Jules Kroll Essay

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In order to cater for the company’s financial needs, Kroll needs to seek for financial aid in order to source the capital required so as to facilitate their plan of venturing into the credit ratings market. The various sources that Kroll can use to acquire the required amount of capital are from;

- The personal savings he made while he was still working. Though not all the savings are supposed to be channeled in this venture.

- Borrowing from friends and relatives. This should be done in a formal way, whereby, they write an agreement on how the borrowed capital will be repaid by the company; be it payment through shares or cash payment within a certain period of time.

- Acquiring loans from government parastatals or other financial and money lending institutions. These institutions lend huge sums of money to finance the development of various projects and in turn the loans are paid back with interests as per the interest rate agreed upon during the acquiring of the loan.

Effective running of any company majorly relies on adequate finance to cater for the ever-growing needs of the company. Opening up a new branch of a company requires adequate financing capacity, acquiring more or new employees requires adequate financing capacity, researching on the rating market daily requires capital too. Thus with inadequate financing capacity and measures, a company can be rendered paralyzed thus cannot carry out its day-to-day activities as required.

- Regulatory Requirements

After the Financial Crisis, that occurred in 2007-2008, which caused a collapse in European national economies and also the global economy several regulations were put in place to prevent such a crisis from reoccurring. The regulations put all the credit rating agencies on the watch so as to ensure that there was transparent and accurate financial institution ratings and also bond advising. This was a major step in rooting out corruption that was a vice common in most rating agencies before the Financial Crisis. The various regulatory requirements put in place include;

- A set of monetary policy instruments by the European Central Bank-The Eurosystem conducted open market operations such as offering standing facilities hence requiring the credit and financial institutions to hold minimum reserves on Eurosystem accounts. This was so as to manage liquidity in the market and control the interest rates. Credit assessment was carried out on assets by ECAIs.

- Registration Process and Requirements- Credit Rating Agencies are registered and supervised by ESMA (European Securities and Markets Authority) which replaced the competent authorities selected by the member states. Applications are submitted by the CRAs to the ESMA who then either register or disregard application for registration of the CRA.

- Specialization

Due the Financial crisis that occurred earlier on, if Kroll is to venture into the rating business market, their company should disregard specializing in the mortgage bonds due to the shakedown that was experienced since not all mortgages can be totally sold out. The Kroll should mostly specialize in the various areas due to various reasons;

- Telecommunication Industry- With the ever-growing population all over the globe, passing of information is vital. Everyone and every company strongly relies on telecommunication channels in order to ensure that the intended listener gets access to the intended message. Thus this would earn fortunes for the investors.

- Energy Industry- Everyone all over the world relies on the various sources of energy. The most vital one in human life being electricity and fuel. Electricity affects both the producers and consumers while fuel affects the producers, suppliers and consumers. If investors invest in this energy industry and bonds are traded, the industry will thrive and will earn the investors fortunes hence enabling them realize their goals and objectives too.

- Textile Industry- With the growing population day in day out, the textile industry produces more output to meet the growing demand for clothing. If this units are traded in bond securities, the investors will earn fortunes from the units consumer both nationally and globally.

- Farming Industry- Farming industry is most vital for any economy. From the farms we get the raw materials which are either processed or manufactured to produce other goods. A lot of units are produced to meet the grown demand for raw materials by the various industries. If these units are traded as bond securities, fortunes can be made by the investors.

References

- McLean, Bethany and Joe Nocera. All the Devils Are Here, the Hidden History of the Financial Crisis, Portfolio, Penguin, 2010 (p.111)

- Raquel Garcia Alcubilla and Javier Ruiz Del Pozo: Credit Rating Agencies on the Watch List; Analysis of European Regulation, Oxford University Press, 2012

- http://www.legislation.gov.uk/uksi/2011/1435/contents/made

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