are regulated by Companies Commission of Malaysia. The Act requires certain companies, such as public listed companies or private limited companies, to prepare financial statements in accordance with approved accounting standards. Among other functions, CCM monitors compliance with accounting standards and the Company Act 1965. This involves investigating companies that do not comply with accounting standards. The function CCM includes: * enhancement and promotion of the supply of business and corporate information; * acting as agent of the Government and providing services in collecting and enforcing payment of prescribed fees; * regulating matters relating to corporations, companies and business. * encouraging and promoting proper conduct amongst directors, secretaries and other officers of a corporation The Companies Commission has played an active role in the accounting profession and the Malaysian Accounting Standards Board (MASB). Coordinated efforts are undertaken by the profession together with the Companies Commission and the MASB to identify issues that impact the financial and reporting environment. 2.1.1 Central Bank Bank Negara Malaysia is the central bank of Malaysia. The main objectives are to issue currency and maintain reserves in order to safeguard the value of the currency; Act as a banker and financial adviser to the Government; promote monetary stability and a sound financial structure; and influence the credit situation to the advantage of the country. Apart from that, Bank Negara Malaysia also responsible for regulates and supervise the financial system in Malaysia. 2. 1.2 Banking and Financial Institutions Act 1989 (BAFIA) Banking and Financial Institutions Act 1989 (BAFIA) is one of the legislations to regulate and supervise the financial system. The objective of the Banking Financial Institutions Act, 1989 (BAFIA) is to provide new laws for the licensing and regulation of the institutions carrying on banking, finance company, merchant banking, discount house and money-broking business, for the regulation of institutions carrying on certain other financial businesses, and for the matters incidental thereto or connected therewith. BAFIA was introduced to provide for an integrated supervision of the Malaysian financial system and also to provide the Central Bank with the power to speedily investigate and prosecute, if necessary any illegal activities in an attempt o reduce white-collar crime. 2.1.3 Securities Commission (SC) Securities commission was set up under the Securities Commission Act 1993. The function of the Securities Commission is to promote a strong and healthy securities market and to maintain the confidence of investors in line with the provisions of the Securities Commission Act and the Securities Industries Act 1983. SC also regulates the corporate sector, particularly the listed companies. Company that listed in bursa Malaysia required filing detailed annual reports with the Commission. The period of the financial report date and the issue date must not exceed six months. The annual reports must be audited. The public companies are required to maintain a high standard of financial disclosure in order to provide the public with the information that is necessary to make informed investment decisions. The SC played a significant role in the establishment of the Financial Reporting Act 1997 and continues to be involved in the Malaysia Accounting Standards Board (MASB). The function of the SC included: * supervising exchanges, clearing houses and central depositories; * regulating all matters relating to securities and future contracts, unit trust schemes, take- over and mergers of companies; * encouraging self regulation; * approving authority for corporate bond issues; * licensing and supervising all licensed persons; * ensuring proper conduct of market institutions and licensed persons. The SC has since 1996 embarked on three phase shift towards a Disclosure Based Regulation (DBR). With effect from 2001, it has embarked on a full DBR focus with requirements of high standards of disclosure, due diligence and corporate governance. Disclosure is crucial to investors who wish to invest or who have invested in securities sp that their investment decision process can be facilitated. Due diligence is a process undertaken by companies in disclosing information, to ensure that all information disclosure in full, timely and accurate. Corporate governance is the process and structure used to direct and manage the business and the affairs of the company towards enhancing business prosperity and corporate accountability with the ultimate objective of realizing long- term shareholder value, whilst taking into account the interests of other stakeholders. 