Quadrant Model of Reality Book 5 Sociology

Sociology Chapter

In economics courses you will learn about the four tiger economies. A tiger economy is the economy of a country which undergoes rapid economic growth, usually accompanied by an increase in the standard of living.[1] The term was originally used for the Four Asian Tigers (South Korea, Taiwan, Hong Kong, and Singapore) as tigers are important in Asian symbolism, which also inspired the Tiger Cub Economies (Indonesia, Malaysia, Thailand, and the Philippines). While economics courses will talk about the four tiger economies there is also the tiger cubs the wolfs and the lions

The Four Asian Tigers or Four Asian Dragons is a term used in reference to the highly free-market and developed economies of Hong Kong, Singapore, South Korea, and Taiwan. These nations and areas were notable for maintaining exceptionally high growth rates (in excess of 7 percent a year) and rapid industrialization between the early 1960s (mid-1950s for Hong Kong) and 1990s. By the 21st century, all four had developed into advanced and high-income economies, specializing in areas of competitive advantage. For example, Hong Kong and Singapore have become world-leading international financial centers, whereas South Korea and Taiwan are world leaders in manufacturing information technology. Their economic success stories have served as role models for many developing countries,[1][2][3] especially the Tiger Cub Economies.

The Big Four is the colloquial name for the four main banks in several countries, where the banking industry is dominated by just four institutions and where the phrase has gained currency. Internationally, the term "Big Four Banks" has traditionally referred to the following central banks:[1] United States The Federal Reserve China The People's Bank of China Japan The Bank of Japan European Union The European Central Bank The bank of england is a possible fifth

Pasteur's quadrant is a label given to a class of scientific research methods that both seek fundamental understanding of scientific problems, and, at the same time, seek to be eventually beneficial to society. Louis Pasteur's research is thought to exemplify this type of method, which bridges the gap between "basic" and "applied" research. The term was introduced by Donald Stokes in his book, Pasteur's Quadrant. The model is based on two axes once again Square 1: Quest for fundamental understanding and no consideration of use.Pure basic research(Bohr). The first square is not the doer, but is more mental. This is the idealist Square 2:No quest for understanding and no consideration of use. The guardian is very conservative and tends to want things to be the way they are Square 3: No quest for understanding and consideration of use. (Edison) The third square is the doer. This is the artisan who is not abstract and mental, but is a doer. Square 4: Quest for fundamental understanding and consideration of use.Use-inspired basic research (Pasteur)- This is the rational who is abstract and utilitarian, looking for use. The rational is a doer.

Daniel Denison’s model (1990) asserts that organizational culture can be described by four general dimensions – Mission, Adaptability, Involvement and Consistency. Each of these general dimensions is further described by the following three sub-dimensions:

Mission - Strategic Direction and Intent, Goals and Objectives and Vision

Adaptability - Creating Change, Customer Focus and Organizational Learning

Involvement - Empowerment, Team Orientation and Capability Development

Consistency - Core Values, Agreement, Coordination/Integration

Denison’s model also allows cultures to be described broadly as externally or internally focused as well as flexible versus stable. The model has been typically used to diagnose cultural problems in organizations.

Deal and Kennedy (1982) defined organizational culture as the way things get done around here. Deal and Kennedy created a model of culture that is based on 4 different types of organizations. They each focus on how quickly the organization receives feedback, the way members are rewarded, and the level of risks taken: Work-hard, play-hard culture: This has rapid feedback/reward and low risk resulting in: Stress coming from quantity of work rather than uncertainty. High-speed action leading to high-speed recreation. Examples: Restaurants, software companies. Tough-guy macho culture: This has rapid feedback/reward and high risk, resulting in the following: Stress coming from high risk and potential loss/gain of reward. Focus on the present rather than the longer-term future. Examples: police, surgeons, sports. Process culture: This has slow feedback/reward and low risk, resulting in the following: Low stress, plodding work, comfort and security. Stress that comes from internal politics and stupidity of the system. Development of bureaucracies and other ways of maintaining the status quo. Focus on security of the past and of the future. Examples: banks, insurance companies. Bet-the-company culture: This has slow feedback/reward and high risk, resulting in the following: Stress coming from high risk and delay before knowing if actions have paid off. The long view is taken, but then much work is put into making sure things happen as planned. Examples: aircraft manufacturers, oil companies.

