Need for Professional Ethics

The professional ethics is one of the most valued criteria in the labor market. Having good conduct in the workplace can be the passport to a successful career.

Life in society, which values ​​and respects the well-being of others, requires some behaviors that are associated with the ethical conduct of each individual. The professional ethics consists of the standards and values of society and the working environment that the person lives.

In the corporate environment, professional ethics brings greater productivity and integration of employees and, for the professional, it adds credibility, trust and respect to work.

However, there are still many doubts about what is ethics, so before talking about professional ethics, it is important to understand a little about what is ethics and what is the difference between ethics and morals.

The work ethic is the set of values, norms and behaviors that lead and more aware of the attitudes and behavior of a professional in the organization. Thus, professional ethics is of interest and importance to the company and also to the professional who seeks the development of his career.

In addition to the experience and autonomy in their area of ​​activity, the professional who presents an ethical conduct gains more respect, credibility, trust and recognition from his superiors and his co-workers.

Ethical conduct also contributes to the progress of internal processes, increased productivity, achievement of goals and the improvement of interpersonal relationships and the organizational climate.

When professionals and companies value ethical values ​​and principles such as kindness, temperance, friendship and patience, there are good relationships, more autonomy, satisfaction, proactivity and innovation.

For this, it is convenient that the company has a code of ethical conduct, to guide the behavior of its employees in accordance with the organization’s standards and posture. The code of business ethics facilitates the adaptation of collaborating and serves as a manual for good coexistence in.

Ethical conduct also contributes to the progress of internal processes, increased productivity and achievement of goals.

Professional ethics and strategic value

Amidst the chaotic national scenario, political problems, social inequality, lack of infrastructure for education and health, ethics has become one of the main issues addressed in schools, universities, work and even on the streets.

With the population more aware of the moral issues and social responsibility that authorities and companies must render to society and the environment, there was an increase in inspection and demand for the ethical commitment of these bodies.

With that, ethics gained a new value, the strategic value. Companies were forced to modify their concepts, break paradigms and present a more transparent, humane and coherent stance so as not to lose public.

In this context, professional ethics, which should be an ingrained virtue of the individual, became part of the organizational strategy and, consequently, a competitive differential in the job market.

However, when the company adopts professional ethics as a market strategy, it also contributes to the development of the professional, who needs to improve his skills with interpersonal relationships and leadership.

A professional with leadership and relationship skills disseminates ethical values, values harmony in the work environment and puts respect for people and commitment to work first.

A professional with leadership and relationship skills disseminates ethical values, values ​​harmony in the work environment

Benefits of work ethics

The ethical professional is, of course, admired, as respect for colleagues and customers is what makes this employee stand out. Ethics would be a kind of filter that does not allow the passage of gossip, lies, the desire to harm an employee, among other negative aspects.

And it is necessary to emphasize that leaders are ethical professionals, or should be, to develop the competencies of the position successfully. Those who choose ethics prefer to offer feedback, instead of leaving the work environment unharmonious, and are honest about their own conditions, that is: they do not invent lies to be absent from failures.

Cultivating professional ethics in the workplace brings benefits and advantages to everyone, as it provides growth for the company and for all those involved. With a well-structured ethical conduct, it is possible, teamwork and mutual respect between all employees.

Professional ethics are principles that guide the behavior of an individual or group in a corporate or business environment. Good ethics is a basic requirement of any profession. Professional ethics are important to any organization success because:

  • They provide personal and professional benefits by regulating the actions of a profession and stipulating the virtues of such profession.
  • They encourage team work and promotes the bonds between colleagues.
  • They are designed to ensure employees are behaving in a manner that is socially acceptable and respectful toward one another and professionally relates with others.

Principles of Personal Ethics, Importance

Personal Ethics refers to a person’s personal morals and code of conduct. From the very beginning of a person’s understanding, these ethics are being instilled in the individual by their parents, family and friends. Without any personal ethics, the life of the human being is incomplete and shallow. As an example, we can consider an individual’s honesty, openness, sense of responsibility etc. The person with good personal ethics will automatically show his moral and virtues while talking to his friends, relatives and elderly people. A person’s personal ethics are revealed in an exceedingly professional situation through his behaviour.

  • Instill a sense of trust and support in leaders: Leaders and other professionals who regularly behave in the same way no matter the situation are more likely to be trusted and supported by colleagues and employees. Individuals who follow a sound ethical code are easier to believe in and are more likely to establish credibility among others.
  • Allow leaders to more effectively lead their teams: When a leader regularly follows a predictable and respectable code of ethics, their team is more likely to follow their lead and feel confident in the contributions they make to the organization as a whole.
  • Give individuals a solid basis of which to determine the most appropriate action in any given situation: When a person has solid personal ethics, they are better able to make decisions and take action in situations that may otherwise seem challenging.
  • Improve the decision-making process: A professional’s ability to make decisions is based on their personal and professional ethics and what they believe to be good or bad. Having strong ethics makes the decision-making process easier and more streamlined.
  • Support motivation: Individuals with strong ethics are often easily self-motivated and willing to go the extra mile to accomplish a task or goal on time and in the correct manner.
  • Set a standard of behavior: In the workplace and in life, ethics help establish an appropriate standard of behavior for individuals. This behavior is called ethical behavior and refers to a person’s ability to make sound decisions based on their ethical nature.
Personal Ethics Professional Ethics
Includes your personal Morals and Values. Rules imposed on the individual by his organization.
Not conforming that this may hurt others. Not adhering that this may destroy your professional reputation.
Learned from family, friends and relatives since childhood. Learned when become part of corporate world.
Personal needs are satisfied by following personal ethics. Professional needs are satisfied by following professional ethics.
Example: Openess, Honesty, Friendliness, Respect for Others, Loyalty, Honesty, Integrity. Example: Abiding by the law, Industry Standards, Worker Treatment, Confidentiality, Worker Safety.