2.1.4 Malaysia Accounting Standards Board (MASB) The Financial Reporting Act 1997 establishes the Financial Reporting Foundation (FRF) and the Malaysian Accounting Standards Board (MASB). The main functions of the FRF are to provide the financing arrangements for the operations of the MASB, and review the MASB performance. MASB is an independent authority to develop and issue accounting and financial reporting standards in Malaysia. The main functions of the MASB are to: * issue new accounting standards as approved accounting standards; * review, revise or adopt as approved accounting standards existing accounting standards; * issue statements of principles for financial reporting; * sponsor or undertake development of possible accounting standards; * conduct such public consultation as may be necessary in order to determine the contents of accounting concepts, principles and standards; * develop conceptual framework for the purpose of evaluating proposed accounting standards; * make such changes to the form and content of proposed accounting standards as it considers necessary. The MASB together with the Financial Reporting Foundation (FRF) make up the framework for financial reporting in Malaysia. 2.2.0 FRS132 Disclosure Requirements In Malaysia, Bank Negara Malaysias and Financial Reporting Standards requirements act as quality control measures for bank to comply in respect of their disclosure contents of their risk in the annual report. FRS 132 (IAS 32) Financial Instruments Disclosure and Presentation shall apply for annual periods beginning on or after 1January 2006. FRS 132 should be read in the context of its objective and the Basis for Conclusions, the Framework for the Preparation and Presentation of Financial Statements. In this study, FRS will take as the guideline to examine the level of compliance among banks in Malaysia to the extent of risk information disclosed. According to paragraph 56 of FRS132 Financial Instruments Disclosure and Presentation, there is a specific requirement that an entity shall describe its financial risk management objectives and policies, including its policy for hedging each main type of forecast transaction for which hedge accounting is used. Similarly paragraph 58 of FRS132 Financial Instrument specifies that an entity shall disclose a description of hedge; nature of risk being hedged, and a description of the financial instruments designated as hedging instruments and their fair values at the balance sheet date. For each type of market risk such as interest rate risk, an entity shall disclose information about its exposure to interest rate risk, including effective interest rates and maturity dates (or contractual re-pricing). On the other hand, for credit risk an entity shall disclose the amount that best represents its maximum credit risk exposure as at balance sheet date, without taking into account of the fai r value of any collateral, in the event of other parties failing to perform their obligations under financial instruments, and significant concentration of credit risk. 2.2.1 Foreign Exchange Risk Disclosure Format When hedging instruments held or issued by an entity, either individually or as a class, creates a potentially significant exposure to the foreign exchange, commodity and interest rate risks. Their terms and conditions that warrant disclosure are: the principal, stated face value, for derivative such as IRS, forwards and future contracts; date of maturity, early settlement option held by either party to the instrument, including the period in which, or date at which, the options can be exercised and the conversion or exchange ratio. 2.2.2 Interest Rate Risk Disclosure Format The carrying amount of financial instruments exposed to interest rate risk may be presented in tabular form, grouped by those that are contracted to mature or be re-priced in the following periods after the balance sheet date. It can be one year or less; in more than one year but not more than two years; in more than two years but not more than three years; in more than three years but not more than four years; in more than fours but not more than five years; and more than five years. Interest rate information may be disclosed for individual instruments, or weighted average rates or a range of rates may be presented for each class of financial instrument. 2.2.3 Credit risk Disclosure Format The disclosure of the financial assets exposed to credit risk shall include the carrying amount of the assets in the balance sheet, net of any provisions for loss. For example, in the case of an IRS carried at fair value, the maximum exposure to loss at the balance sheet date is normally the carrying amount because it represents the cost, at current market rates, of replacing the swap in the event of default. Besides that, a financial asset subject to legally enforceable right of set-off against a financial liability shall be disclosed. It is intriguing to learn that even though MASB advise companies to disclose liquidity risk but no format has been suggested to date. 2. 