Charles Handy (1976), popularized Roger Harrison (1972) with linking organizational structure to organizational culture. The described four types of culture are: Power culture: concentrates power among a small group or a central figure and its control is radiating from its center like a web. Power cultures need only a few rules and little bureaucracy but swift in decisions can ensue. Role culture: authorities are delegated as such within a highly defined structure. These organizations form hierarchical bureaucracies, where power derives from the personal position and rarely from an expert power. Control is made by procedures (which are highly valued), strict roles descriptions and authority definitions. These organizations have consistent systems and are very predictable. This culture is often represented by a "Roman Building" having pillars. These pillars represent the functional departments. Task culture: teams are formed to solve particular problems. Power is derived from the team with the expertise to execute against a task. This culture uses a small team approach, where people are highly skilled and specialized in their own area of expertise. Additionally, these cultures often feature the multiple reporting lines seen in a matrix structure. Person culture: formed where all individuals believe themselves superior to the organization. It can become difficult for such organizations to continue to operate, since the concept of an organization suggests that a group of like-minded individuals pursue organizational goals. However some professional partnerships operate well as person cultures, because each partner brings a particular expertise and clientele to the firm.

Kim Cameron and Robert Quinn (1999) conducted research on organizational effectiveness and success. Based on the Competing Values Framework, they developed the Organizational Culture Assessment Instrument that distinguishes four culture types. Competing values produce polarities like flexibility vs. stability and internal vs. external focus - these two polarities were found to be most important in defining organizational success. The polarities construct a quadrant with four types of culture: Clan culture (internal focus and flexible) - A friendly workplace where leaders act like father figures. Adhocracy culture (external focus and flexible) - A dynamic workplace with leaders that stimulate innovation. Market culture (external focus and controlled) - A competitive workplace with leaders like hard drivers Hierarchy culture (internal focus and controlled) - A structured and formalized workplace where leaders act like coordinators.

Kiyosaki has gained fame for creating "The CASHFLOW Quadrant", a conceptual tool which he developed to categorize the four major ways income is earned in the world of money. Depicted in a diagram, this concept entails four groupings, split with two crossed lines (one vertical and one horizontal). In each of the four groups there is a letter representing a way in which an individual may earn income. The letters are as follows. E: Employee – Working for someone else. S: Self-employed or Small business owner – Where a person owns his own job and is his own boss. B: Business owner – A person who owns a business to make money; typically where the owner's physical presence is not required. I: Investor – Investing money in order to receive a larger income in the future or analyses other businesses as potential investments. In this model the investor encompasses the previous three, making it the fourth square which contains the other three squares, the quadrant model pattern.

Kiyosaki has gained fame for creating "The CASHFLOW Quadrant", a conceptual tool which he developed to categorize the four major ways income is earned in the world of money. Depicted in a diagram, this concept entails four groupings, split with two crossed lines (one vertical and one horizontal). In each of the four groups there is a letter representing a way in which an individual may earn income. The letters are as follows. E: Employee – Working for someone else. S: Self-employed or Small business owner – Where a person owns his own job and is his own boss. B: Business owner – A person who owns a business to make money; typically where the owner's physical presence is not required. I: Investor – Investing money in order to receive a larger income in the future or analyses other businesses as potential investments. In this model the investor encompasses the previous three, making it the fourth square which contains the other three squares, the quadrant model pattern.

Max Weber (1864-1920) was a sociologist who was expressing his concern with rationalization. Rationalization is the process whereby an increasing number of social actions and social relationships become based on considerations of efficiency or calculation. Weber believes that there are four ideal types of social actions. Ideal types are used as a tool to look at real cases and compare them to the ideal types to see where they fall. No social action is purely just one of the four types. Traditional Social Action: actions controlled by traditions, “the way it has always been done” Affective Social Action: actions determined by one’s specific affections and emotional state, you do not think about the consequences Value Rational Social Action: actions that are determined by a conscious belief in the inherent value of a type of behavior (ex: religion) Instrumental-Rational Social Action: actions that are carried out to achieve a certain goal, you do something because it leads to a result

