Risk Assessment and Risk Management

Risk Assessment and Risk Management Assessment 4 Risk Management In the world of business, risk is always associated regardless of how small or big your business is. It is essential to have an excellent management plan to protect the entities reputation and assets. To create a good management plan a risk management process, is a process that aides risk managers to set up priorities and assists in ensuring comprehensive management efforts, is being utilized. Risk management process is composed of six steps namely: Determine the objectives of the organisation Identifying exposure to loss Measure those same exposure Select alternatives Implement a solution Monitor and review the outcomes These steps are essential in drafting a good management plan to further understand these steps this paper will expound its application and its advantages to the enterprise. Determine the objectives of the organisation Each organization has its own and unique objectives. These objectives are the reason a company is being established and also guides them for future development. To be able to identify a risk in an enterprise a thorough understanding of the entities objective should be done by the risk managers. If risk managers completely understood the organisations objectives it will enable them to classify threats and opportunities the enterprise will face in the future and can create solutions or prevent risk associated with an organisations future actions. An example will be a company’s objective is to be globally competitive the risk managers will create a plan that will help the organisation achieve its objectives but prevent the risk associated with it like policies and laws of other country or the consumer needs for the product and service. Identifying exposure to loss Loss exposures include loss of financial assets, physical property, human loss and loss of good will. These are the risk that a risk manager might identify when assessing possible risk of the company. These losses can be prevented if proper risk identification is done before any untoward event occurs. Loss of financial assets is usually due to liability judgement, non-compliance and lawsuits. Loss of physical property can be because of bad investment, land ownership problems and natural disasters that may damage the property. Human loss is related to death, injury or resignation of employees that can affect the operations of the company. Reputation is very important for a company to function if consumers trust an organisations services and products this will increase their reputation but otherwise it can lead to loss of good will. Measure those same exposures An organisation not only needs to identify the risk or loss but as well as measure the impact of those risks to the organisation. These can be achieve by using different tools is assessing risk for example a client complain and satisfaction survey reports. This survey will help risk managers identify the areas where in they need modifications and improvement let as say in the survey patients complained that the nurses are rude therefore the managers should assess the employees in that department and try to do necessary adjustments to increase client satisfaction at the same time prevent human loss. Another one is incident reports these are usually a common tool used to identify risk it is a report made by employees that includes events that occur beyond the normal daily operations. Others are genetic occurrence screening, employee compensation claims data, contact leases and agreements and informal discussion with managers and staff these can be used to determine the risk and its eff ect on the organisations operation. Select alternatives As stated earlier risk is inevitable in handling these risk a risk manager uses risk treatment strategies categorized into two which is risk control and risk financing. Risk control is preventing losses and justifying the effects of losses. It is composed of three techniques which are exposure avoidance, loss prevention and segregation of loss exposure. Exposure avoidance is the reduction of loss to zero if focuses on the eradication of the possibility of loss to occur. It is used when a potential risk can be critical threat to the organization and there is no way to reduce or transfer those risks. Loss prevention gives emphasis on the possibility of an occurrence of an event and reduction of loss by educating staff and reviewing of policies and procedures. Loss reduction reducing the severity of loss an example is having fire drills, alarm system and immediate incident investigation to an event. Segregation of loss exposure this is distribution of assets like supplies to different d epartment to prevent loss for example in the first floor of the facility the flood damaged the supplies of medicines but on the second floor where other supplies are placed these can be used and distributed to the other department reducing the loss and continues the operations of the facility. Risk financing is paying losses that have happened it is composed of two techniques which are risk retention and risk transfer. Risk retention is taking responsibility