Foreign Exchange Risk Management Analysis

Foreign Exchange Risk Management Analysis Chapter 1 Introduction This chapter will introduce the reader to the subject at hand and why the chosen research area is of interest and relevance for further development. Finally, the chapter includes a problem discussion, which in turn ends up in the research purpose of the thesis. 1.1 Background of the Study The deepening of globalization process has led to an increase in foreign exchange transactions in international financial markets. This has determined a higher volatility of exchange rates, and, implicitly, an increased foreign exchange risk. There are many types of risks, but only few of them can bring losses as large as foreign exchange risk. In these conditions, the development of new modern and effective methods for managing foreign exchange risk becomes a great necessity for the players in international financial activity. Foreign exchange risk management is crucial for companies frequently trading in the international market. Empirical research shows that profits of multinational companies are affected by volatile floating foreign exchange rates. Nevertheless, small firms trading exclusively on their domestic markets also become increasingly exposed to foreign currency fluctuations. Actually, small firms depend on the volatility of the main currencies because many of them out-source their production to foreign countries. This means that they incur costs in a foreign currency (wages, taxes, material, etc.) and they also need to manage this exposure. Other small firms are exposed indirectly given that their strategic position can be affected by volatile FX rates. By definition, all entrepreneurial activities incur risks, and coping with risk has therefore always been an important managerial function. In recent years, however, risk management has received increasing attention in both corporate practice and the literature. This is particularly true for the management of financial risks, i.e. the management of foreign exchange risk, interest rate risk and other financial market risks. A major reason for this is the development of markets for derivative financial instruments. Forward contracts, futures, options, swaps and other, more complex financial instruments today allow firms to transfer risks to other economic agents who are better able, or more willing, to bear them. In 1971, the Bretton Woods system of administering fixed foreign exchange rates was abolished in favour of market-determination of foreign exchange rates; a regime of fluctuating exchange rates was introduced. Besides market-determined fluctuations, there was a lot of volatility in other markets around the world owing to increased inflation and the oil shock. Corporates struggled to cope with the uncertainty in profits, cash flows and future costs. It was then that financial derivatives foreign currency, interest rate, and commodity derivatives emerged as means of managing risks facing corporations. The interest in the potential vulnerability of multinational firms to foreign exchange rate risk is heightened by the wide currency fluctuations experienced during the last few decades and this issue has engendered a considerable amount of research (Muller, A., Verschoor, W.F.C. 2006). In India, exchange rates were deregulated and were allowed to be determined by markets in 1993. The economic liberalization of the early nineties facilitated the introduction of derivatives based on interest rates and foreign exchange. However derivative use is still a highly regulated area due to the partial convertibility of the rupee. Currently forwards, swaps and options are available in India and the use of foreign currency derivatives is permitted for hedging purposes only (Giddy et.al. 1992). 1.2 Problem Statement Transaction exposure to foreign exchange risk results from the effect of (unanticipated) changes in the spot exchange rate on the base currency value of foreign currency cash flows (contractual payables and receivables). Financial hedging of transaction exposure is implemented by taking an opposite position (to the spot position) on a currency derivate (such as forwards, futures and options) or by using money market hedging. In some cases, however, financial hedging may not be possible or it may be too expensive. For example, forwards, futures, and options may not be available for some currencies or for long maturities, and it may not be possible to obtain credit lines in certain currencies (which precludes money market hedging). This observation is particularly valid for countries where financial markets are rudimentary. If a firm facing (transaction) exposure to foreign exchange risk cannot indulge in financial hedging, it may resort to the operational hedging techniques of risk sharing and currency collars, which can be implemented by using customised hedge contracts embedded in the underlying trade contracts. Under a risk sharing arrangement, the benefits accruing to one party of a transaction as a result of a favourable change in the exchange rate (which is necessarily an unfavourable change for the other party) are shared by the two parties. A currency collar, on the other hand, is used to set a minimum value for the base currency value of cash flows at the expense of setting a maximum value. Thus, it involves a trade-off between potential loss and potential gain. The unpredictability of forex market may erode or even eliminate the profit margin built into an international sale at the time the sale was carried out, when selling on terms of weeks and even months. Foreign exchange rate keeps on fluctuating and they depend upon the market forces of demand and supply (Platt, G. 2007). Hedging refers to managing risk to an extent that makes it bearable. In international trade and dealings foreign exchange play an important role. Fluctuations in the foreign exchange rate can have significant impact on business decisions and outcomes. Many international trade and business dealings are shelved or become unworthy due to significant exchange rate risk embedded in them. Historically, the foremost instrument used for exchange rate risk management is the forward contract. Forward contracts are customized agreements between two parties to fix the exchange rate for a future transaction. This simple arrangement would easily eliminate exchange rate risk, but it has some shortcomings, particularly getting a counter party who would agree to fix the future rate for the amount and time period in question may not be easy. In India many businesses are not even aware that some banks do provide forward rate arrangements as a service to their customers. By entering into a forward rate agreement with a bank, the businessman simply transfers the risk to the bank, which will now have to bear this risk. Of course the bank in turn may have to do some kind of arrangement to manage this risk. Forward contracts are somewhat less familiar, probably because there exists no formal trading facilities, building or even regulating body. 1.3 Research Objectives and Questions There is a need to identify, quantify, and evaluate a firms risk exposure and to