The famous management expert, Igor Ansoff provided a roadmap for firms to grow depending on whether they are launching new products or entering new markets or a combination of these options. This roadmap has been presented in the form of a Matrix that has four quadrants with the axes of products and markets being the determinants of the strategies. As can be seen from the figure accompanying this section, the combinations of the two axes provide the firms with options that they can pursue in search of market share. The four quadrants (which are described in detail subsequently) pertain to increasing market share through market penetration, venturing into new markets with the existing products or market development, and launching new products in existing markets with product development, and finally, diversification when firms seek to enter new markets with new products. Market Penetration As can be seen from the figure above, market penetration happens when the existing products are marketed in a way to increase the market share of the firm. This is a minimal risk strategy as all that a firm has to do is to increase its marketing efforts and improve on its market share. In other words, the firm has to ensure that it leverages the current capabilities, resources, and gears towards a growth-oriented strategy. However, market penetration has its limitations and these manifest when the market is saturated and hence, growth diminishes for the products. Examples of market penetration would include the Television Channels and Media Houses trying to maintain their existing features in the existing markets and ensuring that they grow because of the growth in the size of the market or because they have provided a value proposition that is better than their competitors are. Market Development When firms seek to expand into new markets with their existing products, market development happens. This is suitable for firms that have the capabilities and the resources to enter new markets in pursuit of growth. Further, the firm’s core competencies must be aligned with the products rather than the markets and wherein the firm senses an opportunity in the new markets for its existing products. Market development is more risky than market penetration as the firm is entering uncharted waters and therefore, it is in the interests of the firms to do their due diligence before entering new markets. Examples of market development would be the mobile telephony companies like Vodafone and Nokia entering African markets where these markets are yet to be tapped and where these firms can leverage their existing expertise to enter these markets. Product Development When firms seek to launch new products in existing markets, product development happens. This strategy can be successful when the firms have already established themselves in the existing markets and all that they need to do is to launch new products, which leverage the brand image and the brand value and meet the expectations of the customers in the existing markets. For instance, whenever consumer giants like Unilever and Proctor and Gamble (P&G) launch new products in existing markets, they have the advantage of a strong brand value and top of the mind recall among the customers about them, which would help them to garner market share. When compared to the previous two strategies, this strategy is more risky as it is not sure whether the transfer of customers from the existing products to the new products would happen as seamlessly as the firms strategists believe. Diversification When firms launch new products in new markets, diversification happens which entails both new products to be developed and new markets to be tapped. This is the most risky of the four quadrant strategies in the Ansoff Matrix as essentially the firms are not only testing the waters in uncharted territory but they are also launching new products that may or may not be well received by the customers. Indeed, diversification is a high-risk strategy and is only justified when there are chances of high returns for the firms. Examples of diversification would include companies like Reliance venturing into mobile telephony and retail segments where they not only have to move away from their core competencies but also have to launch new products targeted at the new customer segment. Management experts recommend diversification only when the firms are sitting on enough cash and other resources, as the firms need to have deep pockets to stay the course until the time profits are realized. Further, they also recommend firms with existing customer loyalty and customer base as the cross migration from one segment to the other happens only when the customers are assured of receiving value for their money. For instance, the TATA group in India is perceived as delivering good value and this helped them to garner market share when they diversified into new markets and new products. This is called the Ansoff matrix

