Briefing Session on Bond and Sukuk Valuation for MASB members - 3 May 2011

Today, BPA Malaysia organised a forum in collaboration with the Malaysian Accounting Standard Board members attended by more than 49 people. It was a first time that we had the chance to meet up with the accounting fraternity.

The agenda for the function are as follows:

9.00AM – 9.30AM Registration (to be handled by MASB)
9.30AM – 9.35AM Opening address by Meor Amri Meor Ayob, CEO, BPA Malaysia
9.35AM – 10.00AM Introduction to Bond Pricing Agency Malaysia by Mohd Shaharul, Chief Business Officer
10.00AM – 10.30AM Coffee Break (on Level 5 RAM Training Cafeteria)
10.30AM – 11.30AM Pricing Methodology by Simon Ng, Chief Pricing Officer
11.30AM – 12.00PM Q&A Session

Below is an excert of my opening speech:


"Good morning ladies and gentlemen.


Welcome to this event organized by Bond Pricing Agency Malaysia with collaboration with MASB. Personally and well as on behalf of the company, I would to extent my appreciation to each and every one of you for being here today.


BPA Malaysia is a creature of regulation. We are under the securities commission under the Bond Pricing Agency Guidelines. When we were established back in 2004, it took 2 full years before we were recognized by the SC as a BPA after stringent assessment of our systems, methods and people. The authorities even allowed the industry affected by the BPA concept to have a say on us.


Although we passed this rite of passage, I always remind myself and my team not to be complacent. We have never taken this stamp of approval by SC for granted. Instead, our corporate tune has always been on winning trust. Since establishment, we have always engaged all the stakeholders to not only bring our massage across but also to listen to comments, suggestions and criticism. We would like to work with everyone and see whether we can help make their work easier."

Learning from Amazon's cloud collapse - Moral of the story? Technology is just an enabler and fallible

A lot of people did not know about a major shock that happened last week that had a big implication for businesses going forward. This article from CNN, View article...,you will learn that Amazon's cloud computing service went offline.

The concept of cloud computing is good. I wrote a piece in this blog earlier, http://myoneacademy.blogspot.com/2011/03/why-cloud-computing-will-be-next-new.html. However, a lot of people forget that technology is only an enabler and not a panacea for businesses of the future. One shouldn't put all their eggs in one basket. You must always have redundancy in place.

Below is an excerpt of the original article.

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Learning from Amazon's cloud collapse

(Mashable) -- Call it Cloudgate, Cloudpocalyse or whatever you'd like, but the extended collapse of Amazon Elastic Cloud Compute (EC2) is both a setback for cloud computing and an opportunity for us to figure out how to stop it from happening again.

Amazon may be best-known for its online shopping site, but it also has a substantial cloud computing business. It provides a scalable, flexible and particularly efficient solution for companies to store and deliver massive amounts of content.

Its model of only paying for what you consume was a radical innovation when it launched in 2006.

In fact, Amazon Web Services has been so affordable and reliable that thousands of companies from Foursquare to Netflix utilize the company's cloud computing technology and servers to run their businesses.

They put their faith in Amazon's cloud because there was no reason to think that it would falter. One of cloud computing's key tenants is reliability through redundancy of both servers and data centers.

Then on Wednesday, Amazon's northern Virginia data center started experiencing problems that caused major latency and connectivity issues.

The trouble was apparently due to excessive re-mirroring of its Elastic Block Storage (EBS) volumes -- this essentially created countless new backups of the EBS volumes that took up Amazon's storage capacity and triggered a cascading effect that caused downtime on hundreds (or more likely thousands) of websites for almost 24 hours.

The collapse took its share of victims. Among the most prominent companies affected were Foursquare, Quora, Hootsuite, SCVNGR, Heroku, Reddit and Wildfire, though hundreds of other companies big and small were affected.

Luckily, one of Amazon's most prominent customers, Netflix, didn't experience problems because it's built for the loss of an entire data center, while companies relying on Amazon's four other global data centers didn't experience too many issues.

A learning moment

FathomDB founder Justin Santa Barbara has a detailed post on his blog about what may be the biggest problem to come out of this week's collapse: Amazon's cloud redundancies failed to stop a mass outage.

Its Availability Zones are supposed to be able to fail independently without bringing the whole system down. Instead, there was a single point of failure that shouldn't have been there.

This week's disaster in the cloud is a reminder to startups to build redundancy into their applications and their own systems, but as Santa Barbara points out, most startups don't have the time or resources to engineer for multiple cloud systems (each Amazon global region/data center has its own rules and features, making a simple "switch" to another center difficult).

These companies trusted Amazon to keep them online, and Amazon failed to deliver.

Catastrophic issues will always occur, but in the pre-cloud era, downtime only affected a single computer or website. Today, a catastrophic event takes down thousands of websites, causing millions or even billions of dollars in lost revenue and productivity.

This incident is no reason for us to shun cloud computing, though. Its benefits (scalability, cost reduction, device independence, performance and more) far outweigh its cons.