of the potential losses which is related to the given risk and creating plans to cover the monetary consequences of that certain loss. Risk retention are usually used for loss that can’t be transferred like legal laws as well as small risk like paying for personal property damages like loss of a mobile phone, broken chair and others. Risk transfer is transferring of the financial responsibilities of the organisation to a third party like insurance companies. In selecting a solution to those losses the risk manager should determine which technique will be suited for the current risk. The risk manager should see to it that before choosing a solution he should determine which alternative has a lesser effect on the organisations normal operations and which one is cost effective for the organisation. Implement a solution Implementation of the solution is putting the plan into action. This will involve the use of the technique identified by the risk management professional which is the best to prevent further organisational loss. This technique will be assumed by other department managers within the organisation. For example if the risk manager professional identified that the best technique risk financing and risk transfer the risk manager may include selecting an insurer and creating a good insurance policy for the organisation. Monitor and review the outcomes The last step in risk management process this is to check the effectiveness of the risk management program. It is an approach done by risk managers, higher management, different department managers, and legal counsel and claim managers to evaluate the risk and its impact to various areas of the organisation. This will enable the organisation to see the flaws and further improve the risk management plan of the organisation. The evaluation is done by comparing the annual report made by the risk manager against the bench mark they have created as well as the previous annual reports in the past years. Risk assessment process is defines as an organized process for identifying and evaluating events that effects the accomplishment of objectives in a positive or negative way. These events can be related to political, legal, environmental, social and competition. It can also be an internal factor like human resource, organisational processes and infrastructure. Risk assessment like any process is made up off different steps which are: Identification of relevant business objectives Identifying events that could affect the achievement of objectives Determining risk tolerance Assessing the inherent likelihood and impact of risks Evaluating the portfolio of risk and determining risk responses Assessing residual likelihood and impacts of risks Identification of relevant business objectives Objectives are the goals that an organisation wants to achieve in order to prosper in the business world. Each organisation has its own set of objectives that may be the same or different from other organisations. Through these objectives a risk manager will be able to extract different risk that could threaten the organisation. Objectives can be constructed by using the SWOT analysis wherein it determines the strength, weakness, opportunities and threats. After the objective identification and finding out the possible risk a risk management plan can be started. Identifying events that could affect the achievement of objectives According to an organisation objective the risk managers should create an initial inventory of undertakings that may affect the accomplishment of the organisations objective. These events can be from within the organisation or from the external environment. The internal factors are organisations policies and processes, the human resource, technology and information that are taken from internal sources. Meanwhile, external factors are related to politics, economics, legal, sociological and environmental. After assessing these factors the risk manager can then categorise them as either a threat or an opportunity for the organisation. Written annual reports of internal and external factors will provide the risk manager of accurate numbers and percentage to pinpoint which threats needs immediate action. Determining risk tolerance The acceptable level of deviation comparative to the accomplishment of a specific objective of an organisation is called risk tolerance. It is a percentage or level in which a risk can be accepted by the organisation but have a certain range of limitation that could still enable an organisation to operate. Assess inherent likelihood and impact of risk In risk assessment it is part of the process to identify the events that has a potential impact on the accomplishment of the organisational objective. These events should be considered to be risk and has to be evaluated based on the chances of it to occur. It is essential that this event should be assessed on natural basis without bearing in mind the risk response that already exists. An inherent risk map should be assess by a risk manager, it is a portfolio view of risk that aides analysis and action, to determine the which risk has more effect and should be a prioritized for an immediate