3.0 Definition of commercial banks In the early days, commercial banks were commonly known as exchange banks because their business was concentrated mainly in the financing of external trade. This involved primary transactions in foreign exchange, such as remitting and receiving funds to and from abroad, and trading in commercial bills, including the short- term financing of foreign trade. Commercial banks are defined as any person who carries on bank business, under the Banking Act, 1973. Banking business means the business of receiving money on current or deposit account, paying and collecting checks drawn by or paid by customers, and making advances to customers, and include such other business as the Central Bank, with the approval of the Finance Minister, may prescribe. However, definition under the Banking and Finance Institution Act, 1989 (BAFIA) is almost the same as the definition under Banking Act, 1973 in which a bank can be defined as individual or organizations whom operates the business of banking such as receiving deposits for current account, saving account, making payment and receiving customers checks and other financing. Today, all the operations in the banking industry are governed by BAFIA, 1989. It is developed to replace the Finance Company Act, 1969 as well as the Banking Act, 1973. The introduction of the BAFIA is intended to provide an integrated supervision of the Malaysian financial system and to modernize and streamline the laws relating to banking and banking institutions. 2.2.1 History of Commercial Banks Commercial banks worldwide are mostly owned by private sectors. They are formed as a business organization with the objective to make profits. In their early establishment in Malaysia, commercial banks have played an important role in the transaction and development in the industry of commerce. The business was mainly focused in financing the overseas business transactions such as foreign exchange (in term of sending and receiving money to and from other countries) and also financing in the short- term markets. The main focus on external transaction was due to the development of economy sector especially in the import and export. Moreover, the business operations at that time were run by the branches with the supervision of their head office in overseas. The first bank branch in Malaysia was Charted Mechantile Bank, in 1959. The banks head office was initially in India, and then shifted to London and lastly China. Later, when the economy has developed drastically, there were more foreign bank branches. Today, the traditional practice of the banking industry in Malaysia has progressed. An important feature in the development of banking is the growing of locally incorporated foreign and domestic banks. BAFIA came into force on October 1, 1989 the domestic bank were required to formally exchange their licenses for new ones issued under BAFIA. The foreign banks, however, were given a time period of five years (up to October, 1994) to exchange their licenses in view of the provision requiring them to incorporate locally. The growth of locally incorporated banks marked a significant change in commercial banking in the country which prior to the 1970s was dominated by foreign banks. As at the end of 1959, there were then only 8 domestic as compared to 18 foreign banks. After 1982, foreign banks had been restricted from opening new branches in Malaysia in line with the policy to encourage the growth and development of domestic banks, particularly the expansion of the branch network into the rural areas. As at December 1996, there are a total of 37 commercial banks with a total branch network of 1569. The regulated expansion of banks has contributed towards a wider and better spread of ba nking facilities. 3. 0 Introduction After the Enron, WorldCom, and Xerox scandals, there has been increasing demand for more disclosures, especially in non- financial segment of the annual report. The need of greater transparency to disclosure the information in the financial statement has increasing more important over the year. Philip (2005), Transparency is defined as the public disclosure of reliable and timely information that enables users of that information to make an accurate assessment of a banks financial condition and performance, business profile, risk profile and risk management. Reliable and timely information mean that information disclosure in the annual report is reliable and can help the investors or any interested parties to make the decision in the timely manner. As for, relevance implies that the risk information meets the decision-making needs of the user of that information and timeliness is necessary to ensure the information is received at appropriate intervals and while it is still relevant. The same author states that reliable information tends to be information about past events, while information about future events is inherently unreliable. However the most relevant information for decision-making is future information and therefore