Robert Wysocki came up with a simple but very intuitive decision model. In it he has defined a project landscape around two characteristics: goal and solution. According to him, and we agree, every project must have a goal and a solution. You could use a number of metrics to quantify these characteristics, but the simplest and most intuitive will be two values: clear and not clear. Two values for each characteristic generate the four-quadrant matrix shown. However, to bring the Wysocki model in line with current leadership and organisational culture models, we have made a small adjustment.. We swapping the solution and goal axes around. From here everything starts falling into place. We can now compare the Wysocki model with situational leadership models of Hersey and Blanchard. We can also integrate it with organisational dynamic models like Schneider Culture Model, and conflict management models, etc. Using the strategic decison making roadmap, you must first determine the type of project they are managing in order to choose the best approach. But for the project manager to be successful they need to be an effective leader and understand the business culture. To do that you need an adaptive framework that applies to work realities. The decision framework that is presented here, is a framework that uses the project landscape and the project characteristics. You have to consider and plan for the internal and external environment forces since they may affect the project, the project team, and the Project Manager. The analysis of these forces and potential opportunities can be used to define the management approach most effective for the execution of the project. We have developed a framework that is sufficiently robust to support the processes and practices of the Project Manager. We then guide them through a project execution strategy. Traditional projects When one think of the Project Manager managing projects, the traditional project is what comes to mind. These are linear projects. The goal and solution are clearly defined. Perhaps this is the result of having done similar projects many times before. They are often simple projects and in many cases of short duration. They are defined, planned and executed with little change involved. They can also include large projects. Large traditional projects have the same linear processes. The team may be very large and the duration stretching beyond a year. Outside contractors may be involved at various phases. The management requirements far more formal and involved. Change and Risk Management are often major parts of such projects. Agile projects As technology races ahead, products, services and business processes have become more complex and uncertain. The business world no longer stands still. This suggests shorter projects of limited scope. What would have been a long project can be decomposed into a sequence of shorter projects. Risk is reduced and business value increased. Change can be accommodated between projects and assure the delivery of business value on an incremental basis. Engaging in longer projects increases the risk of failure and often eliminates the delivery of any business value. So an Agile project is typically of shorter duration but long enough to generate acceptable business value. Extreme Projects They are Research and Development projects with a long-term focus. They are heavily funded by the organization. Whereas extreme projects are strategic. The Traditional and Agile projects on other hand are more tactical or operational. To find a Research and Development project in a functional business unit would be unusual. These are often high risk projects and require funding beyond the ability of a single business unit to provide. Extreme projects require advanced project management skills and competencies. Think of a project to find a cure for cancer. Emertxe Projects While these projects are quite similar to extreme projects, they do relate at the tactical and operational levels. An emertxe project is like an extreme project except time has been reversed. An emertxe project is often thought of as a solution out looking for a problem. A good example here is the cloud solutions which are looking for a business goal. An example should help clarify an emertxe project. Early in the history of Radio Frequency Identification (RFID) technology WalMart was curious about the applicability of RFID to product identification and the automatic warehousing and retrieval of products for their logistics systems. So there was a solution (RFID) and needed a business goal (automatic warehousing and distribution). The unanswered question was the Return on Investment (ROI) that could be expected. It wasn’t until a few years later that the accuracy and reliability of RFID reached levels that could generate an acceptable ROI. At that point RFID became an effective technology in warehousing and other logistics operations and was integrated into the WalMart inventory management systems. Today, the Cloud development will also fall into this catagory.

Joel York coined the above axes to define the three key sales models for SaaS businesses. Many start-ups drop themselves in the lower left quadrant, often without understanding exactly what decisions they’ve made.

His axes are value per account and self serve or complex sales process. He claims that the fourth quadrant, complex sales process and low value per account is where businesses die. The fourth quadrant is always death. He then maps out what businesses fall in each category.

Priority Matrix is a time management software application that is supported on a number of platforms, including Microsoft Windows, Mac OS X, Android, and iOS. It is based on the Eisenhower Method of arranging tasks by urgency and importance in a 2x2 matrix. Priority Matrix offers a cloud-based synchronization of data, allowing for data management across multiple devices. The application is also loosely based on David Allen's Getting Things Done methodology of improving productivity. Quadrants-based task prioritization- The 2x2 time management matrix, detailed in Stephen Covey's book, First Things First, is the general framework on which Priority Matrix is run. The quadrants organize tasks based on importance and urgency. In Priority Matrix, the four quadrants' default labels are: Critical and Immediate, Critical but not Immediate, Not Critical but Immediate, and Uncategorized. Across the various platforms, Priority Matrix has over 90,000 paid customers, and has been ranked among the 10 highest downloaded productivity apps in the Apple App Store.[3] PC Magazine has ranked the iPad version of Priority Matrix among its 100 Best iPad Apps in 2011, 2012, and 2013.[4] In addition, the product has garnered a 4 out of 5-star rating or better on the Apple App Store on both the iPhone and iPad platforms, with over 1,300 reviews. An Android version was added to the Play Store September 2013. As of 2014, this version had an average rating of 3.9, with 1,000-5,000 installs.

The "Eisenhower Method" stems from a quote attributed to Dwight D. Eisenhower: "I have two kinds of problems, the urgent and the important. The urgent are not important, and the important are never urgent."[7][8] Using the Eisenhower Decision Principle, tasks are evaluated using the criteria important/unimportant and urgent/not urgent,[9][10] and then placed in according quadrants in an Eisenhower Matrix (also known as an "Eisenhower Box" or "Eisenhower Decision Matrix"[11]). Tasks are then handled as follows: Tasks in Important/Urgent quadrant are done immediately and personally[12] e.g. crises, deadlines, problems.[11] Important/Not Urgent quadrant get an end date and are done personally[12] e.g. relationships, planning, recreation.[11] Unimportant/Urgent quadrant are delegated[12] e.g. interruptions, meetings, activities.[11] Unimportant/Not Urgent quadrant are dropped[12] e.g. time wasters, pleasant activities, trivia.[11] This method is said to have been used by U.S. President Dwight D. Eisenhower.

