Project Management Constraints

Efficient project management has become one of the most popular tools for both private and public organizations as project handlers have sought ways to improve their operations. Project managers seek to achieve success across all sectors when handling a project. Technological advancement, new product development and streamlining of business perspectives are examples of targets set by project managers. During the inception of a project, there is the careful planning, organizing and prioritizing available resources achieving the desired outcome or the projected results in the least. At the inception stage, a project seeks to achieve the set target within minimal time while using the least amount of resources. However, every project manager faces challenges during the implementation of a project. Such challenges arise from the presence of different constraints within project management.

Background of the study

Even though a project manager prefers to achieve success all through, there are instances where resources allocated become minimal. Timeframe awarded to a project may also exceed leading to the scope of a project taking a new approach. Project constraints hinder project success hence the need to address each constraint. Despite the fact that project constraints are not consistent, schedule, resources and quality seem to be popularly present hindering success. The omnipresence of these three constraints has led to the name triple constraints, and this research study will address these constraints discussing how they affect project success (Kendrick, 2009).

Making a project successful within the triple constraint proves to be a challenge for every project manager. Regardless of whether its quality, resources or time, the three elements have the notion of working in tandem manner. Significantly, the absence or scarcity of one of these elements adversely affects the triumphant completion of projects. An efficient project manager comprehends that the main key of achieving success for a project entails the balancing of the triple constraints (Dobson, 2004).

Research methodology

The research methodology involved entails a presenting approach adopted within the study. Careful analysis of the triple constraints will be presented. The analysis will involve illustrations of various ways in which such project constraints affect the successful completion of a project. The approach taken will require meeting the expectations of the constraints of project management. The approach taken requires meeting the expectations of constraints in project management. Such entails the researcher to espouse a comprehensive research methodology enabling the understanding of project constraints adverse effects.

Approach

In order to remain consistent with this research, there is the approach of extensive methodologies adopted to assist readers in achieving the required results. There were appropriate considerations of projects that have failed or succeeded. Essential to this study, it is significant for a project manager to identify basic project management aspects in order to determine the purpose of a project. Such allows the understanding of project constraints leading to identifying ways of overcoming the constraints (Russell, 2011).

Project Constraint – Quality and Scope

Functions, features, content and data all constitute the scope of work to be done for any project. In order to achieve quality for any piece of work to be done, a project manager is required to provide a precise and specific statement identifying the desired final result of the project undertaken (Dobson, 2004). Every project should have a well-defined and articulate scope of work. However, it is essential to note that the scope of a project is dependent on the output quality. The output quality is essential since it ensures that a project scope is achievable.

Notable to this research, project scope requires effective planning, use of available resources, and proficient management techniques achieving the set target. Failure to adhere to such aspects will frequently lead to project failure. Mandatory for any project manager, changing the scope halfway through the project is suicidal, and often leads to project failure. Nonetheless, every project requires minor changes that are permissible during implementation in order to ensure success (Kendrick, 2009).

The quality of work done is dependent on a project manager’s understanding of project outcomes. Prior to proceeding on with a project, the client will usually have issued instructions on the expected outcome of an assignment. Nonetheless, several prospects of divergence will ensue regarding the necessity to stabilize around the existent resources. A competent project manager has the ability, and resources to cultivate success among projects undertaken. Organizations need to realize the significance of succeeding in projects as these increases their clientele base.

The project manager should have subdivisions that enable tasks undertaken within an organization (Goodpasture, 2004). There are assorted personnel dealing with the diversified projects. For instance, the manager is responsible for overseeing that the objective of the project is realized. The manager is also responsible for directing vast and significant decisions to avoid project failure. Executing this in a resourceful manner requires the program manager to ensure discipline and order is present among supervisors and other member staff.

Project Constraint – Time and Scheduling

Being the primary consideration, time management should be analyzed to the smallest detail. A competent project manager realizes the essentiality of analyzing the required time, and component to ensure successful completion of a project (Dobson, 2004). After careful analysis, each of the components is broken down in order to assign specified amount of time for handling a particular task. A project undertaken requires such aspects since they allow the estimation of a period with which the project can be undertaken. Apart from the estimation of the project period, resources required are identified to ensure success.

Despite the three constraints having a correlation to one another, time management within a project is seen as a diverse unit. Such view is alongside the realization that proper execution of any project within the allocated time is dependent on circumstances and efficient techniques. Project failure may occur despite the project manager having allocated a specific timeframe for each task. Failure can occur should there be exact resources to handle a project (Goodpasture, 2004). Abrupt emergencies may require the use of more resources in handling scrupulous tasks, leading to limited resources. The limitations of resources will often lead to an extended time-frame for a project risking failure (Russell, 2011).

Most project failures have resulted from undermining time allocated to different tasks. However, this often occurs when a project manager is unfamiliar with tasks undertaken. Failure of a project will frequently arise from unexpected events, risks and uncertainties. If the project manager is deemed to be inexperienced, the rise of potential risks will prolong the previously allocated time. Present in most projects undertaken, there ought to be an effective organization, proper restructuring and estimation techniques. Such will ensure that time is managed in an effective manner reducing the risk of failure for undertaken projects.

Project constraint – Cost and Resources

A competent project manager realizes that success of a project is compliant with the readiness and available resources. Even though time has been allocated to different tasks, it is also essential to allocate needed resources to complete the tasks at hand. However, providing the needed resources requires a project manager to have the capital needed to acquire the necessities. Such aspects require wholesome efforts on all levels of accountability. Ranging from casual workers, permanent employees, middle and top level managers, successful project completion requires collaborated efforts from parties involved. Realizing that resources like manpower are the most essential in achieving success, a resourceful project manager ought to ensure that the needs and requirements of labour present is met. Resources pose as the greatest risk in project failure (Wysocki, 2011). There are variables present like rate of materials, machinery and equipment, labour expenses which determine success or failure of a project.

Depending on market prices, the rate of materials seems to be at a constant change requiring the individual assigned to be per with the new prices. The new prices of different prices lead to subsequent changes in quality. There ought to be available capital to purchase high quality materials. For instance in building constructions, it is paramount to purchase quality materials, and failure to do so has a definite chance of project failure resulting from building collapse (Goodpasture, 2004). The purchase of machinery and equipment is also determined by price ranges within the market. However, in order to ensure success, there needs to be the use of high quality machinery and equipment.