choose appropriate procurement strategies. The general objective of this study is to incorporate procurement and marketing decisions into a single hedging model, considering risk factors typically faced by firms in the textiles and garment industry. There are several reasons to explain why foreign risk management has gained in popularity over the last decades. The most important reason lies in the increased volatility of exchange rates, interest rates, and commodity prices, causing firms cash flows to become more uncertain. Secondly, firms tend to focus more on their core business, which makes them less diversified. As a consequence, the volatility of firms cash flows may increase. A third reason for the growing importance of foreign risk management can be found in the globalization of business activities, in which competition has increased and profit margins have declined. A final explanation we offer is the growing number of opportunities to manage risks. Based on the problem discussion our research objectives are formulated as follows: To review and critically analyse the practices adopt by the Indian exporters to hedge the forex risk. To evaluate the impact of foreign exchange risk on exporters and exports of a country like India To critically compile the issues faced by the Indian exporters in hedging foreign exchange risk. Based on the above stated research objectives the following research questions have been developed: RQ 1: How the export company determines foreign exchange risk? RQ 2: Which level the company can actively manage foreign exchange risk? RQ 3: How it can hedge the forex risk? RQ 4: What techniques are preferred by company in its forex risk management? 1.4 Relevance of Research Currently there is a scarcity of research papers about currency exposure management in companies in emerging markets. Theoretical studies like that of Copeland and Copeland (1999) are usually supported by the findings from developed countries (the USA, Canada, the UK). Therefore, the application of such studies might be complicated in developing markets. Researchers that analyze the foreign exposure management in companies often use large samples and questionnaires to evaluate the derivate use, and are successful in describing countries with well-developed markets. For emerging markets like India such quantitative approaches are extremely rare. Most often the situation with currency exposure management and application of derivatives by non-financial institutions is reflected in the newspapers. Yet, these articles are not academic papers and serve only as descriptions of the situation. Therefore, this study will be distinctive in several areas. First, it concentrates on India and will contribute to the increase in the number of academic studies about emerging markets. Second, it will contribute to the business community , as it will analyze the application of derivatives by exporting companies for hedging currency exposure and reveal the causes higher or lower popularity of derivatives. Third, it will apply the theoretical model which was developed based on the practice in developed countries, and test if the results from model application match the empirical findings in reality in India. 1.5 Outline of the Study This dissertation consists of five chapters (see Figure 1.1). In chapter one, a relative broad description is given in the beginning, providing the reader with a background and discussion of issues related to the problem area. This discussion lands in a specific research problem, which has been broken down into research questions. Chapter two gives a presentation of theories relevant for the research problem. Continuously, a description and justification of the methodological approaches chosen in this thesis is given in Chapter three. In chapter four the received empirical data is presented and contains an analysis of the collected data against the theory. Finally, conclusions and implications are presented in chapter five. Literature Review This chapter reviews the literature theory of foreign exchange risk management include the concepts of foreign exchange risks, its characteristics by different types, and hedge theory of foreign exchange risks. 2.1 Foreign exchange risk Whenever a company is running overseas business, the company is exposed to different categories of risk including commercial risk, financial risk, country risk and foreign exchange risk (Oxelheim 1984). Country Risk Foreign Exchange Risk Financial Risk Commercial Risk Figure2.1 The company risk Source: Oxelheim 1984, p14 Foreign exchange risk is commonly defined as the additional variability experienced by a multinational corporation in its worldwide consolidated earnings that results from unexpected currency fluctuations. It is generally understood that this considerable earnings variability can be eliminated-partially or fully-at a cost, the cost of Foreign Exchange Risk Management. (Jacques, 1981). According to Shapiro (2006), foreign exchange rate exposure can be defined as a measure of the potential changes in a firms profitability, net cash flow and market value because of a change in exchange rates. 2.2 The existing classifications of foreign exchange risks In the recent literature of foreign exchange exposure management, the types of exposures are usually summarized and simplified into three categories, translation, transaction, and economic ( Cowdell, 1993; Girnblatt and Titamn, 1998; Eitman et. al.,1998 and Shapiro, 2006). It is conventionally stated that the exposure to currency risk is categorized into three factors; seen below in figure 2.2. Figure 2.2 Types of currency risk exposure Source: Eun et al.,2007 Transaction Exposure The transaction exposure concept concentrates on contractual commitments which involve the actual conversion of currencies. A firms transaction exposure thus consists of its foreign currency accounts receivables and payables, its longer-term foreign currency investments and debt, as well as those of its foreign currency cash positions which are to be exchanged into other currencies. Until these positions are settled, their home currency value may be impaired by unfavorable parity changes. There exist four possibilities by which transaction exposure may arise (Eiteman 2007): When prices are stated in foreign currencies and the firm decides to purchase or sell goods or services. When borrowing or lending funds while contractual agreements on repayment are to be make in a foreign currency. When becoming a party to an unimplemented foreign exchange forward contract. When incurring liabilities or acquiring assets which are denominated in foreign currencies. The total transaction exposure consists of quotation exposure, backlog exposure and billing exposure, see figure 2.3: Figure 2.3 The life span of a transaction exposure Source: Eiteman et al., 2007 2.2.2 Economic Exposure The economic exposure, also called the operating exposure, measures any change in the present value of a company resulting from changes in future operating cash flows caused by unexpected changes in currency exchange rates. The analysis of economic exposure assesses the result of changing exchange rates on a companys own operations over coming months and years and on its competitive position in comparison with other companies. By measuring the effects on future cash flows related to economic exposure, the goal is to identify strategic moves or operating techniques that a company might wish to adopt in order to enhance its value in the face of unexpected exchange rate changes (Eiteman et al., 2007). Loderer and Pichler (2002) assert that firms often manage economic exposure by lending and borrowing in foreign currencies. He cites the following reasons for not hedging economic exposure: firms are unable to measure the size and the currency of future expected cash flows with much confidence, firms already hedge transaction exposure, firms consider that in the long term currency fluctuations offset each others. Surprisingly, the cost of hedging economic exposure is not an obstacle. 