Author, investor and entrepreneur Richard Koch, in his underground best seller of a book -The 80/20 Principle – quotes General Von Manstein talking about the types of officers: There are only four types of officers. First, there are the lazy, stupid ones. Leave them alone, they do no harm. . . Second, there are the hard-working intelligent ones. They make excellent staff officers, ensuring that every detail is properly considered. Third, there are the hard-working, stupid ones. These people are a menace and must be fired at once. They create irrelevant work for everybody. Finally, there are the intelligent lazy ones. They are suited for the highest office. Richard reduces this quote to a 2 by 2 matrix

Stephen Covey, the author of the renowned book 7 Habits of Highly Effective People says, “Important questions always get reduced to two options.” A matrix with more cells may be useful for mapping the territory or analyzing decision criteria, but is too broad for crystallizing core issues. That is why Covey uses two by two matrices aka quadrants.

John Harbison and Peter Pekar's Alliance Driver's Matrix has two factors/dichotomies. One is globalization pressures and the other is Capability Gaps. Globalization is the pressure to establish an international presence and succeed in foreign markets. Capability gaps arise when people skills, knowledge, or scale to meet fast changing market demand

Square 1: Channel access is high globalization low capability

Square 2: Pooled resources is low globalization low capability

Square 3: Global leadership is high globalization high capability

Square 4: Critical mass is low globalization high capability

Business people like to use cost benefit analysis. Cost benefit analysis is quadrant in nature. There are four options. Square 1: High cost Low benefit Square 2: High cost high benefit Square 3: Low cost high benefit Square 4: High cost high benefit

Businesses use the generic risk and reward quadrant to diagnose types of ventures. There are Square 1: Low risk high reward Square 2: Low risk low reward Square 3: High risk low reward Square 4: High risk high reward

Noam Wasserman invented a Rich v. King tradeoff matrix.On the horizontal axis is the value of the entrepreneur’s financial stake. The vertical axis shows Academy 2006 Best Paper Proceedings Page 5 of 7 the degree to which the entrepreneur has kept control at the CEO and board levels, varying from keeping little control (being a “minor player”) to keeping a lot of control (“major player”).the degree to which the entrepreneur has kept control at the CEO and board levels, varying from keeping little control (being a “minor player”) to keeping a lot of control (“major player”). Value of Stake Substantially lower than potential value Close to potential value Flop Rich King Rich & Regal Control Kept - CEO position - Board control Minor player Major player For many founders, the “ideal” entrepreneurial outcome would be one where the entrepreneur both grows a valuable company and remains a big player in it (“Rich & Regal” in the matrix). However, within a particular type of business, most entrepreneurs will face a tradeoff between building value and keeping decision-making control – i.e., between being “Rich” (a minor player with a valuable stake) and being “King” (a major player holding a much less valuable stake). At the same time, entrepreneurs who have a general management background should have a higher likelihood of becoming Rich & Regal.

Hamel and Prahelad have a Beyond Customer Led matrix with two axis. One is articulated and unarticulated needs. The other axis is served and unserved. The business model yields four results

The Dominant Ventures Mode business model has two domains. One is Entrepreneurial the other is administrative. This yields four results. they are Square 1: High entrepreneurial low administrative. This is higher potential growth minded ventures Square 2: Low entrepreneurial low administrative. This is lifestyle mom and pop ventures Square 3: High entrepreneurial high administrative. This is higher potential growth minded ventures Square 4: Low entrepreneurial low administrative. This is mature, beuqacratic dinosaurs. The fourth is always different than the previous three

The transience map in business has two axes and is another quadrant model. One axis is makes sales and marketing channels obsolete v retains existing sales and marketing channels. The other axis is leaves older technologies viable v. makes older technologies obsolete This yields four results Square 1:leaves older technologies viable and makes sales and marketing channels obsolete. Niche- an example is flash drives. Square 2:leaves older technologies viable and retains existing sales and marketing channels. Evolutionary. Example high capacity hard drives Square 3:makes sales and marketing channels obsolete and makes older technologies obsolete. This is architectural. Examples are automobiles and MP3 music. Square 4:makes older technologies obsolete and retains existing sales and marketing channels. Revolutionary. Digital cameras and high tech televisions are examples.