response. Evaluating the portfolio of risk and determining risk responses As we all know risk is inevitable it cannot be fully eliminated if an organisation wanted to have a return of investment they should take on some risk associated for their actions. Evaluating the risk portfolio will enable the risk manager and the organisation to see the impacts of the risk to the organisations objectives and goals. It will also evaluate the effectiveness of the risk response they have made and further improve if such risk arises in the future. Risk tolerance varies depending on the risk type as well as the responses to those risks so it is essential to assist the risk response and the action given and its effectiveness. Assessing residual likelihood and impacts of risks Assessing residual risk will help evaluate the effectiveness and appropriateness of the risk response if it is in within the acceptable level or within the risk tolerance of the organisation. It is assessing the internal checks and balances are still in place within the organisation. Therefore, we could see how essential risk management is to an organisations progress. Risk management is not just a simple work just to identify and provide a solution but it is a systematic and scientific way of identifying, implementing and evaluating the effects of risk to the organisation. The organisation will always face risk to be able to move and not stagnate on the current status they are in. It is a must that a risk management professional understand the organisations objective for him or her to extract and create an excellent risk management plan. It is also important to evaluate the effectiveness of the risk management plan and see to it that flaws are modified for better result in the future. Bibliography: Southern Cross University (09 October, 2014). http://scu.edu.au/risk_management/index.php/8/ Corporate compliance insight. (09 October, 2014). http://www.corporatecomplianceinsights.com/key-elements-of-the-risk-management-process/ Internal Auditor (10,October, 2014). https://iaonline.theiia.org/understanding-the-risk-management-process Health and Safety Executive (10 October, 2014). http://www.hse.gov.uk/risk/controlling-risks.htm Work and safety blogs (10 October, 2014). http://rospaworkplacesafety.com/2013/01/21/what-is-a-risk-assessment/ Southern Cross Healthcare. (10 October, 2014). https://www.southerncross.co.nz/Portals/0/Group/Insurance%20Prudential%20Supervision%20Bill%20220609.pdf

Masses Need to Create Mass Transit Essay -- Transportation, Nationwide

We consume 85 million barrels of oil daily. Nearly 6,500,000 airline operations occurred in 2009. About twenty percent of those were delayed (â€Å"Title from H2† 1). As of January 2011, the average price of a gallon of gas was $3.08, and the annual average parking costs for a vehicle in a downtown business district was $1,930 (â€Å"Rising Gas Prices† 1). All these problems have one thing in common; they can be limited, if not solved, by a nationwide mass transit system such as a bus line. Americans have been using mass transit increasingly in the past few years. The only problem is that no system exists to ferry citizens from one metropolis to another one on the other side of the country. Building a ground-based mass-transit system that connects all the cities in the United States of America will lower the demand for oil, decrease journey times to nationwide destinations, and lower transportation costs. Again, we consume 85 million barrels of oil daily. According to this value, we consume a little over 31 billion barrels of oil in a year. Out of a 42 gallon barrel of oil, nearly 19 and a half are converted into gasoline, almost half of the barrel. The average person in America uses about three gallons of gasoline daily (â€Å"Barrels of Oil a Day† 1). Therefore the average American consumes about 945 gallons of gasoline yearly. If each American uses a public bus transit system, which has an average seating capacity of fifty people per bus, then 47,250 gallons of gasoline, or about 1,125 barrels of oil, would be eliminated per bus yearly. That value is before calculating how much gasoline each bus consumes. The American Public Transit Association, or APTA, stated that if Americans used public transit for ten percent of their daily travel, the... ...power private cars, lowering our dependency, and thereby lowering the demand. Most of the weather that would affect airplane travel would not affect bus travel, thereby lowering journey times for those who experience a flight delay. Finally, a one-time pass for a bus costs an extremely less amount than gasoline and parking costs. Other reasons involving why citizens would use this system, which makes the system worth the labor and funds it would take to create it, and how the funds would be collected and used, have also been explained. We as Americans need to convince legislation to create a mass-transit system that would connect all the cities in the country, pay the taxes that will allow it to be created, and, above all other actions, ride the transit system. If we do this, we can limit, if not solve, all three problems facing the United States of America.