Reasons for the crisis of Professional Ethics (Nepotism, favoritism etc.)

Nepotism and corruption are regarded as acts which are unethical and morally wrong. Corruption is the abuse of public resources, which can be monetary or non monetary in nature, for the private gains. Nepotism is favoring the people who are directly or indirectly related to the office bearer causing inequality in access to adequate means of livelihood.

They are considered unethical because:

  1. Against the principles of equality enshrined in the constitution.
  2. Private gain regarded more important than societal gain.
  3. Gives rise to anti social elements in the society.
  4. Undermines the rule of law.
  5. Against the public service goals of impartiality, dedication, neutrality and public good.
  6. Disregards the principles of socialism as advocated by DPSPs.

The effects of Nepotism on society are:

  1. Further breeds malaise such as poverty, inequality, social tensions and political unrest.
  2. Promotes the ‘getting the work done by hook or by crook’ culture.
  3. Erosion of faith in the constitution and values enshrined within.
  4. Generation of black money.
  5. National security can be jeopardized by such acts in higher echelons of policy making.
  6. Erodes the ethical values such as honesty, empathy, sincerity.
  7. Nepotism also leads to corruption and vice-versa.

The basic concern about nepotism in business is that it contradicts typical customs in employment to hire and promote the most qualified candidate for a job. While a son, daughter or nephew may be the most capable employee, nepotism sometimes leads to relatives getting jobs when other candidates have stronger education and work experience. Even when a relative is most qualified, hiring him may give the impression of nepotism.

Business Structure

The ethics of nepotism in business have a lot to do with the business structure. A family business, often established as a sole proprietorship, partnership or S corporation, typically means you own and control the operation by yourself or with family members who are partners. If you partner with nonfamily members or formalize a corporation with shareholders, the business takes on a formal standing that is distinct from your involvement. In these cases, nepotism is more questionable because other parties have an ownership stake or vested interest in the operation.

Policy Consistency

In large companies, nepotism isn’t inherently wrong, although some people believe it is unethical in all cases. A 2009 Family Business Institute article noted that companies may benefit from nepotism if it consistently enforces fair policies. In a small organization, employees are often hired from internal referrals rather than formal job postings. Some companies encourage referrals of family members and friends to open positions. The ethics in this type of culture relate to the company’s consistency in accepting family referrals and giving candidates fair access to jobs.

Practical Matters

Along with the ethical nature of nepotism, you need to consider the practical business matters. While family businesses often establish legacies from multiple generations of family involvement, not all companies benefit from nepotistic behaviors. In some cases, well-meaning owners or operators hire underqualified, unmotivated family members that aren’t worth what they are paid. Even worse, they undermine the workplace culture and increase the burden on other staff. Balancing your desire to help family while managing a successful business is key.

Tracking Nepotism:

  • Nepotism has a social origin. From ages, human species as been ‘nepotistic’ in the sense that it has been passing its socio-economic-political legacy to its next generations.
  • Humans try to control the sources of prosperity-may it be movable or immovable property, social status, political power, for the benefit of its kith and kin.
  • The divine theory of kingship in ancient and medieval ages was considered ethical and natural. The political power remained in a certain family based on the divine rights notion and the concept of primogeniture.
  • The property has been transferred based on inheritance since the birth of institutions of family and kin.
  • Profession-wise, there has been a division of labor and functional specialty of families/communities all-over the world.
  • In the West, ancient philosophers like Plato talk about three different kinds of men with natural qualities to performs certain tasks.
  • In India too, the root of family/community monopoly over a certain craft/business has been since the Post-Vedic period.
  • The separation since the beginning of the post-Vedic period further transformed into caste-system which can be termed as a structural nepotism rooted in religious notions of purity and human qualities.
  • Technically, the above systems cannot be called nepotism but the ideologies of functional specialty, the ability to gain that specialty and its kith and kin based monopoly was considered natural. The modern form of this social sanction is nepotism.
  • The consequent social progress and rising complexity of structures in polity, economy, and social hierarchies, these natural traits claimed and monopolized by powerful sections everywhere.
  • By this logic, nepotism is a close relative of monopoly. Nepotism leads to monopoly and monopoly breeds further nepotism.
  • Everywhere around the world, the medieval feudal structure was nepotistic where certain families and kin claimed the monopoly over different socio-economic-political functions.
  • This societal sanction to the idea of monopoly was challenged by the Renaissance and enlightenment and discarded by the political revolution of democracy.
  • The freedom to choose ones’ own destiny without any societal and structural-institutional hindrance and the right to choose are the hallmarks of democracy.
  • Here comes the problem with traditional genetic rights and placing family/related members in the positions of common ownership, hence the problem with nepotism.
  • Today, democratic societies do not accept nepotism in the fields of common ownership and democratic decision making, political and administrative structures.
  • This heightened belief in equality in every aspect is the basis of criticism of nepotism in today’s society.

Types of Nepotism

Placing one’s own relatives or the persons with whom one has conflict of interest at positions of power based on personal bias is nepotism. The types are

Political Nepotism

A politician promoting or placing his/her immediate and extended relatives in political posts.

Administrative nepotism

A government employee/bureaucrat appointing his acquaintance/relative on government jobs.

Contractors related to public authorities/representatives of the people getting government contracts.