Project running is comparative to embrowning a project plan comprehensive of the scrupulous objectives and missions. In addition, there ought to be a quantification of the assets required, the accounts should be indomitable within a timeline that is set. There is the existence of a variety of gear that is essential in making projects undertaken to be successful. The responsibilities of the manger should be as minimal as possible to avoid exhaustion from too much pressure to perform. Essential to this study, it is essential to identify different project phases and measure the success. However, the project manager should ensure that the manpower available is well taken care of since they are the success of any organization.

Conclusion

The prioritization of the constraints within a project is the foremost task needed to be undertaken by a project manager. In addition to the development of strategies in the management of multiple constraints, it is also instrumental that a project manager effectively maintains communication with the client. This ensures that they are both on the same page and that the client’s expectations are being met. Additionally, any competent project manager must ensure that they have a thorough knowledge of project management skills. This greatly assists them in being able to effectively and efficiently cater for any unforeseen project constraints. The act of balancing a project’s responsibilities is facilitated by the project manager’s ability to chart, analyze and implement it. This is because the project manager is aware of and has experience with a project’s concurrent risks.

References

Dobson, M, S. (2004). The Triple Constraints in Project Management. Arizona: Management Concepts.

Goodpasture, J, C. (2004). Quantitative methods in project management. Arizona: J. Ross Publishing.

Heldman, K. (2011). PMP Project Management Professional Exam Study Guide. USA: John Wiley & Sons

Kendrick, T. (2009). Identifying and Managing Project Risk: Essential Tools for Failure-Proofing Your Project. Phoenix: AMACOM Div American Mgmt Assn.

Russell, D. (2011). Succeeding in the Project Management Jungle: How to Manage the People Side of Projects. Phoenix: AMACOM Div American Mgmt Assn.

Wysocki, R, K. (2011). Effective Project Management: Traditional, Agile, Extreme. New York: John Wiley & Sons.

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Currency Risk Dissertation

Currency Risk

Currency risk is basically a risk that arises when a price of some country’s currency changes against the currency of some other country (Alastair, 2013). Whenever the companies or investors have their business operations or assets across their national borders, they are exposed to currency risk if they do have their positions hedged (Stephens, 2003). In these modern times of heightening currency volatility and increasing globalization, changes on the currency rates or the exchange rates causes to have a substantial influence over the profitability and operations of companies and even the government in those countries (Graham, 2014). The volatility of the exchange rates or currency rates not only affects the large corporations or multinationals, but also the medium and small sized businesses that operate only in their homeland (Horcer, 2011).

Types of currency risks or exposure

What follows is a brief account of different types of currency risks or exposure that are faced by companies and governments due to the volatility of the currency or exchange rates.

Economic risk

It is among the lesser discussed risks by researchers and scholars, but still is an evident one and has a substantial presence. Such a risk is basically caused by effects of unanticipated or unexpected fluctuations in currency on the future market value and cash flows of a company (Coyle, 2001). The impact of such a risk is long term is nature. It can have a substantial impact on the competitive position of a company even if the company is not making overseas sales or operating overseas. The source behind the economic risk is the change in competitive strengths of exports and imports (Plaza, 2011). This can be understood with an example.

For instance, if a company exports from UK to a country in the Eurozone and the price of the Euro weakens against the pound sterling i.e. it comes from 1.1 euros to 1.3 euros per pound sterling. This is a weak position because one would have to give 0.2 Euros more for one pound sterling. This means that a product from UK priced 100 pounds would cost 130 Euros instead of 110 Euros. This means that the goods from UK would become less competitive in the European market. On the other hand, the goods that are imported from Europe to UK would cost lesser than previously and would make them competitive in the UK market (MOguillansky, 2003).

Methods of risk mitigation for economic risk could be difficult, and especially the smaller companies which have limited international dealings (Hakala & Wystup, 2002). Some of the following approaches in general could be of importance.

Try exporting and importing from multiple currency zones and hope that those zones do not all move together, or move together to the same extent. For example, for the six months from January 2010 to June 2010 €/US$ rate of exchange moved from €/US$0.6867 to €/US$ 0.8164. This caused to strengthen the US dollar against the Euro by 19 percent. This resulted in making it less competitive for the USA manufacturers to make exports to a country in Eurozone. However if during the same period, the value of Pound relative to the US dollar moves from 0.6263 to 0.6783, this would have strengthened the US dollar relative the pound by 8 percent. In such a case, he trade from US to United Kingdom would not have been affected so badly(Poghosyan, 2010).
Another method here is to make the goods in the countries to which they are sold. This is something which is followed by multinationals. Though in such a case, the raw materials might need to be imported and affected by change in currency rates, but the other expenses such as electricity bills and wages in the local currency would not be subject to the currency risks(Clark & Ghosh, 2004).

Translational risk

The impact of currency rate fluctuations on the company’s fiscal statements results in translational risks. It is especially the case when the company features foreign subsidiaries (Matsukawa & Habeck, 2007). This risk is normally short to medium term. If the subsidiary of a company is in some country where the currency weakens, the value of assets of such subsidiary in the company’s consolidated accounts will weaken (Homaifar, 2004). The effect is not severe as it does not impact on the day to day cash flows. However, scholars and practitioners have reserved the translation risk usually for the consolidation effects (Stephen, 2003).

The exposure can be partially mitigated through funding of the foreign subsidiary through a foreign loan. For instance, take a USA subsidiary of a company which has been set up by the parent company using equity finance. The financial position statement of the company would appear something like this:

Current assets – 0.5 million US dollars

Non-current assets – 1.5 million US dollar

Equity – 2.0 Million US dollars

Now if the US dollars, the total assets of the company would have a lesser value as a result.

However, in case if the subsidiary for example was formed through using 50 % US borrowings and through 50 % equity, the financial position would be:

Current assets – 0.5 million US dollars

Non-current assets – 1.5 Million US dollars

The breakup of this position or the assets is that $ 1 million loan is used to finance the assets and the rest 1 million is equity borrowings. So the investment of the holding company is only $ 1 million US dollars and the net assets are only worth US dollars 1 million. Now if the US dollars weakens in such a case, only the net assets value of US dollars 1 million decreases (John Y, 2010).

Transaction risk

Transaction risks are the most evident and talked about currency risks due to fluctuations in currency (Sebetian & Solnik, 2008). The exposure exists when the companies exporting and importing. This type of risk is of a short to medium term. If the rate of exchange during the time the company enters into contract and the time of actual receipt or payment of money changes, the amount of the home currency to be received or paid will alter and would make the future cash flows uncertain (Bartram & Bodnar, 2007).

Methods of currency risk mitigation and their shortcomings

Some of the most renowned and widely used risk mitigation strategies are those are used by companies to overcome transaction risks. Though in case of foreign currency transactions, there are chances of obtaining profit due to the increase in the rate of foreign currency (Ugur, 2012).