2.2.3 Translation exposure By consolidating its financial statements, a parent company with foreign operations must translate the assets and liabilities of its foreign subsidiaries, which are stated in a foreign currency, into the reporting currency of the parent firm. Basically, foreign subsidiaries must restate their local currency into the main reporting currency so the foreign values can be added to the parents reporting currency denominated balance sheet and income statement. The translation is usually used for measuring a subsidiarys performance(McInnes, 1971), providing accurate information for decision makers and investors (Ross, 1992; Bartov, 1995), and for both internal and external users (Sercu and Uppal, 1995). The common reason for translation from a foreign currency into the home currency is to meet the requirements of accounting regulations of home countries. External Hedging Methods As it is shown, the exposure to currency risk may involve current business transactions, future business transactions as well as financial statement translations. However, as there are factors or risk, so are there strategies for dealing with them. For companies, there are a number of external methods to use for the management of currency risk, namely the use of financial derivatives. The name derivative arises from the fact that the value of these instruments is derived from an underlying asset like a stock or a currency. By using these instruments it is possible to reduce the risks associated with the management of corporate cash flow, a method known as hedging. Financial market hedging instruments include (Butler, 2004): Fig 2.4: External Hedging Techniques 2.3.1 Foreign Exchange Forwards A foreign exchange forward is an agreement to buy or sell one currency at a certain future date for a certain price with a specific amount. It is the most common instrument used to hedge currency risk. The predetermined exchange rate is the forward exchange rate. The amount of the transaction, the transaction date, and the exchange rate are all determined in advance where the exchange rate is fixed on the day of the contract but the actual exchange takes place on a pre-determined date in the future. In major currencies, forward contracts can be available daily with maturities of up to 30, 90 or 180 days (Bodie Marcus 2008). A survey by Belk and Glaum (1990) indicates that the most common method used to hedge exchange rate risk is the forward contract. An empirical study of Pramborg (2002), also demonstrates that firms can be fully hedged with forward contracts. 2.3.2 Currency Futures In principle, a futures contract can be arranged for any product or commodity, including financial instruments and currencies. A currency futures contract is a commitment to deliver a specific amount of a specified currency at a specified date for an agreed price incorporated in the contract. The futures perform a similar function to a forward contract, but it has some major differences. Fig 2.5 Currency Futures The specific characteristics of currency futures include (Pike et.al., 1992): They are marketable instruments traded on organized futures markets. Futures can be completed (liquidated) before the contracted date, whereas a forward contract has to run to maturity. They are relatively inflexible, being available for only a limited range of currencies and for standardized maturity dates. The dealings occur in standard lot sizes, or contracts. They require a down-payment of margin of about 5 percent of the contract value, whereas forward contracts involve a single payment at maturity. Futures are usually cheaper than forwards contracts, requiring a small commission payment rather than a buy / sell spread. Table 2.1 provides a clearer summary of the major differences between forward and futures contracts. Table 2.1: Major Differences between Forward and Futures Contracts Forward Contracts Futures Contracts Customized contracts in terms of size and delivery dates Standardized contracts in terms of size and delivery dates Private contracts between two parties Standardized contracts between a customer and a clearing house Difficult to reverse a contract Contract may be freely traded on the market Profit and loss on a position is realized only on the delivery date All contracts are marked to market- the profit and loss are realized immediately. No explicit collateral, but standard bank relationship necessary Collateral (margins) must be maintained to reflect price movements Delivery or final cash settlement usually takes place. Contract is usually closed out prior to Maturity Source: Hull (2006), Moffett et al (2006) and Solnik and McLeavey (2004). 2.3.3 Currency options A foreign exchange option which is different from currency forward contracts and currency futures is to give the holder of the contract the right to buy or sell a certain amount of a certain currency at a predetermined price (also called strike or exercise price) until or on a specified date, but he is not obliged to do so. The seller of a currency option has obligation to perform the contract. The right to buy is a call; the right to sell, a put. There is option premium needed to pay by those who obtain such a right. The holder of a call option can benefit from a price increases (profit is the difference between the market price and the strike price plus the premium), while can choose not to excise when the price decreases (locked in loss of the option premium). Vice versa is for the holder of a put option. For the advantages of simplicity, flexibility, lower cost than the forward, and the predicted maximum losswhich is the premium, the currency option has become increasing popular as a hedging devise to protect firms against the exchange movements. Whenever there is uncertainty in the size of cash flows and the timing of cash flows, currency option contracts would be superior to traditional hedging instruments such as forward contracts and futures contracts. Grant and Marshall (1997) examined the extent of derivative use and the reasons for their use by carried out surveys in 250 large UK companies, found that a widespread use of both forwards and options(respectively 96% and 59%). The pointed that comparing to the primary reasons for the use of forwards were company policy, commercial reasons and risk aversion, a good understanding of instrument, and price were prominent while the primary reasons to use option for company management. 