Nepotism in Economic sectors

A majority owner of a joint-stock company promoting his son/daughter for ownership/highest decision-making positions.

Entertainment Industries

In open professional communities like film industries, producers, directors, production companies preferring industry kids over talented and hard-working outsiders.

Ethical concerns around nepotism

  • The issue of nepotism comes with, among other downfalls, a degradation of the ethics and moral degeneration of society and institutions.
  • The more dangerous issue is that nepotism is often left out of ethics codes because it does not seem unethical to the majority of the population. Another reason for leaving nepotism out is that it very so common in every society.
  • Nepotism leads to serious harm to the principle of equality of opportunity in every field it is practiced.
  • It leads to neglect of fairness as the principle of operation.
  • In politics, there is a massive degradation of democracy and legitimacy of the rule of law to produce desired results of redistributive justice.
  • The highest form of nepotistic structure is a kind of crony capitalism where dynasties in politics and the corporate world get together to appropriate resources and wealth that should in reality belong to the people in the country.
  • In administrative structure, it hampers commitment to the rule of law, disbanding of integrity and impartiality.
  • It creates a sense of despair in the victims of the nepotist system in politics, business, entertainment industry.
  • The victims have to cope with the extreme stress of competition. They mostly either accept the condition and get adjusted to it or very few cannot sustain the shattering of innocent dreams and take the unfortunate route of suicide as in the case of Sushant Singh Rajput.
  • Nepotism is harmful to the system itself, as devoid of quality and character in its flagbearers, the structure cannot sustain itself for long. The dynastic parties become fetters on the new movements and die soon, corporate offices bear losses, administration loses efficiency and art does not satisfy the art-lovers: films don’t do well at the box office and so on.

Impacts of nepotism

There is a loss of belief in democracy when the political spectrum is full of dynasts. It degrades the democratic system and democracy itself faces legitimacy crises. The result is extremist anti-state movements like Naxalite and Maoist movements.

  • Corruption is a big fallout of nepotism. The symbiotic relationship of nepotism and corruption can be seen in the corruption perception index where most of the third-world countries with dynastic politics fare very badly.
  • The nepotism also breaks the governance system as the dearth of quality administrators at every stage of hierarchy makes good governance impossible. Quality of human resources is the pre-condition of good governance.
  • The economic development of a market dominated country suffers due to nepotism in corporate structures of big and small business houses. The interconnected economic sectors also suffer.
  • Nepotism kills entrepreneurial zeal if the majority of investment is directed to create monopolies and nurture nepotism. The thriving startups either cannot sustain the competition or taken over by powerful conglomerates built on nepotism.
  • The societal effect of nepotism can be seen in continuing caste and religious hindrances in progress. The relation between nepotism and caste lobbies in organizational structures is very subtle and that is not often discussed extensively.

Meaning of Ethics, Scope & Importance of Ethics

Ethics is mainly known as the principle of moral conduct that makes a distinction between good and bad/ evil, right and wrong, virtue and non-virtue. The word ethics is derived from a Greek word ‘ethos’ meaning character. It is a branch of knowledge that governs right and wrong conducts and behaviours of an individual, profession, group or organization. It is a core of the professional and personal lives of people. Different scholars have defined ethics differently. However different their definitions might be, ethics is always concerned with morality and right vs wrong and good vs evil. It is applied universally. There is also ethics in professions such as journalism, advertising, education, medicine, etc.

Characteristics of ethics:

(i) Ethics is a set of moral standards and values acceptable in a society. It is relevant in the context of a society only.

(ii) Ethics guides human conduct or behaviour. If any member of the society behaves contrary to the norms and customs, society disapproves it. Moral principles serve as a guide for personal and professional conduct. Ethics checks people from taking decisions and actions which are harmful to society.

There are three main theories of ethics. First, the utilitarian theory suggests that actions become right or wrong on the basis of their consequence. Second, the theory of rights holds that all people have certain basic rights. Third, the theory of justice demands that actions must be fair and equitable.

(iii) Ethical principles are universal in nature. These prescribe obligations and virtues for everybody in a society. Ethics is important not only in business and politics but in every human endeavour.

(iv) Ethical standards differ from society to society. What is considered ethical behaviour in one society might be considered unethical in another. For example, abortion and artificial birth control is a taboo in most of the Islamic countries and catholic Christian communities. But these practices are fully ethical in China, Russia, Japan and many other countries. Similarly, euthanasia (mercy killing) is permitted in some countries but is strictly unethical in most countries.

(v) Ethics is normative or prescriptive in nature. It deals not with what is but what ought to be. It does not rest on feelings of approval or disapproval but on principles. For example, it may be unpleasant to fire an employee but morality may require it.

(vi) Ethical norms might not be legally binding. But these are more powerful than law because these have the sanction of society. When a person’s behaviour is inconsistent with the prevailing values and norms, it is called unethical. Ethics serves as a guide to law by highlighting its short comings.

(vii) Ethics relates to the behaviour of individuals and groups. The ethical norms do not apply to the behaviour of animals, birds, and insects. Only human beings have the capacity to guide and regulate their behaviour.

(viii) Ethics are not hard and fast rules. They are an expression of a society’s attitudes and beliefs. There is an element of discretion as a person has the option to adopt ethical norms. Ethics may differ from place-to-place and time-to-time.

(ix) There exist no sharp boundaries between ethical and non-ethical. Therefore, people often face ethical dilemmas wherein a clear cut choice is very difficult.

(x) Ethics aims at perfection in human conduct. It guides law makers in framing proper laws to regulate the behaviour of all citizens. Existing norms may contain valuable insights but ethics sets out to critics and test them in terms of ultimate norms.