Non-hedging techniques and currency risk

There are two obvious risk mitigation techniques for minimizing the transaction exposure.

Transferring exposure

Under this technique, the exposure or risk of the transaction is transferred to the other company. For instance, an exporter of US selling products in Germany could quote the sale price in US dollars. In such case the transaction exposure or risk for any uncertainty in exchange rate would be faced by the German importer (Ephraim & Judge, 2008).

Netting exposure

The currency risk of transaction is minimized here by netting out. This method is of vital importance for the larger companies that are frequently involved in large amounts of currency transactions (Cavusgil, et al., 2012). Receivable of Deutsche marks of 100 million owed to some US company in 45 days is safe if the USA Company is to pay out some German suppliers Deutsche marks 75 million in about 30 days. The risk increases further if the business only has receipts on continuing basis in Deutsche marks. The risk is decreased when the receipts and payments are in various different currencies. An example has been given earlier in the exposition. Though the transaction of currency cannot be netted off fully, it may become so small that the company accepts the exposure or risks rather than incurring costs associated with hedging that are given below (Judge, 2009).

Hedging techniques for currency risk mitigation (hedging techniques or instruments)

Mitigating short term foreign exchange risks

For eliminating short term transaction exposures of currency, there are various hedging instruments available with different costs.

Forwards contracts

The most direct means to eliminate the transaction risk is by hedging the risk with forward exchange contract. For instance, suppose some USA exporter sells 50 wine cases to some Venezuelan company under sales contract, which specifies an amount of 15 million bolivars to be paid in 60 days. The exporter could eliminate the transaction exposure through the 15 million bolivars to his bank at a 60days forward exchange rate of 750 bolivars / dollar. Now it does not matter what happens to the currency rate during the next month, the company will have assurance that it will be able to convert 15 million bolivars into 20,000 US dollars (Bartram, 2008).

Now the risk or limitation with this method is that exposure could only be eliminated if Venezuelan buyer pays the obligation of 15 million bolivars. The default from the buyer would not relieve the US producer from the obligation towards the bank. Another limitation is that the forward contracts are not usually accessible for the small businesses. Banks normally quote rate that are unfavorable for the smaller businesses because the risk will be borne by the bank in case the company does not fulfill the forward contract. Creditworthy companies are also refused by banks. The non-eligible companies for forward exchange rate contracts can use the option to hedge transaction exposure through future contracts (Bartram, 2008).

Future contracts

The forward market hedge and future market hedge have many similarities. For instance, a US company has payable of $50,000 to be paid by the third Wednesday of September. This organization is able to purchase a Canadian dollar future contract for September. Now if value of Canadian dollar increases, the value of the payable of US Company will increase. However, value of the future contract will also increase by the same amount which would make the net value unchanged. Vice versa would be the case if the Canadian dollar value falls (Qing, et al., 2007).

The future contracts are marked by the market. The losses are to be met in cash and the offsetting currency transactions would be delayed till the transaction takes place. It might also bear the risk for insolvency for the company (Hull, 2008).

Hedging through the money market

Where future market hedge is expensive, not available, or bears large risk of insolvency, a company can use the money market hedge. Suppose a US exporter is to receive 4 million Brazilian reals in in one month time. The exposure or risk of currency fluctuation could be eliminated here through borrowing Brazilian reals at a 10 percent interest rate per month. The business can them convert them into US dollars at spot rate. When Brazilian customer after one month pays of the 4 million reals, they are utilize the settle the principle and interest on the loan.

Companies should pay out more for borrowing the funds than they could receive when they lend the funds. The interest rates charged by banks rises with risk and the requirement of collateral securities or pledge are also in place. In the situation in which the business borrows future payable, it could pledge reals deposit as the collateral security. The company’s and borrowing rate would be almost risk free when the bank has low risk. In such a case, money market hedge will be normally the least expensive option even if forwards and future contracts are available (Maurer & Valiani, 2007).

Cross hedging

Cross hedging is another hedging method which is of importance for countries where options such as future contracts, forward rates, options or credits in the foreign currency are not available (Madura, 2012). It is a hedge that is established in currency which is related to value of currency in which the payable or receivable is denominated. In some of the cases, finding currencies that are correlated is easy because many small countries try pegging their currencies with major currencies like Euro, Dollar, or franc. However, there might not be perfect correlation among these currencies as efforts for pegging the values fail frequently (Lane & Shambaugh, 2010).

Now for instance, if there is a company that has receivables or payables denominated in the currency of some small nation that has no developed credit market or currency. In such case, it will explore possibility that the currency might be pegged to some major currency value. If not, then the company would observe the previous changes in value of that currency to determine whether such currency in correlated with the changes in value of some major currency. The company then undertakes a futures market, forward market, options or money market hedge in that major currency (Chue & Cook, 2008). A limitation with this method is that its success depends change in major currency value corresponds with the currency of the smaller country (Calamos, 2011).

For now, there is an only limited market for the currency futures options that features maturities greater than 1 year. Only a few banks render foreign exchange contracts of long term with maturities such as seven years. Only the credit worthy and the large corporations qualify for those contracts (Hull, 2008).

Back to back loans

Back to back loan arrangements are a method to reduce currency risks in long term transactions. For instance, where a company enters into a project with some company in another country, it can use parallel or back to back loan arrangements for reducing risk. Here the company will lend loan in its homeland currency to the other company if the other intends to invest in that country. Similarly the other company with whom the lending company is making investment will arrange loan in its own homeland currency for the investing company. Thus they will pay each other from the earnings they derive from their respective investments in the form of currencies of their respective countries. In such case both companies will be under bilateral arrangement which will be outside the scope of foreign exchange markets. Ultimately neither of them would be affected by fluctuations in exchange rate.

However the risk of default from either company always remains and they are not freed from their loan liabilities (Patnaik & Shah, 2010).

There are various other methods that are used for mitigating currency risks, but they vary from country to country and have their own limitations in general and in the context of specific countries.

Conclusion and recommendations

Effective legal drafting could be used to minimize substantial international transaction risk. The risk of currency fluctuation exposure could be eliminated or mitigated using the instruments or methods that have been described in this exposition. Though many of the instruments do not hedge the transaction exposure entirely, but they are more accessible for the medium and small size firms and the individuals. Though the instruments and methods increase transaction cost, but still businesses intend to minimize risks as a priority.

Individuals and companies should have an understanding of the transactions they do in terms of the risks associated with them. Similarly they should have an understanding of their financial and money market so that they can determine the risk mitigation instruments and techniques in those markets. In case the risk is higher, then the cost of mitigation techniques should never be avoided. They should have an eye on both the present and future currency risk of a transaction.