The threat matrix It is necessary to adopt a risk-based approach to the threats posed to the jurisdiction so that these may be properly identified and mitigated against. For the purposes of the threat matrix the risk profile of threats will be measured in terms of their likelihood-V-impact. The chart below provides an outline of the threat matrix and fuller descriptions of the reasons are given below High Impact & High Likelihood Threats Smuggling: The recent past of Gibraltar’s tobacco smuggling created a network of underground connections and systems which supported efficient logistical mechanisms to integrate the cash generated from these activities. Such networks and systems could easily be used and maintained to support other less visible smuggling activities. As such, firms must be on their guard to prevent such organisations from making use of the financial system for these purposes. Fraud: Use of legal structures in Gibraltar could be used to hide or obscure fraudulent activities perpetrated, in particular, outside of Gibraltar.   Corruption/Bribes: Recent events in nearby Spanish municipalities point to alleged irregularities in the payment of amounts to persons connected with the granting of planning and other permissions. Because of the geographic proximity of Gibraltar to the alleged committal of such activity, it is possible that Gibraltar could be used as a conduit for these payments even though evidence to date does not suggest that this is the case. The prosecution of a number of high profile cases by Spanish judicial authorities has increased the awareness of this crime and reduced both the likelihood and impact of further cases. Sanctions/Proliferation: Without adequate processes to identify the customer for which a firm is acting, nor their country of origin or source of funds, a firm can easily become a party to a breach of UN, EU or other sanctions imposed by the international community. The likelihood of individuals being caught are low as sanctions are seldom passed against named individuals (with the exception of known or suspected terrorists). It is more likely that firms could get caught by sanctions against countries by providing facilities (e.g. flow of funds through a corporate vehicle, invoicing, etc) for part of a transaction to supply goods or receipt funds from sanctioned countries to acquire goods or services. More recently a number of international measures have been introduced to prevent the proliferation of nuclear technology. This could extend to technical knowledge to the supply of parts or material. Again, firms need to be aware that the use of corporate or legal structures could form part of the supply chain and find themselves involved in high impact transactions.   Mis-use of corporate and trust vehicles: Corporate vehicles and trusts could be used to provide an additional layer of opacity between perpetrators of a criminal activity and the act itself. Firms should always be wary of customers wishing to seek to establish such structures which have no apparent economic reason or link to the jurisdiction. Legal structures are frequently used in the layering and integration stages of money laundering or can be used to conceal terrorist financing. Extreme care must be taken when establishing business relationships for legal structures, and subsequent monitoring, to prevent them from being mis-used. Mis-use of Client Accounts. Professionals (e.g. lawyers, accountants, real estate agents, notaries) make frequent use of pooled client accounts for legitimate purposes. However, because funds from a number of different sources are pooled in these accounts it is sometimes difficult for a firm to ascertain the true nature of the underlying transaction. Criminals may wish to take advantage of this layer of opacity for their benefit. Firms who operate pooled or segregated client accounts must ensure that the accounting of client monies is in full compliance with best practice to facilitate transaction monitoring and subsequent reporting of any suspicious transactions. Integration: This is the process through which criminally obtained funds are used to purchase, support or acquire legitimate business interests either as seed capital or through which other criminal funds can be funnelled. Integration of large quantities of criminal funds in the local economy would be easily spotted but when made in smaller and regular intervals, it may be harder to spot. Care must be taken when making a determination in this regard as to income or wealth that has been derived from the exportation of tobacco from Gibraltar. Whilst this activity is not an indictable offence, and therefore does not fall under the definition of criminal activity for the purposes of the CJA, association by a firm with this activity may have a negative impact on the firm. 3.3.2 Low Impact & High Likelihood Threats Layering: Layering is the term used through which the profits of criminal activity are disguised by changing their nature. For example, a series of transactions which convert amounts into a bank