Research and critical reflection †Money doesn’t buy you happiness. Essay

Money doesn’t buy you happiness. Everyone has heard the statement before and most studies of happiness and well-being generally agree on it. However, even though money does not buy you happiness it is largely agreed that money can be a means to an end. Hence, money cannot buy you happiness, but it can provide you with financial security and well-being. If you asked a poor person if they were happy most will tell you they are not due to living in poor conditions and having poor health. Their need for safety and security outweighs their need for nice things and possessions. So if money does not buy you happiness what does buy you happiness? What are the factors in life that make you happy? One way to address this question could be looking at ones well-being. As such a deeper interpretation of well-being is necessary. When considering the concept of well-being, there are two major approaches, objective well-being, and subjective well-being. Objective well-being looks at how healt hy a person is and the access he has to resources. Subjective well-being on the other hand looks at the overall happiness of a person. In the same breath it is also argued that material well-being, that is the things we buy and want, does not lead to our overall happiness. Hence, money doesn’t buy you happiness. (Williams, 2014). Considering this notion that money does not buy you happiness (Myers & Diener, 1995), Kawachi and Kennedy (2002, p.30 -31) sought out to summarise the main ingredients to happiness in one’s life. They noted sex, ethnicity and age scarcely make you happy. Rather it is the relationships and community you have around you that generates levels of happiness. Furthermore, enjoying one’s work and leisure is highly correlated with happiness. On the other hand, one’s wealth and income does not have a straight correlation with happiness. Some poor people are happy, some rich people are unhappy and vice versa. Nonetheless, millions of people across the globe spend large amount of money consuming things they do not need. I myself fall victim to marketing ploys and consume materialistic things that I do not always need, but want because I believe it will make me fit in more in my community, or make me happier. People follow fashionable trends and want all the new toys that come out thinking it will make them happy. This need of people to have nice fancy things has previously been coined the â€Å"new consumerism†. Back in the day, it meant keeping up with others in your community, if your neighbour got a new flash car, you had to go get one. However, with the popularisation of television,  and later on the rise of mass media, â€Å"new consumerism† meant people were now competing all over the globe. Furthermore, as we live in a world of inequality in terms of income and wealth, the gap between what we want and what we have largely depends on our income. Schor (1998), referred to this as â€Å"the aspirational gap†. If one cannot afford something, he can either be â€Å"unhappy† dealing with not having that product/want, or he chooses to take on debt in order to afford it and have it then and there; thus having to work more to cover the debt and the cycle conti nues. So if we look at happiness as the â€Å"difference between what we have and what we want we suddenly become unhappy† (Williams, 2014, p.5). Largely, I agree with the statement the money does not buy you happiness. By society’s standards I am definitely not a rich man but I consider myself to live a moderately happy life; largely due to the fact that I am healthy, I have good friends and a loving family. According to several scholars (Benin & Nierstedt, 1985, Inglehart, 1990, Myers, 2000) it is indeed our social relationships that generate the highest levels of happiness. With that said, I still consume certain things, materialistic things, and go to certain places in order to construct my social identity. I want things in order to fit in or get praise from my peers. According to many scholars however this does not lead to my well-being but rather to unhappiness. This draws back to the â€Å"aspirational gap†, if I cannot afford to look a certain way or buy certain things and keep up with the times do I ultimately become unhappy? Personally I would like to say it does not apply to me, but reflecting back to Schor’s (1998) study, it appears to point in that direction. As such, I do agree with the concept more so as a lot of people around me become unhappy when they cannot afford something they want. Or become unhappy because they got themselves into debt due to their unnecessary consumptions. Maslow (1943) devised a theory of motivation which attempted to explain the hierarchical nature of people’s well-being. Firstly it is our basic psychological needs like hunger and thirst that we have to satisfy. Next, it is our needs for security and protection, followed by our need for social bonds and love. The last two steps are ones self-esteem and self-actualisation. This is a very hierarchical view which means once a