Bibliography

Alastair, G., 2013. Introduction to currency risk. New York: Rutledge.

Bartram, S. M., 2008. What lies beneath: foreign exchange rate exposure, hedging and cash flows. Journal of Banking & Finance, 32(8), pp. 1508-1521`.

Bartram, S. M. & Bodnar, G. M., 2007. The exchange rate exposure puzzle. Managerial Finance, 33(9), pp. 642-666.

Calamos, N. P., 2011. Convertible arbitrage: insights and techniques for successful hedging. London: John Wiley & Sons.

Cavusgil, S. T., Knight, G. & Reisenberger, J. R., 2012. International business. New Jersey: Pearson Education.

Chue, T. K. & Cook, D., 2008. Emerging market exchange rate exposure. Journal of Banking and Finance, 32(7), pp. 1349-1362.

Clark, E. & Ghosh, D. K., 2004. Arbitrage, hedging and speculation: the foreign exchange market. New York: Greenwood Publishing Group.

Coyle, B., 2001. Foreign exchange markets. Chicago: Taylor & Francis.

Ephraim, C. & Judge, A., 2008. The determinants of foreign currency hedging: does foreign currency debt induce a bias? European Financial Management, 14(3), pp. 445-469.

Graham, A., 2014. Hedging currency exposure. New York: Routledge.

Hakala, J. & Wystup, U., 2002. Foreign exchange risk: models, instruments and strategies. London: Risk Books.

Homaifar, G., 2004. Managing global financial and foreign exchange rate risk. New York: John Wiley & Sons.

Horcer, k. A., 2011. Essentials of financial risk management. Hoboken: John Wiley & Sons.

Hull, J. C., 2008. Fundamentals of futures and options markets and derivate. 6th ed. s.l.:Prentice Hall.

John Y, C. M. S.-D. V. L. M., 2010. Global currency hedging. The Journal of Finance, 65(1), pp. 87-121.

Judge, A. E. C., 2009. Foreign currency derivatives versus foreign currency debt and the hedging premium. European Financial Management, 15(3), pp. 606-642.

Lane, P. R. & Shambaugh, J. C., 2010. Financial exchange rates and international currency risk exposures. The American Economic Review, pp. 518-540.

Madura, J., 2012. International financial management. Singapore: Cengage Learning.

Matsukawa, T. & Habeck, O., 2007. Review of risk mitigation instruments for infrastructure financing and recent trends and developments. Washington: World bank Publications.

Maurer, R. & Valiani, S., 2007. Hedging the exchange rate risk in international portfolio diversification: currency forwards versus currency risk options. Managerial Finance, 33(9), pp. 667-692.

MOguillansky, G., 2003. Corporate currency risk management and exchange rate volatility in Latin America. Santiago: United Nations Publications.

Patnaik, l. & Shah, A., 2010. Does the currency risk shape unhedged currency exposure?. Journal of International Money and Finance , 29(5), pp. 760-769.

Plaza, D., 2011. The role of currency risk futures in risk management. Norderstedt: GRIN Verlag.

Poghosyan, T., 2010. Determinants of foreign exchange risk premium in the Gulg cooperation council countries. Washington: International Monetary Fund.

Qing, D., Dong, L. & Kouvelis, P., 2007. On the integration of production and financial hedging techniques in global markets. Operations Research, 55(3), pp. 470-489.

Rose, P. S. & Marquis, M. H. L. J., 2008. Money and capital markets. London: McGraw-Hill/Irwin .

Sebetian, M. & Solnik, B., 2008. Applying regret theory to investment choices: currency hedging decisions. Journal of International Money and Finance, 27(5), pp. 677-694.

Stephen, B., 2003. Managing currency exposure. CFA Magazine, 14(4), pp. 50-51.

Stephens, J. J., 2003. Managing currency risk: using financial derivatives. John Wiley & sons.

Ugur, L., 2012. Currency hedging and corporate governance: a cross country analysis. Journal of Corporate Finance, 18(2), pp. 221-237.

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Theories of Finance

Finance and Time Value of Money

Definition of Time Value of Money

The time value of money is the value of money figuring in a given amount of interest earned over a given amount of time. It means the value of an amount of money is different in different time periods. The value of a sum of money received today is less many than its value received after some time. Conversely, the sum of money received in future is less valuable than it is today. The time value of money is the central concept of finance.

For example, USD 100 of today’s money invested for one year and earning 5% interest will be worth of USD 105 after one year. Therefore, USD 100 paid now or USD 105 paid exactly one year from now both have the same value to the recipient.

Importance of Time value of money

Time value of money is considered as the fundamental concept in financial management. It can be used to compare investment alternatives and to solve problems involving loans, mortgage, leases, savings and annuities.

Financial planning

How much fund is needed? It’s needed for what’s time? What’s the sources and to this source how much money is needed is detailed description is called financial planning.

Source Identification

After financial planning the most important work of finance is to identify sources from where that fund will be collected. It’s may be a person or organization that will be decided using time value of money.

Raising Fund

Another most important task of finance is to collect funds from identified sources. The question of how much money will be invested in a particular project that will be decided through TVM.

Repayment of loan

The process of repayment of a loan is evaluated through the process of TVM.

Definition of Present Value

Present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return i.e. present value is the current value of a future amount. The amount is to be invested today at a given interest rate over a specified period to equal the future amount.

The present value formula has four variables. The formula is –

PV=FV/ (1+i)ⁿ

Definition of Future Value

Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today. It measures the nominal future sum of money that a given sum of money is worth at a specified time in the future assuming a certain interest rate or more generally rate of return. It is the present value multiplied by the accumulation function.

Following is the future value formula-

FV=PV (1+r) ^t

Definition of Annuity

An annuity, in finance is a terminating streams of fixed payments i.e. a collection of payment to be periodically received over a specified period of time. The valuation of such a stream of payment s entails concepts such as the time value of money, interest rate and future value. For example- annuities are regular deposits to a savings account, monthly home mortgage payments and monthly insurance payments.

Annuity can be classified by the frequency of payment date. The payments may be made weekly, monthly, quarterly, yearly etc.

Finance Amortization

Amortization is the process of decreasing or accounting for an amount over a period. In the concept of finance amortization is the process by which loan principle decreases over the life of a loan. An amortization table shows this ratio of principle and interest and demonstrates how a loan’s principle amount decreases over time. Amortization is generally known as depreciation of intangible assets of a firm.