2.3.4 Currency Swaps Currency swaps are a hedging instrument for which two parties agree to swap a debt denominated in one currency for that in another currency. For example, an agreement between two firms to swap their debts of which one is denominated in Euro and that in US dollar (Leger and Fortin, 1994). In order to explain the use of currency of swaps, a Japanese firm that has exports to Australia is given as an example. The Japanese firm wants to protect its Australian-dollar receivables by using currency swap to match inflows in one currency with outflows in a foreign currency (natural hedging). Assuming the Japanese firm is not well recognized in the US financial markets, it may obtain funds from a domestic bank to swap with another firm that has dollar-denominated debt. This process is carried out by the swap dealers (usually banks) as an intermediary. The common objective of this type of transaction is that firms want to alter various future currency cash flows in its schedules into a particular currency for which its future revenues will be generated (Eiteman et.al 1998). The preference of particular currency is caused by several factors, such as, capital market segmentation, differences in regulation governing investment by institutional investors and asymmetry in the tax treatment of interest income and capital gains/losses (Jacque 1996). Although there are other types of swaps involving foreign currencies, such as, foreign currency forward swaps, plain vanilla, and a three-way back-to-back currency swap, they are designated primarily for hedging interest rate exposure. 2.4 Internal hedging methods For the reason that external hedging techniques with derivatives to manage foreign exchange exposure are often costly, many multinational firms would rather turn to consider using internal hedging devices such as Michael (2006): Currency matching, which involves pairing suitably a multinational firms foreign currency inflows and outflows with respect to amount and timing Currency netting, which involves the consolidated settlement of receivables, payables and debt among the subsidiaries of a multinational firm Invoicing in domestic currency, which reduces transaction risk primarily related to exports and imports. 2.5 Fundamental Philosophy behind Hedging We have presented that authors embrace hedging as insurance, and hedging as a value-enhancing tool. We believe the common view of hedging can be summarized as follows: Hedging is one of the three most fundamental reasons for the existence of the financial market, alongside speculative and arbitrage activities (JÃ ¼ttner, 2000). The hedging industry is evolving just like the rest of the business world. In fact, there is no definite set of tools or technique that can define hedging. As the world changes, new hedging mechanisms are derived; and as time passes, these mechanisms are refined and evolve into something new that can be better applied to the contemporary commercial marketplace (Batten et al, 1993; Faff and Chan, 1998; Alster, 2003;). Hedging is not a way of making money, but to assist management in better managing corporate revenue through reducing the corporate exposure to volatility in the foreign currency markets (Nguyen and Faff, 2002, 2003a; Anac and Gozen, 2003; Alster, 2003; De Roon et al., 2003; and Dinwoodie and Morris 2003). When used prudently, hedging can be effective insurance as well as a value-enhancing exercise for corporations. Effective hedging programs have been proven to allow corporations to minimize or transfer their foreign currency exposure. The diminished exposure to foreign currency fluctuations allows more stable and predictable cash-flows, notably in terms of revenue. As a result, firms are then capable of making more comprehensive financial plans, including more reliable estimations on tax, income after tax and dividends payable to shareholders. It is believed that a dividend payout is often of significant appeal to long-term, current or prospective shareholders (Nguyen and Faff, 2002, 2003b; Alster, 2003; Anac and Gozen, 2003; De Roon et al., 2003; and Dinwoodie and Morris, 2003). The three main questions surrounding hedging: when, what and how to hedge are shown in Figure 2.2 below as a decision tree. How to Hedge? Hedge Ratio 10% 50% 100% OR Any Ratio between 0.1%-99.9% What to Hedge? When to Hedge? Financial Tools Forward Futures Options Swap Hedge Under Currency Risk Exposure Non-Financial Tools Leading Lagging Fully participating market movements No Hedge Fig 2.7 Generic Hedging Decision Tree The question to hedge or not to hedge is a complex and controversial one in financial risk management. Natural hedges carry no explicit out of pocket cost and intrinsically form a better offset to economic exposures and so generally are preferred to synthetic hedges. Synthetic hedging can be likened to insurance, where the company incurs an explicit cost to reduce the risk or volatility inherent in its business results. The cost must be weighed against the risk-reducing benefits of the transactions, taking into account their precision and effectiveness. The real drivers of any hedging decision are 1) what is the risk tolerance of the company; and 2) what cost is acceptable for entering into transactions to reduce or eliminate the risk. Foreign currency-denominated activities engaged by Indian Exporters Expected payments of foreign exchange from trade Expected receipts of foreign exchange from trade Liabilities Assets Debt Debt Equity Net trade foreign exchange exposure (before derivates) Net balance sheet foreign exchange exposure (before derivatives) Foreign exchange Derivatives Net foreign exchange exposure (after derivatives) Fig 2.8: Decision to Hedge Foreign Currency Exposures Some managers feel strongly that hedging either should always be done or never done, and their approaches vary tremendously. Indeed, there is an academic perspective that hedging is never appropriate since risks like FX exposure represent diversifiable risks from the shareholder perspective, and thus, the cost is wasted effort for shareholders. Some managers share this view, but most multinational businesses of significant size engage in some financial hedging transactions. Major arguments for and against hedging are displayed in Table 2.2 Table 2.2: Theoretical Arguments on Hedging For Against Managing earnings volatility for FX risk can reduce a firms potential cost of financial distress. PPP and CIP imply compensating levels of FX rates and prices. Firms in financial distress face higher contracting costs with customers, suppliers, and employees. FX rates even out over time. Firms that hedge and reduce their earnings volatility pay less taxes over the long run if tax rates increase the income levels. With transactions costs, hedging is a losing bet on average. Managing FX risk and smoothing earnings volatility has a positive effect on stock price and shareholder value. Shareholders can diversify their own portfolios to compensate for FX risk.