(xi) The concepts of equity and justice are implicit in ethics. Fair and equitable treatment to all is its primary aim.

(xii) Ethics and morality are interrelated but not synonymous. In the words of Rogene A. Buchollz “Ethics deals with the formalisations of ethical principles in the abstract or the resolution of concrete ethical problems facing individuals in their daily life. Morality on the other hand generally refers to the tradition of belief that have involved over years. concerning right and wrong conduct, so that morality has its roots in belief of a society while ethics aim at formulating the principles to justify human behaviour.” According to Clearance C. Walton, “morality is the standards than an individual or group has about what is right and wrong good and evil.”

Scope of Ethics

Meta-Ethics: Meta-ethics comprises the area of situational ethics and deals with logical questions like ‘What do we mean by ‘freedom’ and ‘determinism’ etc. It delves into the nature of ethical properties, attitudes and judgements. For example, a media critic’s description of a TV series as ‘good drama’ does not necessarily denote that the program is morally sound. It is the function of metaethics to define such vague concepts in ethical terms. Some of the theories of Meta-Ethics are Naturalism, Non-Naturalism, Emotivism and Prescriptivism.

Applied Ethics: Applied ethics is the problem-solving branch of moral philosophy. It uses the insights derived from metaethics and the general principles and rules of normative ethics in addressing specific ethical issues and cases in a professional, disciplinary or practical field. Applied ethics is the vital link between theory and practice, the real test of ethical decision-making. Applied ethics often requires not only theoretical analysis but also practical and feasible solutions.

Some of the key areas of applied ethics are:

  • Decision Ethics
  • Professional Ethics
  • Clinical Ethics
  • Business Ethics
  • Organizational Ethics
  • Social Ethics

Normative Ethics: Normative ethics deals with standards or norms by which we can judge human actions to be right or wrong. It deals with the criteria of what is morally right or wrong. For example, if someone murders a person, everyone will agree that it is wrong. The question is: Why is it wrong to murder someone? There are a lot of different answers we could give, but if we want to specify a principle that stated why its wrong, the answer might be: Murder is wrong because when we kill someone, we violate their right to live. Another perspective might be to inflict unnecessary suffering on the person being murdered or their family is wrong, that’s why to kill a person is wrong. There are three elements emphasized by normative ethics:

  • The person who performs the act (the agent)
  • The act
  • The consequences of the act

Importance of Ethics

Business ethics comprises various traits, such as; trustworthiness and transparency in customer services. Ethical business practices strengthen customer relationship that is of prime importance for long-term organizational success. It deals with retaining and creating a long-lasting impression in the minds of customers.

Such impressions help the enterprise to win the trust of customers and get more business. Business ethics plays a very crucial role in various management functions.

Principles:

Beneficence:

The beneficence principle enunciates a fundamental principle of ethical conduct. This essentially means doing good to others. According to this principle, all our thoughts and actions must be directed to ensure that others benefit from these thoughts and actions. This can be done without much difficulty. People generally tend to care more about themselves than others. Even small actions performed by us can be based on this principle.

As an example, consider a person parking his/her motor vehicle, a car or a motor cycle. He/She must park the vehicle in such a way that it does not block pedestrians walking on the road, prevent smooth flow of traffic, or obstruct another person‘s parked vehicle. Many times, people park their vehicle oil the road without caring about the inconvenience caused to others.

As another example, consider an unfortunate accident where a person has been hit by a vehicle and the driver of that vehicle has fled. The person has been badly injured and requires urgent help. What would you do? Here, doing good to others would mean mitigating the injured person’s suffering by ensuring that he/she gets immediate medical help.

Least Harm:

The second ethical principle to keep in mind is that our actions must result in the least harm to others. There can be situations where, even if we intend to do good to others, our actions may cause some harm to them. In such a situation, it is necessary to ensure that our actions are such that we cause the least harm to others.

Let us consider the case of a train accident. One’s duty in such an event is to help the injured passengers. He/She must get them out of the compartment; help the authorities take the injured to the hospital, and so on. On the other hand, sometimes it is seen that people use such incidents as an opportunity to steal the belongings of the injured, hapless people.

This is what doing harm is. The least good one can do in such situations is to prevent people from acting in such an unethical manner. Consider another example of a day-to-day occurrence. Young people travelling in a city bus are often seen grabbing a seat as soon as it is vacant, while a senior citizen or a woman accompanying a small child has to travel standing. It is your duty to offer your seat to such people if you are sitting.

If you are standing and a seat falls vacant, do not jump to catch that seat, taking advantage of their frailty or inability to move fast. Allow them to occupy that seat. This is the least that you can do.

Autonomy:

This principle essentially states that we need to respect the autonomy of others for performing actions. We should not impose our views on others. This principle assumes that every person knows what is good for himself/herself. One can also look at it from the point of view of the person performing the action, who decides that what he/she is going to do is good for himself/herself.

As an example, consider your own case. As a student you may have opted for a course based on your love for the subject. On the other hand, some of you may have taken up the course because your parents took the decision for you. They have invaded your autonomy to take decisions about yourself. This is a very common occurrence and many students end up pursuing a course for which they have no aptitude or do not like.

As another example, consider the case of arranged marriages in India. It is not uncommon to find parents deciding a partner for their sons/daughters based on factors such as family status or wealth, without caring for their children’s feelings or wishes. This is a clear invasion of the person’s autonomy. Taking the concurrence of the children before getting them married is a very important factor in the success of marriages.