Amortization Schedule

It is a table detailing its periodic payment on an amortizing loan as generated by an amortization calculator. This amortization schedule is based on the following assumptions;

First, it should be known that rounding errors occur and depending how the lender accumulates this error, the blended payment may vary slightly some months to keep this error are adjusted for at the end of each year or at the final loan payment. There are a few crucial points worth noting when mortgaging a home with an amortized loan.

Second, understanding the first statement, the repetitive refinancing of an amortized mortgage loan even with decreasing interest rates and decreasing principle balance, can cause the borrower to pay over 500% of the value of the original loan amount.

Third, the payment on an amortized mortgage loan remains same for the entire loan term, regardless of principle balance owed but only for a fixed rate, fully amortizing loan.

Methods of Amortization

There are different methods in which to arrive at an amortization schedules. These are;

Straight line
Declining Balance
Annuity
Bullet
Balloon
Increasing Balance (Negative Amortization)

Capital Budgeting

Capital budgeting is the process of evaluating and selecting long term investments that are consistent with the goals of the shareholder’s profit maximization.

PBP

Payback period is defined as the number of years required to recover a project cost. The regular pay back method ignores cash flow beyond payback period and it does not consider the time value of money. The payback provides an indication on a project’s risk and liquidity, because it shows how long the invested capital is at risk.

NPV

The net present value method discounts all cash flows at the project’s cost of capital and then sums those cash flows:

Acceptance rule- Accept if NPV>0
Reject if NPV<0
Project may be accepted if NPV=0

Merits

Considers all cash flow
True measure of profitability.
Based on the concept of Time value of money.
Satisfies the value audibility principle.
Consistent with the wealth maximization principle.

Demerits

Requires estimates of all cash flows.
Requires computation of the opportunity cost of the capital that possesses practical difficulties.
Sensitive to discount rates.

IRR

The discount rate that equates the present values of an investment, the cash inflows and outflows is its Internal Rate of Return.

Acceptance rule- Accept if IRR>k,
Reject if IRR<k,
Project may be accepted if IRR=0.

Merits

Considers all cash flows.
True measure of profitability.
Based on the concept of time value of money.
Generally consistent with profit maximization principle.

Demerits

Requires estimates of cash flows.
Does not satisfy the value audibility concept.
At times, fails to indicate correct choice between mutually exclusive projects.
At times, yields multiple rates.
Relatively difficult to compute.

PI

The ratio between the present value of the net cash benefit to the net cash outlay is profitability index or benefit-cost ratio;

Acceptance rule- Accept if PI>1.0,
Reject if PI<1.0,
Project may be accepted if PI=1.0

Cost of Capital

Definition of cost of capital

It is the rate that a firm must earn on its project investments to maintain its market value and attract funds.

The cost of each source or component is called specific cost of capital. When these specific costs are combined to arrive at overall cost of capital, it is referred to as the weighted cost of capital.

Assumptions

A basic assumption of traditional cost of capital analysis is that the firm’s business and financial risks are unaffected by the acceptance and financing of projects.

Business risks

It is the risk to the firm of being unable to cover fixed operating costs.

Financial risks

It is the risk to the firm of being unable to cover required financial obligations such as interest and preference dividends.

Explicit Costs

Explicit cost of capital is the “rate of return of the cash flows of the financing opportunity”.

Implicit Cost

Implicit cost of capital of funds raised and invested by the firm may, therefore, be defined as the rate of return associated with the best investment opportunity for the form and its shareholders that would be foregone.

Cost of debts

Cost of debt is the after tax cost of long-term funds through borrowing.

Cost of preference stocks

It is the annual preference stock dividend divided by the net proceeds from the sale of preference stocks. Or it can be said as the dividend expected by the preference stockholder.

Finance and Working Capital Cycle

Definition of Working Capital

Working Capital refers to that part of the firm’s capital, which is required for financing short-term or current assets such a cash marketable securities, debtors and inventories. Funds thus, invested in current assets keep revolving fast and are constantly converted into cash and this cash flow out again in exchange for other current assets. Working Capital is also known as revolving or circulating capital or short-term capital.

Why finance working capital cycle is calculated

Working capital is a common measure of a company’s liquidity, efficiency, and overall health. Because it includes cash, inventory, accounts receivable, accounts payable, the portion of debt due within one year, and other short-term accounts, a company’s working capital reflects the results of a host of company activities, including inventory management, debt management, revenue collection, and payments to suppliers.

Positive working capital generally indicates that a company is able to pay off its short-term liabilities almost immediately. Negative working capital generally indicates a company is unable to do so. This is why analysts are sensitive to decreases in working capital; they suggest a company is becoming over leveraged, is struggling to maintain or grow sales, is paying bills too quickly, or is collecting receivables too slowly. Increases in working capital, on the other hand, suggest the opposite. There are several ways to evaluate a company’s working capital further, including calculating the inventory-turnover ratio, the receivables ratio, days payable, the current ratio, and the quick ratio.

One of the most significant uses of working capital is inventory. The longer inventory sits on the shelf or in the warehouse, the longer the company’s working capital is tied up.

When not managed carefully, businesses can grow themselves out of cash by needing more working capital to fulfill expansion plans than they can generate in their current state. This usually occurs when a company has used cash to pay for everything, rather than seeking financing that would smooth out the payments and make cash available for other uses. As a result, working capital shortages cause many businesses to fail even though they may actually turn a profit. The most efficient companies invest wisely to avoid these situations.

Analysts commonly point out that the level and timing of a company’s cash flows are what really determine whether a company is able to pay its liabilities when due. The working-capital formula assumes that a company really would liquidate its current assets to pay current liabilities, which is not always realistic considering some cash is always needed to meet payroll obligations and maintain operations. Further, the working-capital formula assumes that accounts receivable are readily available for collection, which may not be the case for many companies.

It is also important to understand that the timing of asset purchases, payment and collection policies, the likelihood that a company will write off some past-due receivables and even capital-raising efforts can generate different working capital needs for similar companies. Equally important is that working capital needs vary from industry to industry, especially considering how different industries depend on expensive equipment, use different revenue accounting methods, and approach other industry-specific matters.

Finding ways to smooth out cash payments in order to keep working capital stable is particularly difficult for manufacturers and other companies that require a lot of up-front costs. For these reasons, comparison of working capital is generally most meaningful among companies within the same industry, and the definition of a “high” or “low” ratio should be made within this context.