Examining the Use of Social Media and Its Impact on Corporate

Title Examining the Use of Social Media and Its Impact on Corporate Commerce Assessment A, Part One – Evaluating the Pros and Cons of Different Social Media Sites Identify the pros and cons for each site. Blogger Con: Security – possible transmission of untrustworthy links Blogger Con: Too much information – public disclosure Blogger Con: Ability to post relevant, up-to-the-minute news and updates Blogger Pro: Ability to create a community Blogger Pro: Ability to incorporate elements of other social media sitesBlogger Pro: Mass customization – widespread use among target audience Blogger Pro: Ability to receive instant feedback from product demographics Digg Con: Not relevant to the niche audience Digg Con: Ability to receive instant feedback from product demographics Digg Con: Mass customization – widespread use among target audience Digg Con: Instant communication to large groups Digg Pro: Media convergence – showing text, screen shots, vid eos Facebook Con: Limited visual presentation of productFacebook Con: Ability to filter comments via an approval mechanism Facebook Con: Security – possible transmission of untrustworthy links Facebook Pro: Ability to create a community Facebook Pro: Ability to incorporate elements of other social media sites Facebook Pro: Mass customization – widespread use among target audience Facebook Pro: Instant communication to large groups Facebook Pro: Ability to receive instant feedback from product demographics Facebook Pro: Mobility – viewing on a cell photo adds to the audienceFacebook Pro: Ability to post relevant, up-to-the-minute news and updates Facebook Pro: Media convergence – showing text, screen shots, videos Flickr Con: Limited access from target audience Flickr Con: Ability to receive instant feedback from product demographics Flickr Con: Mass customization – widespread use among target audience Flickr Pro: Not a good way to build buzz in the beginning Flickr Pro: Limited visual presentation of product Metacafe Con: Ability to receive instant feedback from product demographicsMetacafe Con: Instant communication to large groups Metacafe Con: Ability to receive instant feedback from product demographics Metacafe Pro: Media convergence – showing text, screen shots, videos Twitter Con: Ability to filter comments via an approval mechanism Twitter Con: Character Limits Twitter Con: Limited visual presentation of product Twitter Con: Security – possible transmission of untrustworthy links Twitter Con: Ability to receive instant feedback from product demographics Twitter Pro: Instant communication to large groupsTwitter Pro: Mobility – viewing on a cell photo adds to the audience Twitter Pro: Ability to post relevant, up-to-the-minute news and updates Twitter Pro: Ability to receive instant feedback from product demographics YouTube Con: Ability to filter comments via an approval mechanism YouTube Con: Secu rity – possible transmission of untrustworthy links YouTube Pro: Ability to incorporate elements of other social media sites YouTube Pro: Mass customization – widespread use among target audience YouTube Pro: Media convergence – showing text, screen shots, videosAssessment A, Part Two – Examining the Use of Social Media and its Impact on Corporate Commerce Recommend which social media site Master Dynasty should be launched on. Blog, Twitter, and Facebook. Assessment B – Examining the Use of Social Media and its Impact on Corporate Commerce How can social media sites help us build our brand? Centralizing social site, and create links to our other sites will build up our brand. How can we best reach our target audience? Gather our quality followers instead of quantity, we can choose our niche in our target audience based on profiles.How can it help our corporate commerce to show our audience that we're human beings? Show audience we are not just here to sell, but are gamers to. How does social media help give people a reason to buy from us? Targeting relevant customers and marketing our brand turns selling into participating online community. How can we use customer comments to improve our corporate commerce? By helping, us keep our customers happier by responding to their individual needs after receiving instant feedbacks of comments and posts. Â © 2011 Toolwire, Inc. All rights reserved.

A Process of Bridge Designing - Free Essay Example

Sample details Pages: 11 Words: 3408 Downloads: 1 Date added: 2019/08/08 Category Engineering Essay Level High school Tags: Mechanical Engineering Essay Did you like this example? When designing a bridge there are multiples of different things that make if function correctly. From the actual structure of the bridge to the material that is used. All of these things come into play at some point. Don’t waste time! Our writers will create an original "A Process of Bridge Designing" essay for you Create order There are many different types of structures bridges can be those are Arch, Girder, Truss, and Suspension. There are also many types of materials like steel, wood, and plastics. There are many ways to make good bridges and every company or place that builds a bridge does it with a different reason for that particular structure or material. If we were to build bridges the same way every single time we built a bridge there wouldnt be any because it takes different kinds to fit certain areas. All of the areas I will go over will somewhat lap over each other because with a bridge everything is interdependent meaning that if one side of the bridge fails it is all going to fail because everything is particularly placed. Joints are also a big factor in bridge design joints are what holds all of the individual pieces together there are multiple different ways to do this. When using cables on a bridge the amount of tension or if using beams the amount of stress that can be put on certain parts is critical. If there is too much tension of stress that can cause bridges to collapse. The five stages of the design process can also help to make sure bridges are built with precision and that it will hold what it is supposed to. Bridges are used thousands and thousands of times a day all over the world. One reason bridges are able to hold so much weight and their structure designs only have gotten better over the years because of benchmarking companys use existing bridge designs to then make their bridges even stronger and are able to use even more amazing structures because everyone has a different way of building bridges all over the world. What kind of structure makes a good bridge. There are many different types of structures bridges can be those are Arch, Girder, Truss, and Suspension. Arched bridges have a curved shape to them. These bridges are very durable and can hold a lot of weight. They are a limited length bridge making them harder to build in large places without more anchor points. Girder bridges have the roads on top of them and are supported by columns or girders giving them the name. Truss bridges are made of different connected elements to for triangular shapes. Suspension bridges have cables ran to the top of suspenders therefore giving the road below extra support using its own structure. All of these bridges can be made of different materials some are made of concrete like girder bridges. But others are usually made of steel like arch, truss, and suspension giving it more ability to support itself in different shapes. Over passes and most railway and city highways are made with the girder structure. While the Brooklyn Bridge and the Manhattan bridge use the suspension structure. These bridges are lightweight and strong meaning they can handle a lot of weight and stretch a lot further than the regular bridge. The disadvantage of this bridge is that they are expensive to build and   move in the wind which can be a problem when people pass over them thinking the