PRINCIPLES OF BUSINESSCOLLATERAL SECURITY

This is property or other assets pledged by a borrower to secure a loan. The collateral serves as protectionagainst default - that is, a borrower failing to pay the principal and interest under the terms of a loan obligation. If a borrower does default on a loan (dueto insolvency or other event), that borrower forfeits (gives up) the property pledged as collateral - and thelender then becomes the owner of the collateral. This is called a lien. In a typical mortgage loan transaction,for instance, the house or building serves as the collateral. Should the buyer fail to pay the loan underthe mortgage loan agreement, the ownership of the real estate is transferred to the bank. The bank uses a legal process called foreclosure to obtain real estate from a borrower who defaults on a mortgage loanobligation. The bank now offers secure and unsecure loans. Secure loans are less risky as the asset used assecurity ensures that the borrower continues to make regular payment or give up his asset. Unsecure loan arehighly riskier than secured ones because there is no asset to stand as security, therefore interest rates areusually higher.

WHAT IS ETHICAL CODE?

What is legal is not always ethical. They differ in the manner that what a person must do is not always what aperson should do. The former is universally accepted while the latter is ideal human conduct, agreed upon by most of the people. Ethics are a set of moral principles that normally guidesdecision making and policy setting within a work environment. A moral person is someone whose actions areguided by what is considered wrong or right. Business ethics are therefore the actions of persons within the organization that are considered morally correct. This includes:– Social responsibility

– Balance between what’s right and what’s profitable– Often no clear-cut choices– Often shaped by the organization’s ethical climate– environmental protection– occupational safety and health– product liability– equality of opportunity

It is likely to cover:• Personal behaviour e.g. when dealing with customers and suppliers• Corporate behaviour e.g. when negotiating deals• Behaviour towards society e.g. when recruiting• Behaviour towards the environment e.g. when deciding on process

COMMON BUSINESS ETHICAL CHALLENGES

In order to ensure that ethics are embedded in the organization

culture, a Code of Ethical Practices has beenestablished by businesses. It is published as part of theirmission statement and each employee must ensure that these are adhered to.The benefits of having good ethical behavior include:

Improved corporate imageIncreased customer loyaltyImproved staff motivation and Morale

The drawbacks may include:LawsuitsConflict within the organizationReduced profitsBriberyIt first needs to be stated that bribery to secure a contract(especially a contract with a public sector body) is against the law and severe penalties can result. However, it is sometimes deemed (wrongly) as a victimless crime and is often rationalized in terms of “if we don’t offer bribery,others will”. This is described as offering financial or other advantagesto perform a relevant function or activity improperly. Its intent is to influence the outcome of an event so as to gainbusiness or an advantage in connection with other businesses.Ethical issues arising from internal and industry practices.

- Examples• Treatment of customers - e.g. honouring the spirit as well as the letter of the law in respect to warranties and after sales service

• The number and proportion of women and ethnic minority people in senior positions• The organisation’s loyalty to employees when it is in difficult economic conditions• Employment of disabled people• Working conditions and treatment of workers• Bribes to secure contracts• Child labour in the developing world• Business practices of supply firms