certain level has been satisfied one seeks to satisfy the next until you reach to the top – self actualisation. This will explain why people become unhappy when they cannot afford  something – reach self-actualisation. Moreover, identities are fluid. I constantly consume new trends, go to new places, and change my habits to fit society’s norms. Social psychology attributes this to people’s nature to conform. One study by Asch (1952, ci ted in Bond & Smith, 1996) shows the tendency of people to conform to the majority even when the outcome is clearly wrong. I agree with this as I buy certain clothes and go to certain places because I want to fit in with my surroundings. Zaichkowsky (1994) claims that peoples involvement with a product depends on a person apparent relevance of a product based on his inherent needs and values. Hence my values stem from my surroundings and my need for a product comes from my need to fit in to my surroundings. A lot of the above-mentioned concepts discussed were first investigated after WWII and throughout the 20th century. However, as the world is constantly evolving and changing do these outlooks on happiness and well-being still apply today? Have they gotten any better or worse? Early studies showed an increase in mental disorders and divorces throughout the late 20th century, as well as the increase need of people for bigger and better things. A study by Helliwell, Layard, and Sachs (2012) found that on average rich people are happier than poor people. However, they found that a country’s economic growth does not indicate an increase in the overall happiness of its people. This is simply due to the fact that once people reach a comfortable/secure level of income; further increase of it does not generate higher levels of happiness. Moreover, they found unemployment is highly correlated with low levels of well-being, whilst being employed – and satisfied with your job – was correlated with higher levels of well-being. Finally, they noted in Maslow’s pyramid of human needs, love and belonging come just after basic physiological and safety needs. Clearly, the sources of individual happiness include the set of social interactions through which individuals are interconnected.† (p.70). The aforementioned trends discussed appear to be in line with the current state of New Zealand. Helliwell et. al. (2012) found New Zealand ranked as the 13th happiest country in the world. This was attributed due to a low unemployment rate (6.2%), divorce number down (stats.govt.nz), and ranking high on education as well as freedom. (Helman, 2013). However, when looking at the top 50 richest countries in the world (aneki.com) New Zealand does not even make an appearance. However, it is safe to assume that new  consumerism and the â€Å"aspirational gap† still apply to New Zealand as the countries spending ($2,578 million) is higher than its GDP ($211,678 million). (stats.govt.nz). It certainly appears that money does not buy you happiness. Rather being poor is correlated with low levels of well-being. Money in itself can provide a person with security, but increased income does not appear to have an effect on overall happiness. Looking at Maslow’s theory, a person could have all the money in the world but if they are alone and do not have a loving community of friends and family to share it with they are almost always going to be unhappy. Rather, happiness is determined by a large number of factors with an emphasis on basic needs such as food and water, as well as friendships and belonging to a loving community. Consumption of materialistic objects and the aspiration for more money negatively affects our well-being. References Benin, M.H. and B.C. Nierstedt: 1985, ‘Happiness in single- and dual- earner families: The effects of marital happiness’, job satisfaction and life cycle, Journal of Marriage and the Family 47, pp. 975–984. Bond, R. & Smith, P. B. (1996). Culture and conformity: a meta-analysis of studies using asch’s (1952b, 1956) line judgment task. Psychological Bulletin, 119(1), 111–137. Maslow, Abraham H. 1943 â€Å"A theory of human motivation.† Psychological Review, 50: 370-396. Helliwell, J., Layard, R., & Sachs, J. (2012). World Happiness Report. Centre for Economic Performance. The Earth Institute Columbia University. Helman, C. (2013). The world’s happiest (And Saddest) countries. – http://www.forbes.com/sites/christopherhelman/2013/10/29/the-worlds-happiest-and-saddest-countries-2013/ Inglehart, R.: 1990, Culture Shift in Advanced Industrial Society (Princeton University Press, Princeton, NJ). Myers, D.G.: 2000, ‘The funds, frie nds and faith of happy people’, American Psychologist 55(1), pp. 56–67. Myers, D. G. & Diener, E. (1995). Who is happy? Psychological Science, 6(1), 10–19. Offer, A. (2006). The challenge of affluence: self-control and well-being in the United States. Williams, J. (2014) Consumption and Well-being. Chapter 12. P. 104 – 127. Zaichkowsky, J. L. (1994). The personal involvement inventory: reduction, revision, and application to advertising. Journal of Advertising, 23(4), 59–69.