Non-Violence or Peace:

This principle has become very relevant today. Violence has now pervaded all sections of society and has become its greatest bane. One of the basic ethical principles is to shun violence and to not support those who resort to it. Unless we adhere to this principle, no substantial progress can be made in ethical behaviour.

Our greatest concern is that there is a tendency to resort to violence in cases where many other options are available. There is also a nonchalant attitude to violence among people. This is a major cause for concern.

In an incident, a person was killed by a group. The police could not even investigate the case because in the violence that spread in the aftermath of this murder, many people were killed, a large number of houses were burnt, and hundreds were injured. In this case, there was violence for no particular reason.

In a case that was reported by the press, a group was collecting donations for a festival. The group approached a small shopkeeper and demanded Rs. 1000. The shopkeeper refused to pay more than Rs. 250. The group resorted to violence, beat him up, and ransacked his shop. It is to be remembered that donations, by their very nature, are voluntary.

However, extortion of money in the name of religious festivals and, in case someone refuses to pay, resorting to violence and causing bodily harm have become common nowadays. As a society, we have become violence- prone and there is an urgent need to curb this to prevent further damage.

Thus, commitment to peace and non-violence is a fundamental principle of ethics. There should be a commitment to not resort to violence and explore other better options to solve a problem.

Justice:

The principle of justice states that our actions must be such that they are fair to everyone concerned. All ethical decisions must be based on the principle of fairness. There can be situations where a deviation from past practice is required. All such cases must be analysed and justified before a decision different from earlier decisions is made.

For example, consider the many development-induced displacements that make headlines in the newspapers these days. The building of a dam, the requirement of a weapon-testing ground, the need for a nuclear power plant, or the need for an expressway might necessitate displacement of a community to clear land for such a purpose.

If you take the specific case of a dam, it is a necessary part of infrastructure development as it provides water for irrigation and electric power generation. The construction of a dam is, thus, for the common good of a large section of the society. However, thousands of people are displaced from their land and their means of livelihood threatened because of such a project.

It is generally found that the rehabilitation of people affected by such projects is shoddy. They are left in the lurch at the end of the project with, in some cases, inadequate compensation and in others, no compensation, land, or means to earn a living. Here, injustice is done to the thousands affected. Similar examples can be seen in many developmental projects.

Truthfulness:

Truthfulness is the quality of telling, adhering to, or upholding the truth. This appears to be a universal principle. Truthfulness also leads to other values such as trustworthiness and honesty. Mahatma Gandhi highlighted this principle when he undertook the freedom struggle and named it Satyagraha, desire for truth.

We will seldom find an example where not telling the truth gets us any real benefit. In the Upanishads, it is said asato ma sat gamaya, meaning ‘lead me from falsehood to truth’. Truthfulness is thus a universal principle propounded by all religious texts. In engineering measurements, it is mentioned that the true value of a quantity is not known.

Fixed Deposits in Companies

Company Fixed Deposit (corporate FD) is a term deposit which is held over fixed period at fixed rates of interest. Company Fixed Deposits are offered by Financial and Non-Banking financial companies (NBFCs). The maturities of various company fixed deposits can range from a few months to a few years.

Factors before choosing Corporate FD schemes to invest in.

  • Company Background: Assess a company’s business viability by referring to its Financial Statements, Management Discussion and Analysis (MD & A).
  • Credit Rating: Opt for higher-rated corporate FDs based on its credit rating which indicates the underlying risk of the company.
  • Repayment History: Companies repayment history helps to determine company’s credit score, credibility and stability.

Reasons to invest:

Short-Term Investments

One of the major advantages of investing in corporate FDs is short-term investments. Bank FDs can be anywhere between a few months to a few years, but corporate FDs cannot exceed more than five years of timeframe, and this makes it a viable option when investors want high returns in a short duration of time.

Interest rates

Corporate FDs are the best in interest rates compared to banks. Considering a debt instrument where the investor needs higher returns, Corporate FDs can find the best fit. These are not influenced by the market performance and the fluctuations in the interest rate and provide much better returns than banks and other financial institutions.

Likewise to the banks, Corporate FDs also take care of the senior citizens. Here, senior citizens can find stability and attractive periodic money that can make life easier. Besides, the interest rates for senior citizens are higher than the banking schemes, which makes it a much more viable option when choosing to invest in FDs.

Ratings and Comparisons

Several corporates offer FDs, but which is the right company to invest the money as a Fixed Deposit? This is a common problem, and to solve this, investors can check the ratings of corporates given by CARE (Credit Analysis and Research Limited), CRISIL(Credit Rating Information Services of India Limited), or ICRA (Investment Information and Credit Rating Agency of India Limited) and then make a wise decision. These ratings are given to corporate after examining the company records, repayments, and interest rates which help potential investors by giving them a clear picture.

Company ratings are in the format AAA, AA, BBB, and more. AAA is the highest rating which signifies an investor can find a potential money hive after investing in such a company. This also gives a clear comparison with other companies, and investors can stop investing in a AA or BBB rating.

Solid Comparison

Several corporates offer Fixed Deposits but not all the corporates offer the same interest rate, they vary, and sometimes the marginal difference is too high. It is better to compare the corporates first before investing and check if they have better CARE, CRISIL, and ICRA ratings. AAA rating is considered to be the best.

Nominee

Nominee can be chosen by the investors when investing in corporate FDs, and this gives a greater advantage for investors. If the investor is holding a huge amount in the corporate Fixed Deposit and there is a sudden unfortunate demise of the investor, the nominee can take charge and possess all the money.