a tension arises between relevance and reliability. Central to this is the issue of forward looking risk information which is potentially of great relevance, but which is also inherently unreliable. Risk management 3.1 Disclosure Regulation Debate Patrice Gelinas (2007), the information firms disclose through regulatory filings and voluntary communication bring into being a complex array of costs and benefits. For example, publicly disclosed information can attract investors as well as qualified employees, increase public profile, and permit benchmarking when competitors must similarly disclose. At the same time, producing information is costly because firms must, among other things, hire and equip information producers and release intelligence that can harm their competitive position. Hua Hwa Au Yong (2005), the disclosure of proprietary risk management information can put banks at a competitive disadvantage as valuable information is available to their rivals. Additionally, the cost of producing and providing information may be a significant burden for some banks. The prescriptive accounting treatments could bias banks decision- making towards the activity and instruments with the least costly regulatory outcome. For example, banks may simply decide to reduce the use of risk management instruments given the detailed disclosure requirements. Extent theory on voluntary disclosure shows that, absent market imperfections or externalities, firm managers have incentives to optimally trade off the costs and benefits of voluntary disclosure, and to provide the efficient level of information to investors in the economy (Healy and Palepu, 2001). A single efficient amount of disclosure exists when disclosure costs increase at an increasing pace and benefits increase at a decreasing pace as the amount of disclosure a firm releases augments. Similar assumptions are widespread (e.g. refer to Admati and Pfleiderer, 2000) and seem reasonable. For example, if regulators mandated public disclosure of detailed itemized inventory up to, say, the number of paper clips at every employees desk, this extra disclosure would probably generate minimal incremental benefits because of its limited value for investors. However, the costs associated with preparing this information in terms of labor hours, additional pages of printed information, and loss of intelligence to competitors, to name but a few, would certainly be exponential. Philip (2005), state that it is important to note that disclosure itself will not create transparency unless it is disclosure of useful information. Immaterial risk information need not be published as, by definition, this is information that would not influence the users decision. Three theoretical arguments support disclosure regulation in favor of investors and any interested parties. First, Leftwich (1980) and Beaver (1998) note that regulation increases economic efficiency because market failures in disclosure could lead to underproduction of information. Failures arise because existing shareholders pay for the production of information disclosure, but cannot charge potential shareholders who free-ride on the information. Second, the same authors note that it can reduce the information gap between informed and uninformed investors, a purpose that simply redistribute wealth between different shareholder strata. Linsmeier (2002), information gap refers to information asymmetry that exists between a firms insiders and outsiders. An information gap reduces firm value due to high monitoring and bonding costs. Managers can increase firm value by narrowing the information gap between banks, investors and other stakeholders via disclosure of value information. Thi rd, Coffee (1984) and Mahoney (1995) argue that it leads to efficient and liquid securities markets because it reduces information asymmetry between investors and managers to solve the agency problem. Keryn Chalmers (2005), derivative disclosures can reduce agency costs. Bank managers, as agents, may act in their own interest, with regulators and shareholders needing to restrict and monitor their behavior. Restriction and monitoring is achievable through the imposition of higher capital adequacy requirements, strict disclosure regulations, or higher expected returns to debt and equity capital providers. By disclosing derivative related information, bank managers are able to reduce agency costs. In contrast, Admati and Pfleiderer (2000, p. 479) summarize well the viewpoint of researchers who do not believe that disclosure regulation favors investors: If disclosure is good, why dont firms do it voluntarily? Regulation should not be necessary if disclosure is in the firms best interest. The need for disclosure regulation is further brought into question by the well-known unraveling results of Ross (1979), Grossman (1981), and Milgrom (1981), whereby lack of disclosure is taken to be bad news, forcing the informed party to