The Profitability Liquidity And Credit Risk Finance Essay - Free Essay Example

Sample details Pages: 5 Words: 1497 Downloads: 2 Date added: 2017/06/26 Category Finance Essay Type Research paper Did you like this example? The chapter will discuss aspects of research methodology applied in this study. It will also discuss on the data collection method and other statistics tool that will be used in evaluating the performance of the banks. This study will use descriptive financial analysis to describe, measure, compares, and classifies the financial solutions of Malaysian banks. Don’t waste time! Our writers will create an original "The Profitability Liquidity And Credit Risk Finance Essay" essay for you Create order To evaluating banks performance, this study uses a ratio measure that is not a new method in the literature. The use of ratio method has many advantages and the most important benefit is that it compensates bank disparities. Banking firms are not equivalent with respect to sizes. The ratio removes the disparities in sizes and brings them at par. In order to examine whether there is a difference in performance between Islamic banks and conventional banks of Malaysia, equality of mean test is performed. The equality of mean test used for comparing statistics from two or more samples of numeric data drawn from two or more populations is most widely used in the literature of performance and the typical text in statistics. The hypothesis is that the performance ratios are normally distributed. The null hypothesis of the equality of mean for the conventional banks and Islamic banks is tested against not equality of mean. Dependent variable The dependent variable for this research is performance Islamic banks comparable to conventional banks in Malaysia, coded 1 if a performance Islamic bank is at par with the conventional banks and 0 otherwise. Independent variable The independent variable for this research is comprising (1) profitability performance, (2) liquidity performance and (3) credit risk performance that will influence the overall performance Islamic banks comparable to conventional banks of Malaysia. 3.3 Data collection In this study, the performance of Islamic banks in Malaysia is compared with the conventional banks. The data for financial ratios are obtained from the respective banks annual report each year for 10 years from the period 2002 until 2011 of the both Islamic and conventional banks (include foreign banks). Therefore, the growth rate of the banks are measured based on 2011 as the base year consist of : Local full-fledge Islamic banks Bank under this category is classified as standalone Islamic commercial banks established with no relationship with conventional bank either as tha parent or subsidiary company, such as, Bank Islam and Bank Muamalat. Local Islamic subsidiary banks Islamic subsidiary banks are those banks that have been established after the migration of conventional banks with Islamic bank windows into a full licensed of Islamic bank status. Foreign banks (both conventional and Islamic) Foreign banks are those foreign players that have been granted a li cense by BNM to established financial institutions in Malaysia. The data employed is obtained from the annual reports of respective banks. All data for Islamic subsidiary banks are taken from the annual report of the parent bank is annual report is not available, that is prior to establishment of standalone Islamic banks. 3.4 Sample The sample banks for this study are forty three (43) banks (include foreign banks) comprising two (2) full-fledge Islamic banks, other fourteen (14) Islamic banks and twenty seven (27) conventional banks. The unavailability of audited financial statements of some banks limits us to use bank population for analysis. 3.5 Performance measures This study uses internal factors for those related to items of balance sheet and income statement of banks and well within the control of the bank management. After examining the income statement and balance sheet of Islamic banks and conventional commercial banks of Malaysia, this study utilizes seven financial ratios for evaluating the financial performance of Islamic versus conventional of bank of Malaysia. These financial measures of performance are placed under three categories as given below: Profitability Performance Liquidity Performance Credit (loan) Risk Performance Profitability performance There are some financial measures for evaluating profitability performance of a firm. This study uses the following three basic. They are: Return on Assets (ROA) = profit after tax/total assets ROA is a superior indicator of a banks financial performance and managerial effectiveness. It shows how proficient the management is in allocating asset into net profit. The higher the ROA, the higher the financial performance or profitability of the banks. Return on Equity (ROE) = profit after tax/equity It shows a rate return on base capital, i.e., equity capital. The higher the ROE, the more efficient is the performance. Cost to Income (CTI) = total cost/total income. Cost incurred per ringgit generation of income or in other words, income generated per ringgit cost. It is indeed considered to be one of the best indices for measuring economic efficiency or profit performance. The lower the CTI ratio, the better is the profitability performance of a bank. Liquidity performance Liquidity is the life of a commercial bank. Liquidity means cash availability: how quickly a bank can convert its assets into cash at face value to meet the cash demands of the depositors and borrowers. The higher the amount of liquid asset for a bank, the greater is the liquidity of the bank. Among the various liquidity measures, this study uses the following: Cash Deposit Ratio (CDR) = cash/deposit. Cash in a bank vault is the most liquid asset of bank, therefore, when withdrawal exceeds new deposit significantly over a short period, banks will get into liquidity problem. Bank with higher CDR is relatively more liquid than a bank which has lower CDR, thus enhance depositors trust. Loan Deposit Ratio (LDR) = loan/deposit. It indicates the percentage of the total deposit locked into non-liquid asset. The higher the LDR, the higher is the liquidity risk. Credit risk performance Three financial ratios are used for measuring loan/credit risk performance of a bank. These are: Equity to Asset ratio (EQTA) = common equity/assets. It measures equity capital as a percentage of total assets. EQTA provides percentage protection afforded by banks to its investment in asset. It measures the overall shock absorbing capacity of a bank for potential loan asset losses. The higher the ratio of EQTA, the greater is the capacity for a bank to sustain the assets losses. Equity to Net Loan ratio (EQL) = total equity/net loans. It measures equity capital as a percentage of total net loans. EQL provides equity as a cushion (protection) available to absorb loan losses. The higher the ratio of EQL, the higher is the capacity for a bank in absorbing loan losses. T-test analysis A  t-test  is any  statistical hypothesis test  in which the  test statistic  follows a  students  t  distribution  if the  null hypothesis  is supported. In order to examine whether there is a different in performance between Islamic banks and conventional banks of Malaysia, t-test is performed for all financial ratios. The assumption is that the performance ratios are normally distributed. The t-value is an indication the probability that both selected samples have the same mean and that differences in the sample means are due to fluctuation. As the t-value gets smaller (approaches zero) the probability that sample means ate the same gets larger. As the t-value gets larger (in either the positive or negative direction) the probability that sample means are the same gets smaller. Whereby: n = sample size s ² = variance = sample mean df = degree of freedom subscript1 = sample from Islamic banks subscript2 = sample from conventional ban ks Since t-value is used to determine whether there are significant differences between two groups, the comparison is made between conventional banks and each category of Islamic banks. Regression analysis In  statistics,  regression analysis  includes a lot of techniques for modeling and analyzing several variables, when the focus is on the relationship between a  dependent variable  and one or more  independent variables. Regression equation : ÃÆ'†¦Ãƒâ€šÃ‚ · = a + bx Once you have the regression equation, using it is a snap. Choose a value for the independent variable (x), perform the computation, and you have an estimated value (ÃÆ'†¦Ãƒâ€šÃ‚ ·) for the dependent variable. Regression model : ÃÆ'†¦Ãƒâ€šÃ‚ ·Islamic = a + bx1 + bx2 + bx3 ÃÆ'†¦Ãƒâ€šÃ‚ ·Conventional = a + bx1 + bx2 + bx3 Whole model : ÃÆ'†¦Ãƒâ€šÃ‚ ·Malaysian banks = a + b1PROFITABILITY + b2LIQUIDITY + b3CREDIT RISK Whereby : ÃÆ'†¦Ãƒâ€šÃ‚ · = performance of banks (each and both) (dv) a = a constant terms bx1 = profitability performance (iv1) bx2 = liquidity performance (iv2) bx3 = credit risk performance (iv3) Regression analysis is also used to understand which among the independent variables are related to the dependent variable, and to explore the forms of these relationships. In restricted circumstances, regression analysis can be used to infer  causal relationships  between the independent and dependent variables. All these method can be identified by using SPSS to see the result of every method one by one. Regression analysis includes a few techniques for modeling and analyzing several variables, when the focus is on the relationship between a dependent variable and one or more independent variables (Keller, 2008). 3.6 Chapter summary This chapter contains a description of the research methodology that will be used in this study. Furthermore, the research design and method, sampling, data collection method and the types of analysis to be used are also discussed. The results of the study as well as the conclusions to be drawn from the findings will be constructed in the next two chapters.