account which are then transferred to a different person in order to confuse the paper trail. Because of the variety of products available in Gibraltar and the increased sophistication of the market, there is an increased risk that firms may become unwilling participants in the layering process and must therefore guard against it. Cash Conversion: Cash is the biggest by-product of criminal activity with a need to change, layer or integrate it. Cash conversion frequently arises as the criminal and their customers may operate in different markets (e.g. drug pushers sell drugs in £ but need to purchase from their suppliers in Euro, or in Gold). With a cash based economy in Spain and the large number of tourists that visit Gibraltar legitimate bureau business may easily become tainted with criminal activity. Identity Theft: This is becoming more and more prevalent in today’s society. Criminals making use of another person’s identity may wish to seek a jurisdiction outside of the stolen person’s country of residence to transact their business as this is perceived to weaken ID checks and therefore heighten their chances of success. The increased use and availability of pre-paid credit cards and on-line wallets is making id-theft more likely. Tax Evasion: Because of the historical linkages made between “offshore” financial centres and tax evasion, those seeking to evade tax would naturally be attracted to international finance centres to perpetrate their criminal activity. Firms must guard against customers who purposely obfuscate their real reasons for establishing a business relationship in Gibraltar where there is no real or apparent reason for doing so. The implementation of Tax Information Exchange Agreements in Gibraltar has reduced the likelihood and impact of this threat. 3.3.3 High Impact & Low Likelihood Threats Organised Crime: The establishment of a number of organised crime syndicates on the nearby Spanish coast heightens the likelihood score, due to its proximity, for this threat which would otherwise be practically non-existent in the Gibraltar context. Financing of terrorist activity: Modern day terrorism has moved away from a command and control structure, which often required fund raising activities for its maintenance, to loosely co-ordinated cells connected primarily by shared ideology, therefore requiring limited resources to maintain. Increasing restrictions on movement (e.g. through enhanced ID checks at borders) means that Gibraltar’s geographic proximity may increase its risk. However, the existing controls of the Gibraltar requirements have already mitigated most of the risks from this threat, hence why the matrix shows this threat as low likelihood. The impact, should a firm be associated with terrorist financing is perceived to be high both for the firm itself and the jurisdiction. The highest risk arises from a Gibraltar legal structure being used to flow funds through the jurisdiction rather than as a fund raising jurisdiction. People Trafficking: Although physically close to the activity of people smuggling that takes place between North Africa and Southern Spain the transactions tend to be made mainly in North Africa. 3.3.4 Low Impact & Low Likelihood Threats Placement of Cash: Although no longer a major threat, the cases of a customer wanting to place substantial amounts of cash in the their account still take place. Firms must guard against large cash placements and be vigilant over a number of smaller, but related, cash transactions for customers that are cash based when they would not normally be considered to be cash-rich customers. Money Transmission/Wire Transfers: The growing sophistication and availability of on-line payment systems increases the risk that money laundering or terrorist financing will occur through the legitimate payment systems as small, irregular payments may not be identified. The FSC has recently been made responsible for the regulation and supervision of authorised Money Services Business. Through the implementation of the supervisory regime, it is anticipated that the likelihood of these business being used for money laundering or terrorist financing will be reduced. Market Abuse: The potential exists for Gibraltar legal structures being used to disguise some form of market abuse on recognised exchanges. Firms must therefore be aware of this risk and monitoring of the activity should guard against the materialisation or early detection of this activity. On-line banking/Phishing : As on-line presences move away from a static advertisement to web-sites where the full panoply of transactions can be conducted, the temptation of fraudsters to establish “fake” sites becomes increasingly popular. Firms may be used to provide corporate structures, banking or even web-hosting facilities. HAWALA/Alternative Remittance Systems: The existence of small/informal payment systems used for payments of dowries, etc have the potential to be abused to finance terrorism but are perceived to present a low likelihood of materialisation in the Gibraltar context.

