Are we going toward another recession?

We have been talking about risk management for a week. From airline cost management, Publix shopping center parking lot hazard control, to insurance policies against price increases. It seems to me that there are many ways to help us prevent from losses. How about our depressing economic market? Is there an efficient way to manage its risk?

Ever since the war started, the government spent trillions of dollars overseas on our battles. Don’t get me wrong. I am not against it. I have been supporting it all along. Unfortunately, we can’t afford the military expenses any longer. We have already spent our retirement money. How can we get out of this bad financial situation? Real estate has its most foreclosures this year. The housing market is in a slump. Hourly workers can’t find any construction jobs anymore. The stock market has experienced its lowest point. Are we going into another recession? Or, are we already in it and we just haven’t realized it yet?

You will be able to find some related article from the following link. Just like the article said, the economic downturn can cause panic and psychological disturb. This is the reason why consumers lose confidence in the market. This is negatively correlated to the market economy. We should do what we can. Support our government, support our soldiers, and get through the tough times together.

http://www.marketoracle.co.uk/Article383.htmlhttp://www.abcnews.go.com/Health/Depression/story?id=3473606&page=1

Airline Industry

We talked about why we manage risk last week in RMI4150. As we all know, the goal of managing risk is to minimize the cost of risk. Furthermore, we discussed the airline industry on Thursday. It kept me wondering what really makes an airline profitable. Is the airline industry as profitable as it used to be? Probably not. Think about it. As the oil price goes up, ticket prices become more competitive. Do you remember back in the days when you would get a hot meal on an airplane? Service used to be fabulous and seats used to be so much more comfortable. Now, the passengers only get some crackers or peanuts instead and service quality is very low. Seats are tight and narrow that they make you miserable. Obviously, all the airlines are trying to cut their costs back.

I believe airline travel will be more convenient and enjoyable as time goes by. IATA, International Air Transport Association, forecasts international air travel to grow by an average of 6.6% a year to the end of the decade and over 5% a year from 2000 to 2010. The future of the airline is globalization and consolidation. Airlines need to reduce their costs to ensure they survive an economic recession. Improving service, maximizing capacity, and selling commercial products to passengers will help airlines boost profits.

http://adg.stanford.edu/aa241/intro/airlineindustry.html

Risk Management

Today, we talked about the importance of managing risk. Every single enterprise takes risk on different scales; so does every individual. I have always been a risk adverse person my entire life. I believe in the traditional way of living. For example, I put my money in a savings account, buy government bonds, and fix the interest rate on my home with a 30 year mortgage. However, after taking FI 4000 and RMI 3750, I started to realize risk is not necessarily bad. As a matter of fact, it is helpful for our everyday economy. Here is a useful link that helps you to manage risk in your own surrounding: http://www.hse.gov.uk/risk/index.htm

Risk exists everywhere. For example, there is risk on campus, at the office, and on the highway. We can’t ignore risk. Instead, we need to diversify the risk and learn how to manage risk efficiently. Reducing the cost of risk is the goal. Utilizing risk to create safer results and higher profit is our target.