We do need to take a hard look at how we structure our cloud infrastructure though and find new ways to either prevent single points of failure or quickly move content off failing clouds faster, especially as the world's computing power is consolidated into fewer and fewer systems.

Cloud computing is still in its infancy, and today's events make it clear that we still have a lot of work to do. It could be a whole lot worse next time if we aren't prepared.

Speaker biographies & agenda for the Islamic Finance Symposium on Sukuks: May 3rd, 2010

Speaker biographies & agenda for the Islamic Finance Symposium on Sukuks: May 3rd, 2010

Special Discounts - a good method to grab undecided customers

Recently I was shopping for a resort to host my company's upcoming retreat. The specification was simple: somewhere beautiful, requires a short plane ride and all inclusive. The resort that I had in mind was Tanjung Rhu Resort in Langkawi. I started inquires about the prices as well as the flight tickets.

Within a space of 4 hours, I have not only committed to the Resort but also booked the flight tickets through MAS. This is not the normal speed for company type purchases. So why the difference?

Special Discounts. Both the resort and MAS suddenly offered a special deal to the company that is nearly 40% and 70% lower, respectively over the standard price. The catch is; the company must commit within 4 hours or the special rates will disappear.

In this case, although I knew what I wanted, it is still not a foregone conclusion that I will go to Tanjung Rhu. Cost matters considerably. Nevertheless, the "special discount" by both the resort and MAS was too good to resist.

On reflection, I realised the power of "special discounts". Although your margin drops considerably if it is offered, the positive angle to it is that you will get a big booking. Sometimes it is not the marginal profit that matters. Bottom-line profit and effective use of company assets should also be looked into.

In the case of the resort, they have sunk cost in terms of the rooms. If a big booking comes in, it makes sense to take up the booking as it ensures a good proportion of the rooms will be occupied. Keeping strictly to the standard rates reduce your potential to monetize your operating assets.

In the case of MAS, taking a big booking now ensures that a number of seat on their plane will be taken. Now, the other seats can be priced at standard rate without the need to offer any further concessions.

Net position - Revenue and profit gain!

The problem of nationalizing the Toll Roads – who actually pays for it

The talk about the Government buying up the toll roads to enable users to use the roads for free is a very interesting topic which has many hidden problems. It is true that only the Government will have the necessary resources to buy such an asset but it is also true that such resources must come from somewhere.

The first problem is of asset allocation.

The suggested asset to be purchased is specific with specific contribution to the national economy as well as to a specific section of the population. One important question that should be asked: will it benefit the general population? Definitely NOT. Ask the people from Sabah, Sarawak, Kelantan, Terengganu, and Pahang. Do they get any direct benefit from it?

If you get the Government to allocate a substantial amount of asset for the purchase of the toll roads, some other parts of the national service machinery will have to suffer. Education? Medical? Security? Can we actually afford to give this subsidy when it will impact the general living standards of all Malaysians?

The second problem is maximization.

Free market economy dictates that resources should go to activities that can maximize its potential. Governments do not operate under the same mindset. If Governments have the same thinking, we would not have schools in the rural areas nor will we have security in the vast majority of towns in Malaysia as all will be concentrated in Kuala Lumpur. Let free market operate under the maximization axiom and let Government focuses on providing basis services. This two should not mix.

The final problem is cost.

It is not cheap to buy a major asset such as the toll roads. The Government will have to borrow and this will affect our economy. For the benefit of a few, the whole country will have to take the burden.

THIS IS NOT FAIR!

Sometimes it makes sense to shop for your car insurance

It is now coming up a year since I got my new car. As usual, a new car insurance (or renewal) will have to be purchased before the authority issues a new road tax for the car. But which insurer should one go to?
As expected, the current insurer sent me a reminder. Interestingly, the end-financier for the car also sent me an introduction to another insurer.

In Malaysia, the rate for car insurance is standard. What makes the difference in the service as well as the other add-ons that comes with it. In this case, the difference between the incumbent insurer and the new one is a whopping RM600! This prompted me to do my investigation further.

The first thing that I noticed is that the original insurer did not reduce the sum assured for the car. It assumes the value of the car is the same as what it was a year ago while the second one did its homework and only quoted what they deemed as the current value of the car now. The second thing that I noticed is that the second insurer has a lot of add-ons that does not seem to be cost effective for the buyer. The third and final thing that I noticed is that these two insurers did not offer the expected 10% discount. This could only imply that the purchase still went through an agent.

To give myself some certainty, I approached the insurer that I have been using for the last 10 years for a quote. Surprisingly, I was given a smaller quote due to the actual market value of the car. Moreover, the windscreen cover was also cheaper, also using the actual market price. Finally, an additional discount of 10% was given as I was considered a “walk-in” customer. All-in-all, the insurer that I finally signed up with was RM1,000 cheaper from the first insurer.

Moral of the story: do shop around even for car insurance. It does pay!