There is a higher return with the Corporate Fixed deposits compared to bank FDs, but there are a few notes that the investors should make before investing in Corporate FDs,

Research

One of the things that most investors do is only follow the rating system. Investors should check the company’s track record with profit and loss-making history. If the loss is a one-time or exceptional case and the track record is much positive. It can stand as a great investment opportunity for corporate FDs. Besides, it is a good practice to know the company’s plans and analyze if it will cause a positive or negative impact overall.

Premature Withdrawals

Most banks penalize the FD investors for premature withdrawals. This is usually around three months after investing. The situation is the same with Corporate FDs, and there is a penalty for premature withdrawal. It is best to know the penalty before investing.

Objectives of NSE, BSE & OTCEI

Objectives of NSE

National Stock Exchange of India (NSEI) commenced operations in Whole- sale Debt Market (WDM) in June 1994 and trading in equities has been started in the Capital Market Segment (CM) in November 1994.

  • To establish nationwide trading facility for equities and debt instruments.
  • To provide a fair, transparent and efficient securities market to investors using electronic trading system.
  • To ensure equal access to investors all over the country through an appropriate communication network.
  • To improve the standard of securities market to international level.

Objectives of BSE

The full form of BSE is the Bombay Stock Exchange. The BSE is the oldest stock exchange of Asia which was established in the year 1875 as Native Shares and Stock Broker’s Association and is the first exchange in India that was recognized as the exchange in the year 1957 under the Securities Contract (Regulation) Act by the government. Since then, it is playing a pivotal role in the development of the capital market of the country.

  • To provide a trading platform for equities of small and medium enterprises.
  • To provide an efficient and transparent market for trading in equity, debt instruments, derivatives, and mutual funds.
  • To ensure active trading and safeguard market integrity through an electronically-driven exchange.
  • To provide other services to capital market participants, like risk management, clearing, settlement, market data, and education.
  • To conform to international standards.

Objectives of OTCEI

The establishment of the Over the Counter Exchange of India (OTCEI) marked the down of a new era in the history of a stock exchanges in India. It is regarded a blessing for the small, both existing and new, companies and for investors, particularly small investors. The OTCEI which was incorporated in 1990 become fully operational in 1992.

Over The Counter Exchange of India allows nationwide listing and trading in securities, widely disbursed trading across centres provides for greater liquidity and less risk of intermediary charges, there is no arbitrage. The main feature is screen based scrip less trading, settlement is faster and no physical delivery of scrips is involved. The approach is highly professional.

  • National Network:

Unlike other Stock Exchanges, the Over the Counter Exchange will have a nationwide reach enability widely dispersed trading across the cities, resulting in greater liquidity. Companies, thus, have the unique benefit of nationwide listing and trading of their script by listing at one exchange, Over the Counter Exchange.

  • Ringless Trading:

Over the Counter Exchange has eliminated the traditional trading ring with a view to have greater accessibility to the investors. Trading will instead take place through a network of computers (screen based) of Over the Counter dealers at located several places within the same city and even across cities. These computers allow dealers to quote, query and transact through a central Over the Counter computer using telecommunication links. Investors can walk into any of the counters of members and dealers and see the quote display on the screen, decide to deal and conclude the transaction.

  • Computerized Totally:

All the activities of the Over the Counter trading process will be computerized, making for more transparent, quick and disciplined mark. The trading mechanism brings on these features of the system.

  • Two Ways of Making Public Offer:

Another unique of Over the Counter Exchange of India is its two ways of making public offer. Under ‘direct offer’ a company can offer its shares directly to the public after getting it sponsored by sponsored but under indirect offer’, the company may give its shares first to the sponsor who along with the company can at a later and convenient time make a public offer.

  • Exclusive List of Companies:

The Over the Counter Exchange will not list and trade in companies listed on any other stock exchange. It will therefore list an entirely new set of companies sponsored by members of the Over-the-Counter Exchange.

  • Faster Transfers and Trading Without Shares:

Over the Counter trading also provides for transfer of shares by Registrars, up to a certain percentage per folio. This results in faster transfers. The concept of immediate settlement makes it better for the investors. Investors will trade, not with share certificates, but with a different tradable documents called Counter Receipt (CR). However, an investor can always exercise his right of having a share certificate for Counter Receipt surrendering the Counter Receipt and again exchanging the share certificate for Counter Receipt when he wants to trade. There will be a custodian who will provide this facility along with a settler who will do the signature verification and Counter Receipt validation.

  • Investor Registration:

Yet another feature of Over the Counter Exchange of India is investor registration, introduced for the first time in India. The investor registration is required to be done only once and is valid for trading on any Over the Counter in the country in any scrip. The purpose of the investor registration is to facilitate computerized trading. It also provides greater safety of operations to the investors.

Benefits and Limitations of Stock Exchange

The National Stock Exchange of India Limited (NSE) is the leading stock exchange of India, located in Mumbai. The NSE was established in 1992 as the first demutualized electronic exchange in the country. NSE was the first exchange in the country to provide a modern, fully automated screen-based electronic trading system which offered easy trading facility to the investors spread across the length and breadth of the country. Vikram Limaye is Managing Director & Chief Executive Officer of NSE.

National Stock Exchange has a total market capitalization of more than US$2.27 trillion, making it the world’s 11th-largest stock exchange as of April 2018. NSE’s flagship index, the NIFTY 50, the 50 stock index is used extensively by investors in India and around the world as a barometer of the Indian capital markets. Nifty 50 index was launched in 1996 by the NSE. However, Vaidyanathan (2016) estimates that only about 4% of the Indian economy / GDP is actually derived from the stock exchanges in India.