Finance Theories Relevant Blog Posts

Corporate Finance And Governance

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Social Structure

Social structures are seen all forms of social interactions. These social interactions are the ones responsible for shaping social reality. Social structure can be broken down into five elements. These elements include social roles, statuses, groups, social institutions and social networks (Lamm & Schaefer, 1998). These elements form the foundation of social structure. According to social sciences, social structure can be defined as a social arrangement where actions of an individual person both and emerge and determine them (Schaefer, 2012). Social structure is more about macrosociology since the society is considered as an institution rather than individual entities. However, some sociologists have come up with several scales of a social structure such as macro scale which features social structure or a large social group. The meso scale is concerned with social network structure. This scale examines the ties between organizations or groups. The micro scale is concerned with how norms define the behaviors observed on individuals in a given social system (Lamm & Schaefer, 1998).

Social Structure Discussion

When one talks about status, many people usually think it has to do with influence, fame or wealth. However, talking about status in terms of sociology refers to a wide range of positions that are socially defined in a given society from the highest to the lowest. For instance, in a society like ours, someone can have the status of a teenager, doctor or even the president. It is also possible for someone to have two or more statuses at the same time since one can be a doctor as well as a neighbor and a resident of New York. There are also two types of statuses, achieved and ascribed. An ascribed status is a status that one is given by a society without considering the person’s talents or achievements. The assignment is usually done after birth (Schaefer, 2012). Many conflict theorists are concerned with ascribed statuses. In my society, my ascribed statuses include being a daughter, female, sister, and 27 years old among others. On the other hand achieved statuses are the ones one get after achieving something in a society. My achieved statutes include being a student, friend, classmate, teammate, and roommate.

In many cases, there is little one can do in order to change their ascribed statuses. However, one gets achieved statutes through one’s efforts. Being a computer expert is through one’s effort. In order for one to acquire an achieved status, one must work for it. As demonstrated earlier, one can have many statuses, but there is always a master status in one’s social life in a given society. A master status has many and conflicting statuses. The master status can elevate or lower someone’s status in the society. A master status dominates all others and is the one that is responsible for shaping someone’s position in the society (Luckmann & Berger 2011). In my case, my current master status is being a student. In my society, everybody knows that I am a student and everybody identifies me with schooling. Therefore, I can conclude that my master status is being a student.

Some roles associated with the statutes mentioned above include the fact that as a daughter I have to be answerable to may parents and elders in the society. As a student I have to attend and work hard in school. I also have to act as female is expected while at the same time ensuring that I am the best sister to my siblings. There are times when all or some of these roles come into direct conflict with each other. For instance, there was a time I was studying for a very important exam and my younger sister wanted me to take her to the park at the same time. The statuses of being a student and being a sister were in direct conflict and I had to make a tough decision whether to be a good student or be a good sister (Ebaugh, 1988). The final decision was to refuse my sister’s request.

I belong to several groups in our society’s social structure. My primary group is our study group at school which has six members. We meet everyday and share ideas. Most of the meetings are study oriented although we also talk about other things in general. My secondary group is our community’s welfare group. This group has more than 50 members and we usually meet once or twice per month. Most of the issues that we discuss are how we can improve our community.

My study group holds great value to attendance and respect among the members. The members of the group are supposed to be polite and should treat each other with respect. Looking down upon another member is frowned upon. The idea behind the group is not only to help each other academically, but also help each other socially. The community welfare group (social structure) is meant to create awareness among the members about problems that affects communities. Attendance is not mandatory although there are values and norms that one is expected to portray. They include respect among the members and respect for authority.

Status, mass media, roles and groups have played a big role in shaping my self-identity, behaviors and values. The statutes have helped me identify myself. These statutes play a big role in the way I behave and the way I present myself to the public. There are certain values that are expected of me in the society and I have to uphold them. The same goes for social media and social structures in general. Mass media has also played a big role in my life. Social networking has eased the way I communicate and exchange ideas with members of my groups. It has also eased the ways in which I can express myself.

Conclusion

Statutes and groups not only serve elements of a given social structure such as roles, they also play part in linking an individual to the larger society. Each and every person belongs to a particular unique group. The social network makes it possible for people from different groups to interact and form larger relationships. This is why social networks are considered as one of the key elements of the social structure alongside other like statutes.

References

Ebaugh, H (1988) Becoming an ex: The process of role exit. Chicago, IL: University of Chicago Press, Ltd.

Lamm, R. & Schaefer, R (1998) Sociology: Instructor’s manual. New York, NY: McGraw-Hill Education.

Luckmann, T. & Berger, P (2011) The social construction of reality: A treatise in the sociology of knowledge. Boston, MA: Open Road Media.

Schaefer, R (2012) Sociology: A brief introduction. New York, NY: McGraw-Hill Education.

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Infrastructure Virtualization

Virtualization is a constantly growing trend in the business organizations of large scale. The approach of virtualization allows the organizations the ability to perform more work with fewer computers as the computer systems are actually relying on the computing powers of the system server which is replicated through the individual systems throughout the organization. Each system represents a single instance of the server computer. Implementing the virtualization techniques help a company save big on resources while keeping the productivity high.

This report is aimed towards analysing the applicability of the virtualization in the real organization of Regional Gardens Ltd. An implementation plan of the virtualization system will be developed as per the requirement specification of the organization. The advantages of the virtualization systems in data centre and legacy systems will be evaluated against productivity and cost-effectiveness. Virtualization techniques are generally implemented with challenges like information security and recover in case of disaster; therefore, both the issues with be discussed here with respect to the selected organization.

Introduction

Virtual desktop infrastructure is the approach of using a virtual machine as a way of hosting a different operating system in a machine other than the original or installed operating system in the machine. It is also possible to run a specific OS on many systems using virtualization technique while the OS is originally running on a centralized server system only. The Virtualization technique of this fashion is a variant of the basic client-server model of computing and is generally adapted by the organizations to enable virtual OS systems in the organizational IT infrastructure without the client-server model in its original form.

This report focuses on the implementation of virtualization of computer systems in the Regional Gardens Ltd organization. The organizations operates through three different offices, which includes a garden that is open for public viewing couple of times every year, A Regional Garden’s Nursery which operates as a seller of plants, and Regional Garden Planners, which is a gardening consultation firm operating for the organization and provides consultation about gardening to the general public. The managerial board at Regional Gardens is seeking the option of adapting the virtualization technique as a way of allowing its old computers to run relatively new OS, and is also planning to adapt to a virtualization technique to ease the pressure on its data centre which is costing a lot in cooling mechanisms. The report will analyse the implementation plan of virtualization for the organization as well as assessing the advantages and disadvantages of it.

What is Virtualization?

Virtualization in the field of computing technology refers to the ability of a machine to run a virtual machine on it even though the machine is not installed on the system. Virtualization can be performed not just for the applications, but for Operating Systems, run time environment and hardware components as well.