bridge might fall or not be sturdy. Permanent bridge structures are usually made out of steel with concrete anchoring the ends and center points they are maintained at a high level so that they have the ability to last a long time. Through Bridges have the structure above formation level while semi-through bridges have the super structure only partly above the formation level. There are also structured bridges on flood level submersible bridge structures make it able that water can go over the bridge on unimportant roads and they are low cost. Out of all of these bridge structures suspension bridges are the best structure because of their ability to hold a lot of weight. Thats why they are some of the most used structures for large bridges like the Manhattan. The strength of the structure also depends on the quality of the material being used if you are using cheap steel then your bridge might be prone to stress cracks in the steel especially if it is being used in a very cold environment. All of this can be solved by using the steps in the design process when brainstorming you could make your bridge with steel and a truss or suspension structure giving it great strength. There are hundreds of different kinds of bonding fastening and joining methods used on bridges. This is what the bridge depends on most for its support if the bridge cant stay together properly then its not a bridge. One major way to hold wood bridges together or anything wood are screws they come in different lengths and sizes to hold all your pieces together. Soldering is an option used on smaller pieces of metal mostly in electronics and circuit boards. Most of the bridges use welds when needing to join two or more pieces of steel together. But there are other choices like riveting which is taking two pieces of metal and punching through them and adding a metal fastener, but this is usually used on sheet metal and would be difficult for large pieces of steel.   On a truss bridge the pieces push against each other to add support these pieces of steel would be welded together. On a smaller scale of bridge that we are building we will be using glue. There are multiple different typ es of glue. White craft clue being the most common found in school classrooms and is somewhat flexible. Wood glue is more rigid and a stiffer hold than craft glue but isnt as flexible. The next glue is super glue, this glue has very strong adhesive properties and works good for Bolsa wood projects. Next is hot glue this is a better version of the white craft glue sets up strong and holds good strength. There are many more glues but those are the most used for small projects and shows which you should use for what you need. Out of all these methods superglue and got glue will work best for our project because they have the strong adhesive abilities along with the strength needed to hold everything together. Bridges come in all shapes and sizes longer bridges are harder to handle because it relies on more man power and more mechanical power. On bridges that are 50 to 250 meters the Balanced cantilever method. Which is building the bridges in segments and casting it in place. This is great on cable-stayed bridges because they are attached with strong piers that are usually concrete. Cast-in-situ bridge construction is a flexible method where shapes that are irregular or are unusual can be constructed. These pieces are made at a different place then installed once they are in the exact place they are meant to be in. Turning large complex bridges into something that can be handled with less mechanical and man power. Precast construction methods are pre made parts that are then assembled once they are at the location. A lot like cast-in-situ method these parts are usually beams, decks, or segmental decks. These are set in place by a crane once transported many parts are only small sections of a much larger piece. Span by Span method of construction is where decks are began at one point and piece by piece are laid throughout making one whole bridge. This is the most economically beneficial method and is used all over the world. This method is also safer and has had many advancements in the way they are constructed. The Incremental Launching Method of construction is for continued segments of bridges that are usually concrete or steel. These bridges are longer than 250 meters and can be even longer than that. The bridge is built section by section putting pressure on each anchor point making this a very strong design. There are many things that can affect a bridge like the scale, nature of the soil and also local weather. These can make all the difference by making sure the anchor points are all str ong. If the soil erodes the bridge could collapse causing major issues. Beam bridges are a very simple design two vertical beams are put into the ground while one horizontal beam is then put on top. The only issue with a bridge like this is it must be a short bridge because force is applied to the middle of the horizontal beam causing tension. They are in expensive and easy to build but must only be built in short segments. The super structure of a bridge is what holds it all together. It is your trusses for your truss bridges or girder for girder bridges. The super structure of the bridge all begins with what bridge you are wanting to design. The superstructure is what holds all of the weight that will be crossing over it. The deck of the bridge is what is used for the road. This can be concrete or wood whatever the preferred material being used is. Most of the larger bridges are made with concrete decks because they are able to hold more weight over longer periods of time. The decks are supported by large beams which are usually anchored into the piers. Bearings are a large part of a bridges structure they help evenly disperse the load through the bridges anchor points or piers. The bearings help the bridge move horizontality with the way the decks are facing giving for a smoother structure. The type of bearing depends on multiple things like weight, geometry, and tolerances. Piers are the structures that hold the bridge up they are vertical to the bridge usually places either under or in between the decks supporting the load above them. Piers are made from steel with concrete surrounding into the soil giving it added structural support. The type of pier depends on structural connectivity, and the shape of the section. The structural connectivity of the pier is labeled as monolithic or cantilevered. When talking about shape they are labeled as hexagonal, hollow, solid, round , octagonal or, rectangular. Abutments control the earth behind the bridges structure. Usually placed under the oncoming point of the bridge.   