Benefits

To the Investors

  • Availability of regular information on prices of securities traded at the stock exchanges helps them in deciding on the timing of their purchase and sale.
  • The investors enjoy the ready availability of facility and convenience of buying and selling the securities at will and at an opportune time.
  • Because of the assured safety in dealings at the stock exchange the investors are free from any anxiety about the delivery and payment problems.
  • It becomes easier for them to raise loans from banks against their holdings in securities traded at the stock exchange because banks prefer them as collateral on account of their liquidity and convenient valuation.

To the Companies

  • The market for their securities is enlarged as the investors all over the world become aware of such securities and have an opportunity to invest.
  • The companies whose securities have been listed on a stock exchange enjoy a better goodwill and credit-standing than other companies because they are supposed to be financially sound.
  • As a result of enhanced goodwill and higher demand, the value of their securities increases and their bargaining power in collective ventures, mergers, etc. is enhanced.
  • The companies have the convenience to decide upon the size, price and timing of the issue.

To the Society

  • The facility for convenient purchase and sale of securities at the stock exchange provides support to new issue market. This helps in promotion and expansion of industrial activity, which in turn contributes, to increase in the rate of industrial growth.
  • The availability of lucrative avenues of investment and the liquidity thereof induces people to save and invest in long-term securities. This leads to increased capital formation in the country.
  • The Stock exchanges facilitate realisation of financial resources to more profitable and growing industrial units where investors can easily increase their investment substantially.
  • The volume of activity at the stock exchanges and the movement of share prices reflect the changing economic health.
  • Since government securities are also traded at the stock exchanges, the government borrowing is highly facilitated. The bonds issued by governments, electricity boards, municipal corporations and public sector undertakings (PSUs) are found to be on offer quite frequently and are generally successful.

Limitations of Stock Exchanges

Like any other institution, the stock exchanges too have their limitations. One of the common evils associated with stock exchange operations is the excessive speculation. Speculation implies buying or selling securities to take advantage of price differential at different times. The speculators generally do not take or give delivery and pay or receive full payment. They settle their transactions just by paying the difference in prices.

Normally, speculation is considered a healthy practice and is necessary for successful operation of stock exchange activity. But, when it becomes excessive, it leads to wide fluctuations in prices and various malpractices by the vested interests. In the process, genuine investors suffer and are driven out of the market.

Another shortcoming of stock exchange operations is that security prices may fluctuate due to unpredictable political, social and economic factors as well as on account of rumor’s spread by interested parties. This makes it difficult to assess the movement of prices in future and build appropriate strategies for investment in securities. However, these days good amount of vigilance is exercised by stock exchange authorities and SEBI to control activities at the stock exchange and ensure their healthy functioning.

Benefits and Limitations of Secondary Market

Secondary market is also called as after market. Stock exchange is the secondary market. The stock exchange is the medium through which the exchange of shares, Equities takes place between the seller and the buyer. Secondary market is the place where most of the trading takes place. The trading of shares and capital in secondary market takes place between the buyer and the seller, company is not involved in transactions. The price of share is decided by demand and supply of the shares and price keeps on fluctuating. In secondary market no new stocks are issued, only trading of stocks is there.

Benefits

Secondary markets are have benefits because they provide liquidity to investors. Buying and selling securities quickly often reduces the amount of value lost on a trade. These markets also allow smaller investors to get involved with trading securities. Many investors don’t initially have access to initial public offerings (IPOs), so secondary markets provide resources for smaller investors. Here’s a list of other ways that illustrate the importance of secondary markets:

  • They provide adequate resources for a company’s fair valuation.
  • They help indicate the economic health of a country by revealing booms and recessions.
  • They drive security prices toward their genuine market value through supply and demand.

Limitations of Secondary Market

  • Buying and selling in a secondary market can be time consuming. Investors have to deal with the tedious paperwork involved before completing final transactions.
  • The prices of securities in a secondary market are subject to high volatility. Price fluctuations may lead to sudden or unpredictable losses for investors.
  • Investors must be careful with their brokerage commissions because they are taxed every time the trade is made. Commissions can have a huge impact on investors and may even dent your profit margin if you’re not paying attention.
  • Multiple external factors influence the investments in a secondary capital market thereby subjecting them to high risk. These may lead investors’ existing valuations to change rapidly within seconds.

Benefits and Limitations of Primary Market

When a company publicly sells new stocks and bonds for the first time, it does so in the primary capital market. This market is also called the new issues market. In many cases, the new issue takes the form of an initial public offering (IPO). When investors purchase securities on the primary capital market, the company that offers the securities hires an underwriting firm to review it and create a prospectus outlining the price and other details of the securities to be issued.

All issues on the primary market are subject to strict regulation. Companies must file statements with the Securities and Exchange Commission (SEC) and other securities agencies and must wait before their filings are approved before they can go public.

Companies that issue securities through the primary capital market may hire investment bankers to obtain commitments from large institutional investors to purchase the securities when first offered. Small investors are often unable to purchase securities at this point because the company and its investment bankers want to sell all of the available securities in a short period of time to meet the required volume, and they must focus on marketing the sale to large investors who can buy more securities at once. Marketing the sale to investors can often include a road show or dog and pony show, in which investment bankers and the company’s leadership travel to meet with potential investors and convince them of the value of the security being issued.

Prices are often volatile in the primary market because demand is often hard to predict when a security is first issued. That’s why a lot of IPOs are set at low prices.

A company can raise more equity in the primary market after entering the secondary market through a rights offering. The company will offer prorated rights based on share investors already own. Another option is a private placement, where a company may sell directly to a large investor such as a hedge fund or a bank. In this case, the shares are not made public.