reveal its information in equilibrium. If this is the case, again, regulation that requires that certain information be disclosed seems to be redundant. In short, the debate between proponents and opponents to disclosure regulation demonstrates that there is no consensus on its desirability for investors or on whether it increases economic efficiency. To the opposing, disclosure regulation is costly for investor it supposedly helps and, to the extent that managers pay is linked to the performance of the firm, it impacts managers pay negatively. Conclusion Disclosure debate Banks need to disclose minimum information as required by the regulator. In other words, banks are giving their right to choose not to disclose additional information. As thus, this may lead to complex array of costs and benefits. Although public disclosed additional information can attract more investors, but banks may choose to not disclose it as the cost of disclosure might be greater than it benefit. This why lead to complex of interest. Three theoretical arguments support disclosure regulation in favor of investors. First, the regulation increases economic efficiency. Second, it helps to reduce information gap between informed and uninformed investors. Lastly, it reduces information asymmetry between investors and managers. 3.2 Risk Disclosure Requirements Among the many new areas of interest that require disclosure in the annual report are matters relating to social and environmental obligations and the intellectual property of the company. Currently, such disclosures are still left to the discretion of the company in many countries and under varying guidelines issued by the authorities and accounting bodies. (Azlan Amran, Abdul Manaf Rosli Bin and Bin Che Haat Mohd Hassan, 2009) Below are some guideline and standards that which is issue for the banking sector. Basel II According to Bank Negara Malaysia, Malaysia will adopt the new capital accord- Basel II set by Basel committee. This Basel II is the revised international capital framework. The Basel II Framework describes a more comprehensive measure and minimum standard for capital adequacy that national supervisory authorities are now working to implement through domestic rule-making and adoption procedures. It seeks to improve on the existing rules by aligning regulatory capital requirements more closely to the underlying risks that banks face. The objective of this new framework is to emphasize on the need for refined measurement of risks, more efficient capital management and the adoption of sound risk management practices that will ultimately contribute to greater financial stability. This will to enhance the corporate governance framework, the robustness of the internal control systems, and to introduce greater transparency and market discipline. Currently bank in Malaysia is still follow the current accord issued in 1988, this Basel I has served as the international benchmark for capital adequacy assessment for banking institutions. Although this can achieved the desired results in terms of developing more well- capitalized banking institutions globally, however the rapidly change in the developments in financial market over the years, the existing accord may less effective. The new Basel Accord comprises three pillars. The first pillar provides a minimum capital measurement framework for credit and operational risks. In essence, the regulatory capital requirement is aligned more closely with the actual degree of underlying risk that the banking institution faces. It provides the capital measurement that has three options with different levels of complexities for both credit and operational risks to better reflect actual risk. The second pillar focuses on strengthening the supervisory process, particularly in assessing the quality of risk management in the banking institutions. The supervisory process aims to provide the mechanism to ensure that other risks such as concentration risks and market risks in the banking books being managed. Under such an environment, prudent lending such as that characterized by a high degree of portfolio diversification, could justify lower capital requirements. The third pillar specifies minimum disclosure requirements on capital adequacy to enhance market discipline. (Evidence from Bank Negara Malaysia, 2009) The adoption of the new accord is consistent with strengthening risk management capability. This not only can result in greater capital savings but the domestic banking system also can become more competitive and integrated with the global marketplace. However, Malaysia will adopt a two- phased approach for Basel II. Which mean that, the first phase will begin in January 2008 all the banks will adopt the standardized approach for credit risks and basic indicator approach for operational risk. The second phase will adopt by year 2010. IAS 30- Disclosures in the Financial Statements of Banks and Similar Financial