Wingwalls are extensions of the abutments and also help retain the earth coming from beneath the bridge. Guardrails and hand rails are added to bridges to help from cars driving off the side or for walk ways over the bridge for people to grab. These are all ways of different structures and designs and ways to build bridges when bringing this into a wooden model bridge isnt much harder the same designs can be used. From these designs a truss bridge will be best for this project. With each individual piece pushing against the other force helps the bridge stay strong. The pros of working with balsa wood on this project is that its flexible and can support a bit of weight for being wood. This will help with the force that is applied to the top. Fishing sting can also be applied to the bridge adding a suspension like structure. This also supports the down force by pulling down on the vertical supports adding a helping force. With having multiple piers in this case will help the bridge from collapsing from the middle this force will be absorbed by the piers. Using the different types of bridge structures and designs will add extra support to the bridge. For joining and bonding methods wood glue will be the best for the deck beca use it is very strong and the pieces wont break from each other. Using the craft glue for points that have great forces helps the flexibility of the bridge giving added support to the forces. If we were able to use metal in this project the strengths of the bridge could be much better if we used steel the joints could be welded together. The bridge could also have even more options of support like cables. if we were to use a stacking pattern of balsa wood sticks for the deck that would be greater support because the forces of the stacked pieces would push outwards towards the force that is applied. The cons of using balsa wood are also that it is inconsistent in density which can lead to the bridge breaking in certain places just because of the density of the wood. Bass wood could be a better alternative to balsa wood because it is heavy, and is also stronger and does better with tests of force. Lateral bracing is also a great way to keep the bridge from twisting because of the properties of balsa wood it is flexible which is a pro and a con in it self. With shorter pieces used in the construction of the bridge can handle more applied force because it is a shorter piece and the weight can be more evenly distributed without sagging. The more triangles that can be used in the structure will be better because they are able to bear more weight. Triangles also hold their shape better than squares because they only have 3 supporting points that push on each other. The truss bridge structure also is great for a project like this because it is a short bridge and a simple design doing what its supposed to, hold force that is applied to the top. Balsa wood is also different in different climates. If the wood is wet it is going to be more flexible but the glue might not stick. If the wood is dry it is more sturdy but is also prone to cracking under force. Building different bridges and testing them will also help find the best design and strengths. Stage four of the design process uses prototypes to find which one best fits what you are designing also eliminating failures when the final product is made. If we were to make our bridge a beam bridge it would not support the weight as much as another bridge because all the force is applied to the center causing breaking in the middle. Hot glue will also help hold all of the deck pieces together and the piers adding flexibility in the joints when the force is applied. All of this is applied to everyday bridges when one piece is pushing the other it is supporting the force above it which are usually cars or people walking over the top of them. The structure of these bridges havent changed a lot over time because these structures support the most weight. Bridges that have irregular shapes or are bent are usually more for aesthetic purposes meaning that those bridges dont usually carry a lot of weight over the top of them this would be a bad design to use in our project because they have no functional purpose. Aesthetics have no use in function therefore dont have a big place in the design of bridges that need to function more than they need to look good. After looking at everyones designs taking the strongest points from each will help our bridge be the strongest. In stage two of the design process concepts and ideas are thrown out by taking the strongest parts of each of these concepts or ideas you can find what makes the strongest bridge. When building the supports or anchors for the wooden bridge they should be made out of short pieces to keep force applied to all parts as should the bridge. With force applied to all parts it is going to handle more weight over all. If the bridge can be supported in the middle it will have the best chance of not breaking because that is where most of the force will be applied. Super glue will not be a good use in this project because it can break easily when force is applied to the joint. A better alternative to this would be using wood glue. The popsicle sticks are strong and should be used for the deck as support to the force because they are stronger than the balsa wood. If the fishing line is twisted together it can be used as cable for suspending   which helps take away some of the pressure that is also coming from the ends of the bridge. This is used on bridges like the Manhattan bridge because it is a long segment of bridge and has a lot of everyday traffic and force that is applied. It is also flexible and helps with strong winds. End posts wont really help in this project because the force is being applied to the center of the bridge if the force was being applied evenly throughout the whole bridge then this would be a good way to add support. This helps in other bridges that are used for everyday purposes because cars are going from one end to the other when the force is applied to the center you dont get the same effect and the results will not be the same. Having a good base structure before adding the deck because this will be the main structure that takes the force. The overall design of the bridge should have a truss design on the side using triangle to keep the force equal through the bridge. There should be a lateral brace or anchoring point in the middle so that the applied force isnt just flat wood. This is taking the basic design aspects of normal truss bridges and arch bridges. Keeping all of the pieces shorter will help by not snapping the pieces and keeping the overall length shorter. There should be three anchoring points or more throughout the bridge so that there are multiple points supporting the bridge and not just all the force on one point. Overall the bridge should be able to hold more than the minimu m force of 30lbs. the weight of the bridge should also be very low if only using glue in the necessary joints and not using excess wood where it will not help the force. If there were one material that would be better to do this project with I believe it would be steel because it has better strength properties and shows what kinds of stress that real bridges go through with the forces of everyday wear. There would also be more ways of joining the materials other than glue because most glues used on projects do not reflect the glues or other bonding or joining methods in actual bridge design. After the research of different joining and bonding methods and different types of structures to use for bridges. Truss and arch bridges because they can hold an ideal amount of weight. These are also basic bridge designs that have been perfected thought-out the years. These designs have the best possible outcome of strength to weight ratio. Using the triangles on the side as trusses and multiple lateral braces and anchor points we will be able to disperse the force throughout the whole bridge. Using the popsicle sticks as the deck of the bridge there will also be more surface area for force to be dispersed. Also using the hot glue and the wood glue will give us the best joining and bonding methods with the hot glue flexibility and the strength of the wood glue for the lateral bracing. By not using super glue the bridge will be less prone to cracking at the joints with the force applied. By possibly using the fishing line we can have suspension to the major points of force keeping th ese points from snapping with the applied force. If all of these techniques are used in the design process then the bridge will be successful if multiple different designs are not used and the wrong structure and bonding methods are used then the bridge will be unsuccessful. These same steps are followed with everyday bridges multiple different designs are researched and hand-picked to fit the project guidelines If the steps arent followed then the same outcome will show. Testing of a mock bridge will also help find spots of failure before the final product is tested.