Over time, most of the functions that computers perform have in some way benefited from virtualization (Kusnetzky 2011).

Desktop virtualization is the technique of providing a different desktop environment in a already running desktop environment without installing the virtualized environment physically on the system. On the physical device that is hosting the virtualization, this technique provides a in-between layer for the desktop environment and the application software programs running on it by providing a virtual desktop environment to run the applications. With the desktop environment virtualization, it is also possible to use virtual applications on the virtual desktop environment using virtualized applications. It is also possible to run the virtual OS in all the systems of an organization with the use of a centralized OS installed on the server, which makes it very easy to keep the backup of all the information as virtually all the employees are making use of the systems through a OS that is physically present on one device only which is well protected. In such a situation, if one virtualized system is lost or broken, it will be very easy to restore a new system with the same information as it had stored on it before, since all the information is actually stored on virtual data center and a virtual desktop environment that are hosted somewhere else physically.

Proposed Virtualization Technique and Infrastructure

Virtualization technique can be used with different variations of it such as by installing a virtual OS maker on the system itself or by a centralized virtualization model that works using remote systems. Regional Gardens Ltd organization has a staff of 150 people under its payroll with its operations spawned across three different offices and locations. As the company is wishing to make use of a virtualization for its data centre as well as for the old specification systems installed in company’s IT infrastructure, the company should rely on the services of remote desktop virtualization technique to provide the relatively new OS programs to its fleet of old computers.

Hardware virtualization offers several benefits, including consolidation of the infrastructure, ease of replication and relocation, normalization of systems and isolation of resources (Wolf & Halter 2005).

The remote virtualization technique for the computer systems of Regional Gardens Ltd will function as a client server model between the server hosting the OS originally and the computers systems which are relatively old in the organizational structure and are in need of virtualization to make use of new OS systems. In this infrastructure, the execution of different applications and OS features will take place on an OS system that is not installed on the individual systems, but will be installed physically on just the server system which is connected to the local clients using a remote connection mechanism. The interaction of the user with the applications running on the server system takes place through a remote virtual display that replicates the display of the server system on the local system of employees. In the environment of remote functioning, the data stored on the systems in only stored on the physically installed OS device which is the server and only the local hardware information are stored on the local machines. Due to this special properly, the IT infrastructure of the organization will get robustness and high reliability as the data stored is much more secure in this environment. The most common approach of implementing this kind of system architecture is by installing the OS on a server machine that is running hypervisor, and then host a number of different OS instances on the same server system to make use of them by local systems of employees working for Regional Gardens Ltd. This approach is known as the virtual desktop infrastructure technique and is generally abbreviated as VDI.

The remote virtualization technique to provide OS instances on the local computers using a OS instance installed on server side system is generally preferred in the following situations:

The virtualization technology is highly efficient in the organizations where the availability requirements for the OS systems are very high and the technical support is not readily available every time. This is true in cases of retail companies and the branch office environment. This is also true in case of Regional Gardens Ltd, and having the OS system installed on the server system only helps the company infrastructure reducing the cost of maintenance and fixing technical errors in individual systems.
The virtualization technique is also very helpful in situations where the high latency of the network reduces the performance and productivity of the general client-server module. In such cases, the remote desktop virtualization technique helps reducing the latency by using centralized system based on a variant of client-server model.

In the organizations, where the data must entertain the need of remote access as well as data security issues. Both aspects conflict with each other, but with the remote virtualization technique, the remote nature of services is retained while keeping all files stored on the centralized system only that ensures the high level of security.

As some devices in the Regional Gardens Ltd are running on operating systems other than windows, the virtualization technique will allow running a windows OS in such systems without having to install the OS in these systems physically. With the proper implementation of the virtualized technique, the employees can also work on the windows OS through their non-Windows tablets and Smartphones.

The remote virtualization technique for the OS virtualization is also a great way of sharing different kinds of resources in the organization. It will be difficult for the organization to provide every employee with a dedicated high-end specification computer or to replace the old computers with expensive modern technology computers.

In the organizational structure of Regional Gardens Ltd, the virtualization technique will help the company with the accommodation of legacy systems as well as enhancing the security of the entire system architecture.

Data Center Virtualization

The Regional Gardens Ltd has a data centre where all the data information related to the organization and its three different offices is stored. The organization is currently facing the issue of high costing for the cooling of the data centre. The objective is to get the cost low for the data centre maintenance and cooling by using the virtualization techniques. For this purpose, the data centre can make use of the a virtual data centre which appears to be present physically within the organization, but is actually stored in a cloud and is replicated on the Regional Gardens Ltd systems through the use of virtualization. The systems need to be connected to the network in order to use this data centre technique. As the data is basically stored in the cloud networks and there is no physical data stored on the industry systems, the maintenance and cooling expenses can be saved. For security and restore purposes, a continuous backup of the data centre can be produced by the IT department of the organization which will keep a latest copy of the data stored.

Given the state of virtual and cloud-based infrastructure, it’s almost impossible not to think about end-to-end data environments residing in abstract software layers atop physical infrastructure (Cole 2014).

Introducing cloud computing involves moving computing outside this firewall, in effect dismantling the firewall and enabling much richer collaboration with various stakeholders (Willcocks, Venters & Whitley 2013).

In this digital age of networking systems, a large pool of business entities is looking forward to the cloud networks as the ideal solution of handling the responsibility of a network system. There is a big trend of implementing the cloud based networks in the business organizations and a large number of organizations have already implemented such a system. Most of the businesses adapting to the cloud networks are the once which are in need of upgrading their outdated network systems. The cost-effectiveness and flexibility present in the cloud networks is making such networks the ideal solutions to the problem of implementing a new network system.

Cloud Computing is the paradigm where computing resources are available when needed, and you pay for their use in much the same way as for household utilities (Harding 2011).

The character of the internet forces cloud providers and application builders to compromise, often in the form of eventual consistency (Waschke 2012).

Cloud technology in networking helps the organizations in keeping the infrastructure for the future changes in the network as well as keeps the development and maintenance of the system cost-effective for the company. The planning of infrastructure is very simply in this technology and it is also a dynamic approach that makes it very easy to make scalable to develop the cloud applications, for data storage, etc. There are various type of could networks that can be implemented and these types include clouds like Public, private, hybrid network or the latest technology in this field, Community cloud.

All of the different networking technologies in the cloud services are significantly different from one another and have own advantages and disadvantages. Based on the advantages of each cloud technology, the Regional Gardens Ltd can decide which kind of cloud solution to implement on the network. As the organization is having a network of 150 employees and only these employees have the access to the system, a private cloud network virtualization will be suitable for the needs of Regional Gardens Ltd.