Institutions The financial statements of banks and similar financial institutions are complying with all Financial Reporting Standards. According to Financial Reporting Standards, IAS 30 recognizes the uniqueness of bank and their different accounting and reporting needs. IAS 30 also encourages the presentation of a disclosure of a commentary on management and control of liquidity and risk. The objective of the IAS 30 is to prescribe appropriate presentation and disclosures for banks. The purpose of this is to provide users with appropriate information to assist them to evaluate the financial position and performance of banks and to enable them to obtain a better understanding of the special characteristics of operations of banks. Users of financial statement of banks will be interested in the liquidity and solvency and the risk related to the assets and liabilities recognized in the balance sheet including off balance sheet items. 4.0 Introduction The objective of this chapter is to describe the methodology to be used in conducting this study. This included the explanation on sample selected, data collection, method of analysis and hypothesis. 4.1 Sample Selected From the total number of twenty two licensed commercial banks in Malaysia only out of nine banks are locally own. Thus, only nine banks have been chosen as the sample size for this study. As this study only focus on risk management disclosure from Malaysia perspective. (Table 3) No. Name Local commercial bank Foreign commercial bank 1. Affin Bank Berhad x 2. Alliance Bank Malaysia Berhad x 3. AmBank (M) Berhad x 4. Bangkok Bank Berhad x 5. Bank of America Malaysia Berhad x 6. Bank of China (Malaysia) Berhad x 7. Bank of Tokyo-Mitsubishi UFJ (Malaysia) Berhad x 8. CIMB Bank Berhad x 9. Citibank Berhad x 10. Deutsche Bank (Malaysia) Berhad x 11. EON Bank Berhad x 12. Hong Leong Bank Berhad x 13. HSBC Bank Malaysia Berhad x 14. J.P. Morgan Chase Bank Berhad x 15. Malayan Banking Berhad x 16. OCBC Bank (Malaysia) Berhad x 17. Public Bank Berhad x 18. RHB Bank Berhad x 19. Standard Chartered Bank Malaysia Berhad x 20. The Bank of Nova Scotia Berhad x 21. The Bank of Nova Scotia Berhad x 22. United Overseas Bank (Malaysia) Bhd. x Table 3: List of Licensed Commercial Banks in Malaysia (Evidence from Bank Negara Malaysia, 2009) 4.2.0 Data Collection 4.2.1 Source of Data Source of information can be generally categorised into 2 categories namely the primary and secondary data. Primary data come from the original source and are collected especially to answer the particular research question. The method of collecting primary data normally is through observation, questionnaires, and interview. In the other hand secondary data are collected from various sources such as thesis, journals from library and internet, government sources, textbooks and various articles that are related to this study. As for this study, secondary data will be used as the sources of information and data for analysis. Choosing annual reports to examine to what extent the banks disclosed their risk due to (1) the annual reports is the main source for the investors to make investment decision, (2) easier to make comparison among banks by study their annual reports, (3) annual reports also is the secondary data that can gather from internet. Thus, this method is very useful for the purpose of this study. 4.2.2 Data Collected Annual reports for every single bank as listed on the Table 4 will be used to analysis the information on risks disclosed by the banks in their financial statements. Bank Annual Report 2007 Annual Report 2008 Annual Report 2009 Affin Bank Berhad (under Affin Holding Group) X Alliance Bank Malaysia Berhad (under Alliance Group Berhad) AmBank (M) Berhad (under AMMB Holding Berhad) CIMB Bank Berhad (under Bumiputra-Commerce Holding Berhad) X EON Bank Berhad (under Eon Capital Berhad) X Hong Leong Bank Berhad Malayan Banking Berhad Public Bank Berhad RHB Bank Berhad X Total 9 9 5 Table 4: Number of Commercial Banks Annual Report that able to download from Bursa Malaysia as at February, 28 2010. In reference to Table 4 above, total nine banks annual reports were able to downloaded from Bursa Malaysia for the period between 2007 and 2008. However, as for year 2009 only five of these reports were available in Bursa Malaysias website. The other four banks annual reports were not able to obtained due to the banks financial year end date is on 31 December (i.e. their financial reports for the year ended 2009 are still in the process of being audited). These banks are Affin Bank, CIMB Bank, EON Bank and RHB Bank. Nonetheless, for Public Bank even though its financial year ends date is on 31 December, the banks annual report was available in Bursa Malaysias website due to the fact that the companys annual general meeting was scheduled to be held on March 2, 2010. Among the banks, they have difference financial year-end. For example, RHB Bank Berhad