Benefits / Advantages of Primary Market

  1. Mobilization of Saving: Primary market helps in mobilising surplus savings of individuals and others to investment.
  2. Channelizing Savings for Productive Use: The funds raised in the primary market are mainly used for expansion, diversification and modernisation purposes of the corporate.
  3. Source of Large Supply of Funds: The new issue market is a market for raising long term capital funds from investors who are spread across the country. Thus, large amount of funds can be raised for a longer period.
  4. Rapid Industrial Growth: Investment of the surplus saving by the corporate in industrial sector led to increase in production and productivity in the economy.

Disadvantages of Primary Market

Primary market operating in the country is not free from any defects and some of the important defects of the primary market in India are given below.

  1. Possibility of Deceiving Investors: The corporate raising money through public issue may not disclose detailed information in the prospectus, in order to deceive investors.
  2. No Fixed Norms for Project Appraisal: The projects for which money is raised are to be evaluated in terms of financial, economic, profitability and market feasibility by the project manager. As there are no fixed norms for the appraisal of a project, the evaluation is subject to the personal capability and judgement of the project.
  3. Ineffective Role of Merchant Bankers: The merchant bankers perform most of the pre-issue and post issue obligations with regarded to the new issue. But it has

Implementation of e-procurement system

Electronic procurement, also known as e-procurement or supplier exchange, is the process of requisitioning, ordering and purchasing goods and services online. It is a business-to-business process.

Unlike e-commerce, e-procurement utilizes a supplier’s closed system and is only available to registered users. E-procurement facilitates interactions between preferred suppliers and customers through bids, purchase orders and invoices.

E-procurement started in the 1980s, following the development of Electronic Data Interchange (EDI). A decade later, improvements in EDI allowed organizations to develop online catalogs for vendors. Today, e-procurement involves everything from supplier evaluation and selection to contract management, electronic orders and payments.

Implementation Steps

Assess Your Current Process

Before you can introduce a new procurement solution, it’s important to have a clear understanding of the current process. Analyse every step of the procurement process, including how long each task takes, the suppliers involved, controlled commodities, payment methods, and compliance checks.

A typical master dataset consists of the following:

  • Product and services master catalog: Unique numbering and naming of all routinely procured goods and services. The product naming and nomenclature is made consistent across your entire organization and your business units so that the same item is recorded with the same code and name across every transaction.
  • Supplier master directory: Consolidated directory of suppliers across your entire organization. All goods and services in the master catalog should be mapped to the suppliers in a many-to-many relational structure.
  • Master category list: List of all categories against which goods and services are classified for reporting and analytics purposes and to support strategic planning and budgeting. All items in the master catalog should be mapped to these categories.
  • Organizational structure: A chart representing the breakdown of your organizational structure, specifically aligned to the way your procurement process flows. This helps create a structure against which users can be assigned relevant user roles and permissions, and approval workflows can be created. The organizational structure may include your head office, branch offices and regional locations, business units and departments, discrete functional units and teams, and any other independent procuring unit within your overall procurement organization.
  • User directory and permissions: All levels of users of the system such as executives, managers, audit, finance, procurement agents, purchasers, storekeeper, and end-users. Once defined, you can also assign broad permissions and roles and responsibilities for these users. These users should be defined for each organizational entity that you have defined and mapped accordingly.
  • Procurement approval workflow and hierarchy definition: For the users defined, approval hierarchies should be defined for use in procurement workflows along with any conditional flows and alternate workflows.
  • Historical transactions: Uploading a year of historical data comprising transactions conducted, items procured, and supplier engaged enables you to set a baseline for your future procurement. This ensures that on future purchases of similar items, you have some price history and intelligence to guide your purchase decisions.

Identify any Potential Gaps

Once the assessment is completed, you will have a better understanding of where there’s wasted time, duplicated efforts, lack of visibility, non-compliance or supplier issues and other factors that the new e-procurement system will need to solve.

Think About the Benefits

When a business truly adopts an e-procurement solution and gains 100% user adoption, purchasing compliance increases ten-fold, more spend is brought under management, and goods and services can be negotiated at better prices from strategic suppliers. In addition, e-procurement can:

  • Optimise spend by reducing maverick purchases
  • Seize discounts by combining orders and purchasing in volume
  • Increase overall transaction speed
  • Standardise the purchasing experience
  • Provide more spend visibility
  • Negotiate more favorable contracts with strategic suppliers
  • Strengthen supplier relationships
  • Safeguard against risk and supply chain disruption
  • Alleviates routine tasks so procurement teams can focus on strategic initiatives
  • Minimise fraudulent purchases

Choose A Provider

There are many e-procurement providers on the market and initial research may make it feel a little overwhelming. When you begin your search for the perfect e-procurement solution, it’s important to take into consideration all relevant stakeholders’ needs. Make sure you lead with your requirements and understand your budget to ensure both are met. Refer to the procurement section of this source-to-pay checklist for some suggested functionality to review in your demo(s) with each provider and clearly communicate what you’d like to see, so you can fairly evaluate each.

Create An Implementation Plan

Once a solution provider is awarded, you need to develop a plan for the implementation of your e-procurement strategy. Before kicking off the implementation project, it’s important to ensure you have the proper time and resources allocated. To minimise disruption, we suggest establishing key points of contact for each team affected and frequently communicate progress throughout the process.

Analyse

Once the e-procurement solution is in place, you’ll need to monitor performance and analyse results. When doing this, keep in mind the KPIs set out earlier or refer to this eBook for key metrics to watch.

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