In the business organizations where privacy is a big concern, private cloud networks are mostly used to keep the access to the network limited to the staff members. Such a private cloud allows a business entity to host a specialized application on the cloud and it is also possible for the organization to focus on security concerns with this approach which is component missing in the public kind of networks. This kind of network is not shared among a large pool of people or with other organizations. Such kind of a network can be hosted internally or externally.

There are two different types of private network based on the configuration

On-premise private cloud: This is a cost effective method of developing a private cloud network for the organization. The cost for this and the operational costs of such a model will then be attached with the IT department of the company as the network will essentially become responsibility of the IT department. On premise private cloud networks are highly suitable for the applications that are hosted within organizations and offer high level of control or configuration ability to the management as well as high security to the whole network.
Third party private cloud: These are also known as the externally hosted private cloud networks. Such cloud networks are designed by a specialist firm functioning in the networking industry for the exclusive use of one company only. In such a case, the cloud services are organized by the help of a third party network solution which also hosts the service. The service provider then develops a network that is managed for the purpose of that specific organization only and it is also ensured that the network developed is highly secure for use in organizational scenario.

For Regional Gardens Ltd, as the organization is not having an IT department, hiring services of a third party cloud company will be highly beneficial and recommended to keep the cloud secure and functional. Implementation of a cloud based virtual data centre will reduce the cost of maintaining a physical data centre.

The advantages of Virtualization for Regional Gardens Ltd

In the IT infrastructure of the Regional Gardens Ltd, the virtualization technique will provide great benefits. Some of these advantages are listed below:

Consolidation: The technique of virtualization in the organization will reduce the workload on the non-efficient systems or the legacy systems by means of consolidation. The approach combines the workload of a number of machines on a single computer. Through the use of this technique, the employees can run more application on fewer hardware components. This is a cost-effective feature of virtualization in Regional Gardens Ltd as it does not require all systems to be of top-notch specification.
A full data centre: In the present infrastructure of the organization’s data centre, the data centre is almost full and cannot handle more workload or adding more computers. Additionally, the cooling and maintenance of data centers are also running on their full limits and are costing a lot as well. Virtualization makes it easy on the datacenter by allowing adding as many computers as required to the datacenter without physically combining them. Virtualization of cloud based data center is the perfect solution for the datacenters. In this manner, the data is stored on a cloud network and the maintenance and cooling cost is significantly reduced.
Hardware isolation: There are new hardware components coming out every other month with faster and better performance than the previously available components. However, shifting from one server hardware to another is a tough task and requires long configuration. There is also a risk that the new hardware component architecture may not work for the existing applications. In case of virtualized systems, this issue is not present as the systems are virtual and not physically present. Every machine in the network is actually replicating the server machine only hence, this issue is minimized heavily.
Legacy operating systems: Regional Gardens Ltd is also facing issue of the legacy systems in its IT infrastructure. The organization wants these legacy systems to run the modern operating system just like the rest of the computers in the company structure. However, it is not natively possible as the hardware specifications of legacy systems are not adequate to hold the modern OS. Using the virtualization, such legacy systems can make use of virtually installed modern OS which are actually physically installed on the server system. This process will allow Regional Gardens Ltd to make use of its legacy systems.

Disaster Recovery in Virtualized Infrastructure

In the virtualized technique of data centre and the company systems, the computers run an OS that is physically installed on the server machine only. All the information that is stored on any of the computers in the organization is actually stored on the server system only. This approach reduces the risk of losing data or information through the individual device or computer damage. However, at the same time, it increases the dependability of the organization on a single server machine which is actually virtually providing its own OS instances to different computers in the network as all the data is stored on this machine only.

As the data is stored on the server only, the organization becomes prone to disastrous situations if the server machine is compromised or damaged. To overcome from this issue and to perform a disaster recovery in the virtualized infrastructure, the organization must take out backups of the data stored in the server machine in a periodic manner. For maximum security and protection of data against a disaster situation, multiple instances of recovery backup files should be stored in locations which are not close in proximity. Storing one of the backup instances in a cloud network is also a good option for the organization.

By using the method of periodic backups, the organization can protect its virtualized systems against any kind of disaster. In case of a disaster, if the server loses all of its information stored, then the latest backup file can be used to restore information in the server system which will be replicated to all the other computers in the system as well. As the network is virtualized, there is no need to restore the backup for individual computers and only restoring it on the server system would be enough to gain back the same functionality.

Information Security Changes Required

Use of a virtual network where all the employees of the company who are working on different computes are actually working on the same server machine system, the security issues are to be entertained differently. In this system all the employees of the company are making use of the same server therefore there needs to be some security constraints regarding the information stored on the server. Some security changes required are listed below:

Using different OS instances: Instead of providing same OS instances to all the employees, the virtual server should run different OS instances for different computers.
Using employee user-accounts with set privileges: Every employee of the Regional Gardens Ltd should be given a separate OS account to login to the computer and each account should have its own access privileges based on the position of the employee in company.
Restricted access to stored files: The server system should have logics applies to restrict the access to the files created by other users. This approach will ensure that the information confidentiality is maintained even in the shared resource and storage scenario.
Encrypting the system: For added protection, the files stored on the system should be kept encrypted.

Conclusion

The Regional Gardens Ltd is facing issues like legacy systems in the organization and high cost of maintaining the datacenters which are getting used up to their highest limits. The idea suggested by the management to make use of virtualization technique in order to reduce the cost of cooling the datacenter as well as making use of legacy systems has been analyzed through different perspectives. The implementation of virtual systems in the company infrastructure will assist the origination in better managing its resources and legacy systems as well as reducing the cost of maintenance for datacenter.

The issues of information security and recovery processes are also discussed in the report and it is found that the mentioned approaches will not create an overhead on the organization.

References

Cole, A 2014, Is the Virtual Data Center Inevitable?, IT Business edge, viewed 15 May 2014.

Harding, C 2011, Cloud Computing for Business: The Open Group Guide, Van Haren Publishing.

Kusnetzky, D 2011, Virtualization: A Manager’s Guide, O’Reilly Media, Inc.

Portnoy, M 2012, Virtualization Essentials, John Wiley & Sons.

Waschke, M 2012, Cloud Standards: Agreements That Hold Together Clouds, Apress.

Willcocks, L, Venters, W & Whitley, E 2013, Moving to the Cloud Corporation: How to Face the Challenges and Harness the Potential of Cloud Computing, Palgrave Macmillan.

Wolf, C & Halter, E 2005, Virtualization: From the Desktop to the Enterprise, Apress.