has their financial year-end on 31 Dec, while Malayan Banking Berhad has their financial year-end 30 Jun, and Alliance Bank Malaysia Berhad has their financial year ended 31 March. As so, for the purpose of this study, three years time period taken as the reasonableness time period for this study. In reference to Table 5, out of the total of nine local commercial banks, two banks having financial year-end on 31 March. Whilst another two banks having financial year- end 30 Jun and the rest having financial year- end on 31 December. Bank Financial year- end on 31 March Financial year-end on 30 Jun Financial year- end on 31 December Affin Bank Berhad Alliance Bank Malaysia Berhad AmBank (M) Berhad CIMB Bank Berhad EON Bank Berhad Hong Leong Bank Berhad Malayan Banking Berhad Public Bank Berhad RHB Bank Berhad Total 2 2 5 Table 5: Banks List with Year-end which differs. 4.2.3 Method of analysis (Analysis Technique) Information that was disclosed in the banks annual report can be qualitative (non financial) and quantitative (financial). Hue Hwa Au Yong (2005), point out that qualitative information consists of management objectives and strategies, discussion of risks and management method, while as for quantitative information consists of notional amount, market value data, risk weighted asset computation, gross current credit risk, and liquidity risk and others risks . For the purpose of this study, it is focuses on the qualitative part of annual reports, as Amran (2006), indicated that from an earlier study have shown that most of the disclosures are qualitative in nature and concentrated in the chairmans statement. Information to be disclosed is a matter of judgments. Hence, guideline from Financial Reporting Standards in Malaysia will take as guidance to examine the level of compliance among commercial banks in Malaysia. Descriptive analysis is use for this study. The bank annual report will downloaded from Bursa Malaysia website. To locate the a bank disclosure of risk, the Find option in Adobe PDF was used to search key word such as risk, credit risk, interest rate risk, liquidity risk, foreign risk and operation risk. Then I will seize the content of risk in a statement from the banks annual reports and study the type of risk they disclosure examine whether it is voluntary disclosure or mandatory disclosure. I believe that with used of take the content and put in a statement and examine the level of compliance, I will be able to gather accrual result from the study. 4.3 Hypothesis Hypothesis 1: H0 = Interest rate risk disclosure was favored as compared to credit risk. H1 = Interest rate risk disclosure and credit risk are equally disclose in banks financial statement. Hypothesis 2: H0 = The commercial banks disclosed both mandatory and voluntary risk information. H1 = The commercial banks disclosed only mandatory risk information. Hypothesis 3 H0 = All commercial banks in Malaysia disclosed financial risk management objectives and policies. H1 = Not all commercial banks in Malaysia disclosed financial risk management objectives and policies. Hypothesis 4: H0 = The commercial banks in Malaysia comply with Financial Reporting Standards in Malaysia. H1 = The commercial banks in Malaysia do not comply with Financial Reporting Standards in Malaysia. 4.4 Conclusion The risk management disclosure level categorize into few type of risk; credit risk, interest rate risk, foreign exchange risk, liquidity risk, and operating risk. Among those types of risks some banks disclosed in their annual reports while some of the banks do not disclose it. Out of twenty two commercial banks in Malaysia only nine banks have been chosen for this study, as this study only focused on risk management disclosed from Malaysia perspective. This project will be conduct by descriptive analysis, study the note to account that disclose in the annual reports for the banks, and to examine the level of compliance to FRS 132. Nevertheless, the study only focuses on the non- financial section or the narrative part of the annual report. 5.0 Introduction 5.1 Research question The purpose of this paper is to determine the extent of which commercial banks in Malaysia are providing risk management disclosure suggested under FRS 132. Research question 1: Which type of risk more likely to be disclosure by banks? Type of risk Number of company disclose (percent) Number of company do not disclose (percent) Total Operational risk Credit risk Liquidity Risk Market risk: Foreign Currency Exchange Risk Interest Rate Risk Equity Risk Research question 2: Do the commercial banks in Malaysia disclose financial risk management objectives and policies? Listed Bank (percent) Non Listed Bank(percent) Total Financial Risk management statement and policy Yes No Total Table 6: This table reports the number of banks providing financial risk management and policy Research question 3: Do commercial banks provided additional voluntary disclosure?