Jack Spiros threat matrix has four possibilities based off of four axes. They are low impact v. high impact, low probability v high probability

Roger L. Martin's virtue Matrix contrasts intrinsic social value with instrumental business value Let’s now take a look at the sidebar “The Virtue Matrix.” The matrix is composed of four quadrants. The bottom two quadrants make up the foundation of the matrix, the top two its frontier. The lower two quadrants of the matrix are what I call the civil foundation. The “common law” of responsible corporate behavior, the civil foundation is an accumulation of customs, norms, laws, and regulations. It promotes conduct that is socially responsible and enhances shareholder value. In the left quadrant is conduct that corporations engage in by choice, in accordance with norms and customs. The right quadrant represents compliance—responsible conduct mandated by law or regulation. A dotted line divides the choice side of the civil foundation from the compliance side, indicating that the boundary between the two is porous. Some activities that enter the civil foundation through the left quadrant eventually become so widespread that the norms are enshrined in laws or regulations. For example, only a handful of companies once offered health care benefits to employees’ dependents. Because the goodwill engendered among employees and customers exceeded the cost of the benefits, more companies copied the practice. Eventually, government regulations required most companies offering health benefits to extend them to employees’ dependents as well. The civil foundation is not drawn to scale. It is deep and robust in prosperous, advanced economies, whereas in poorer, less developed economies it is likely to be shallow and fragile. As we shall see, much of the anxiety over globalization stems from the differing dimensions of the civil foundations of richer and poorer countries. Perhaps the most significant aspect of the civil foundation is its upper limit—that is, the line separating it from the frontier quadrants. It is not fixed. Rather, in robust economies it tends to move upward over time, as new social benefits become norms or even legal requirements. But the civil foundation can shrink as well as expand. Pressures on less healthy economies can weaken the norms, and in some cases even the legal enforcement, that support the civil foundation. For a case in point, consider Russia immediately following the collapse of Soviet rule. Regulations governing working conditions, child labor, and the like were largely unenforced, and legal authorities, far from protecting state assets, participated in their wholesale looting. As a result, commercial enterprises, which had been subject to at least minimal discipline by Soviet authorities, became vehicles for the enrichment of a handful of plutocrats. Only in the past few years, as foreign financiers have conditioned their investments on a modicum of responsible corporate behavior, has Russia reestablished the semblance of a civil foundation. The top two quadrants of the matrix, the strategic and structural frontiers, encompass activities whose motivation tends to be intrinsic and whose value to shareholders is either clearly negative or not immediately apparent. The strategic frontier includes activities that may add to shareholder value—become instrumental—by generating positive reactions from customers, employees, or legal authorities. Actions that fit in this quadrant, though risky, are generated by the conscious choice of the corporation’s senior management, as part of their profit-making strategy. Socially responsible corporate practices in the strategic frontier tend to migrate to the civil foundation as other companies imitate the innovator until the practice becomes the norm. An example of such a practice is Prudential Insurance’s introduction, in 1990, of viatical settlements—contracts that allow people with AIDS to tap the death benefits in their life insurance policies to pay for medical and related expenses. The move generated so much goodwill that competing insurers soon offered viatical settlements as well. Very quickly, corporate behavior that had seemed radical became business as usual throughout the insurance industry. When Prudential allowed people with AIDS to tap the death benefits in their life insurance policies to pay for medical expenses, the move generated so much goodwill that competing insurers soon offered viatical settlements as well. Very quickly, corporate behavior that had seemed radical became business as usual. The upper right quadrant of the matrix, the structural frontier, houses activities that are both intrinsically motivated and clearly contrary to the interests of shareholders. The benefits of corporate conduct in this quadrant accrue principally to society rather than to the corporation, creating a fundamental structural barrier to corporate action. Aaron Feuerstein’s actions following the fire at Malden Mills were a classic case of conduct on the structural frontier. By continuing to pay his employees, Feuerstein spared them considerable hardship and relieved the state and city of the costs of unemployment insurance and welfare payments. But his generous act decreased his own wealth and that of his fellow shareholders. Unlike Prudential’s actions, Feuerstein’s conduct probably won’t become the norm in corporate America. The strategic and structural frontiers are separated by a wavy line, which is intended to suggest that some actions are not clearly beneficial or detrimental to shareholders. For instance, Procter & Gamble had a strict policy of refusing to pay bribes to win foreign business long before the Foreign Corrupt Practices Act banned such conduct. While this may have placed the company at a disadvantage compared with its rivals, Procter & Gamble’s improved reputation among consumers in the United States and elsewhere likely offset that harm. On the whole, though, actions that fall between the strategic and structural frontiers tend to gravitate, by default, toward the structural frontier. If the corporate consensus is that a particular activity will not accrue to shareholders’ benefit, no one corporation is likely to take the initiative to disprove that assumption. Thus, executives’ commendable concern for their shareholders’ wealth can sometimes stifle innovations in corporate social responsibility. Having toured the virtue matrix, let’s use it to analyze the issues confronting senior executives when they consider their corporations’social responsibilities. The first to tackle is why the public clamor for more responsible corporate conduct never seems to abate.

The cost effectiveness plane is another business model with two axes. They are Square 1: less effective and more costly- dominance Square 2: less effective and less costly- non dominance Square 3: more effective and more costly- non dominance Square 4: more effective and less costly- dominance