Female Genital Mutilation A Violation Of Human Rights

The World Health Organization (WHO) defines female genital mutilation (FGM) as â€Å"all procedures which involve partial or total removal of the external female genitalia or other injury to the female genital organs whether for cultural or any other non-therapeutic reasons.† There are four classifications of female genital mutilation: type I consists of the removal of the prepuce; type II is the removal of the clitoris and labia minora; type III is the removal of the external genitalia and the restricting the vaginal opening; and type IV encompasses all the other procedures to the female genitalia, such as pricking, stretching, scraping, piercing, or cutting. Human rights activists argue that female genital mutilation is a violation of human rights deeply rooted in gender inequality and discrimination. On the other hand, others argue that the practice is supported by fundamental cultural traditions that should not be banned. In this paper, I will be focusing on the practice of female genital mutilation, its harmful effects, and how the rights of women and girls trumps the right to culture. The practice of female genital mutilation predates Islam and Christianity, dating back to 2000 years ago in Ancient Egypt, where it was believed to be a sign of aristocracy. Today, female genital mutilation promotes gender inequality and discrimination against women. Now embedded in many cultures, female genital mutilation is necessary for marriage. For the 28 African countries and 130Show MoreRelatedFemale Genital Mutilation And Human Rights Violations2013 Words   |  9 PagesWhen a human rights violation occurs, the violated individual is deprived o f his or her basic freedoms—the right to life, liberty, and security. When individuals experience human rights violations it is not of their own volition. An individual does not choose to partake in the wrongdoing and thus did not give explicit permission or consent to the practice. While the concept of consent is a fundamental principle in western societies, all communities and people are vulnerable to human rights violationsRead MoreFemale Genital Mutilation: A Violation of Human Rights Essay3246 Words   |  13 PagesFemale genital mutilation (FGM) is an ancient traditional non-therapeutic surgical procedure that involves total or partial removal of the external parts of female genitalia. This paper aimed to define and classify FGM, identifies the prevalence, describes reasons for performing the practice, and concentrates on the problems associated to this practice with regard to women’s health, religious beliefs, and socio-cultural, behavioral and moral consequenc es. Researches and survey reports that the globalRead More Female Genital Mutilation: A Gross Violation of Human Rights4218 Words   |  17 PagesFemale Genital Mutilation (FGM) has often been viewed as a rite of passage for women in various countries within Africa, South America, the Middle East and Asia. However, due to societal norms and pressures, whether it based in culture or religion, forces women to partake in a practice that has serious health risks and takes away the rights of women who believe they have no other choice. The Universal Declaration of Human rights are applicable to all member states including most of the countriesRead MoreThe Contribution Of The Enlightenment Era1725 Words   |  7 Pagesand philosophy the idea of human rights was first introduced. Philosophers such as Thomas Hobbes and John Locke wrote articles regarding the role of the individual and the role the individual plays in society. They elaborated on how governments are supposed to respect and honor the inalienable human rights attained during birth. The ideas that were presented during this time period have continued to have an impact in today’s society and provide an understanding of how humans around the world, regardlessRead MoreFemale Genital Mutilation And Women1250 Words   |  5 PagesBackground: Female Genital Mutilation refers to several manners of conducting operations of women and girls, involving the partial or total removal of external genitalia. This practice is considered a traditional practice amongst many people and communities throughout the world. While the practice has been ongoing for centuries it has been deemed a human rights violation on the grounds that it inflicts harm on females, including damaging them in a physChapter one: Introduction 1.1 Background: Female GenitalRead MoreFemale Circumcision Or Female Genital Mutilation1551 Words   |  7 PagesFemale circumcision or Female Genital mutilation is a term utilized to describe a wide range of traditional practices in relation to female circumcision. This study addresses the practice within the Maasai communities of Tanzania and Kenya, Africa. This study will address this practice by looking at the historical and cultural context of the people, procedure, the various beliefs in the world, and within the community. Chapter One: Introduction 1.1 Background: Female Genital Mutilation refersRead MoreFemale Genital Mutilation : When A Cultural Practice Develops Clinical And Ethical Dilemmas861 Words   |  4 PagesGibeau, Anne M. 1998. Female Genital Mutilation: When a Cultural Practice Generates Clinical and Ethical Dilemmas. Journal of Obstetric, Gynecologic Neonatal Nursing 27 (1): 85-91. Female genital mutilation may be currently reaching a changing point in its history. It is a cultural practice that is considered to have long standing importance but female genital mutilation presents to most developed nations a need for education and a need to clarify ethical dilemmas regarding it. In most casesRead MoreFemale Genital Mutilation Essay1562 Words   |  7 PagesFemale Genital Mutilation Introduction Pain, shame, lack of ability to reproduce. Marie, who suffers from each of these symptoms, is one of the many women from Africa who have suffered from female genital mutilation. When Marie was only two years old, she had her clitoris and labia cut off. Since then, she has moved to New York yet is still suffering from the many consequences you get from female genital mutilation. Female genital mutilation, also known as FGM, is a very common procedure primarilyRead MoreFemale Circumsion1179 Words   |  5 Pagessituation where lives of people are put at risk. An eminent practice which is taken into attention is female genital mutilation. This writing shall discuss clashes between human rights and cultural relativism with my personal stance about these two ethical dilemmas. Female genital mutilation is considered as unlawful act by many people while in several cultures it is a common cultural practice. â€Å"Female circumcision is mainly carried out in western and southern Asia, the Middle East and large areasRead MoreFemale Genital Mutilation And Women Essay2346 Words   |  10 PagesFemale Genital Mutilation in Egypt The term female genital mutilation or cutting refers to â€Å"all procedures involving partial or total removal of the external female genital or other injury to the female genital organs for non-medical reasons† (WHO, 4). The practice of female genital mutilation dates back over 2000 years ago, and is thought to have originated in Egypt as a sign of nobility. However, the practice now holds a deeply rooted inequality between the sexes and remains a severe form of discrimination