The risk of hedging in the banking world - Free Essay Example

Sample details Pages: 11 Words: 3366 Downloads: 1 Date added: 2017/06/26 Category Finance Essay Type Cause and effect essay Did you like this example? Hedging is a risk management tool to offsetting the risk inherent of price in any cash market position by taking an equal but opposite position in the futures market. Hedging activities protect futures contract holder from fluctuations in the underlying assets price. Investors are benefit if the price of underlying asset moves in the same direction as what investors expected (Hedge Fund, 2009). Don’t waste time! Our writers will create an original "The risk of hedging in the banking world" essay for you Create order Short hedge is a short selling by borrowing underlying asset such as commodity, security or financial instruments from a broker and selling it by using the future contract. It then later bought back at lower price and returned to the broker. Short hedge is used by investors as a technique to capture the profit or protect losses from the falling price of the underlying asset. If the price is moves as investors expectation of going down, the investors are then buy at lower price and sell at the higher pre-determined agreed price. Thus, the investors gain from the differences of buying at lower price and selling at higher price. Furthermore, short selling can increase the liquidity in the market as investors can sell short the underlying asset without holding any stock (Short Hedge, 2010). For example, the price of corn is $3.50 per bushel at today. A producer of corn expects that the price of the corn will be dropping in six months later. Thus, the producer short sells the corn b y using future contract and lock in the price at $3.50 per bushel. Six months later, the price drops to $3.00 per bushel. The producer then buy the corn at $3.00 per bushel in cash market and sell the corn at $3.50 per bushel which is pre-determined agreed price in the future contract. Thus, the producer gained $0.50 per bushel by using the short hedging. Furthermore, producer is also protected from the losses of reducing in the price of corn by just locked in the selling price when enter into a contract. However, producer is making losses if the expectation of producer goes wrong. In the event of corns price rises to $4.00 per bushel six months later, the producer have to buy at $4.00 per bushel in the cash market and sell it out at pre-determined agreed price of $3.50 per bushel. From here, we know that the producer is making losses. A long hedge involves buying futures contracts with the intention of receive delivery of the underlying assets by locking the price of the asset. Investors will only enter into a long hedge contract when there is expectation of increase in prices of the underlying asset in the future. Long hedge is also enables investors to hedge and protect against the volatility and uncertainty of future price. A long hedge is beneficial for the investors who worry about the increasing of the underlying assets price in the future. Thus, long hedge allows investors to lock in the purchase price. In the event of the underlying assets price going up later, the investors are protected from the increasing in price by just paying the asset at the lower pre-determined agreed price (Long Hedge,2010). For instance, the seller of corn enters into the contract when he wants to purchase a certain amount of corn from the producer but is worrying about the rises in the price of corn in future. Let says corn price is $3.50 per bushel today and the seller locked in the price at $3.50 per bushel. If the price rises to $4.00 per bushel in six months later , the seller is protected from the rising of the corns price because the price is locked at $3.50. The seller is gained $0.50 per bushel from the long hedge. Same situation applies to long hedge when the price moves unfavorable for the seller. When price drops to $3.00 per bushel, the seller is facing losses. This is because the seller has to pay $3.50 per bushel instead of the actual market price is $3.00 per bushel after the six months period. b) The cost of jet fuel is an important issue for airline companies because it affects the profitability of the firms. This paper explores the hedging fuel costs strategies, implication of accounting rules for driving hedging strategies in United States. Besides, authors also conducted an industry survey to examine current hedging strategies and its benefits in United States business aviation. Cobbs and Wolf (2004) pointed out that there are three type of contracts utilized for fuel hedging purposes: over-the-counter instruments, exchange-traded-futures, and notÂÂ  hedging. Over-the-counter contracts entered by airlines are swaps, options and combinations of options such as collars structures. Despite of illiquid market and insufficient quantities available to hedge jet fuel consumption, many airlines still prefer over-the-counter instruments because of its customisation feature. Southwest successfully used this hedging strategy to implement its dynamic hedging program. It all ow the airlines to lock in prices at a lower point in the oil price cycle assuming that oil price cycle is a mean-reverting process. For examples, fixed swaps are used at the low point of oil price cycle because of the likelihood of price appreciation than price declines. Then, the airline can use swap contract to lock in at a lower price. Giving up potential savings from price decrease whilst hedging against further increases, airlines use collar to lock in a specified range of prices in the mid-range of the price cycle. Peak prices are more likely to require caps in the form of straight calls to allow company benefit from price depreciation and prevent losses from further appreciation. A substantial amount of monitoring is required for this strategy. United States do not have exchange-traded derivatives on jet fuel, therefore a similar hedge are set up such as between the price of heating oil and crude oil which highly correlated with jet fuel. These commodity future contrac ts result basis risk because of imperfectly correlation (contracts are based on an underlying asset other than jet fuel). Some airline companies employ another strategy- not hedging. There are two conditions should be met for this strategy to work: Firstly, other competitors also do not hedge jet fuel cost. In fact, this condition hardly is met, because hedging airlines have a competitive position (stable cash flow and better cash flow planning) over non-hedging airlines though aviation is not an actively hedging industry. Secondly, increase air fare and pass the change in fuel prices to passengers. It is more difficult for airlines to transfer additional fuel cost in highly competition nature of industry because being competitive on price was the key to any airlines survival and success. As such, aviation businesses in United States use various hedging strategies ranging from not hedging to fully hedging using a combination of instruments. Parties involved in hedging need som e accounting standards knowledge since it has great implication in adopting hedging instruments and enable the firms to receive preferable accounting treatment. Industry survey reveals that fuel costs is the second-largest expense for airlines which account for 16% of the carriers operating costs. To reduce the volatility of operating expenses and maintain bottom line profitability, airlines choose to hedge fuel prices. Study showed that Southwest and JetBlue are the industry leaders. Cobbs and Wolf (2004) indicated that there is a positive relationship between fuel hedging and the value of the firm by illustrating price/revenue ratio and hedging ratio of airlines. This study also suggests that airlines that are hedged have a competitive advantage over the non-hedging airlines. This paper concluded that a sophisticated hedging program can create a comparative advantage, overweight the costs and enhance firm value. c) Industry survey was conducted based on 13 United Stated domestic airlines. Survey shows that hedging jet fuel costs brings benefits to airlines. This result is supported by theory that hedging increases firm value. Cobbs and Wolf (2004) indicate that fuel costs is the second-largest expenses for airlines which account for about 16% of the carriers operating expenses after personnel expenses in year 2003. At least 80% of fuel costs were bear by each of the airlines in this industry survey. Aviation businesses average airfare pricing (available seat mile) decrease by 0.1%; airlines faced a compounded annual rise of 25.9% in fuel costs from 2001 to 2003. Few airlines have tried to transfer the rises in fuel costs to passengers by charging surcharges or increase in airfares during the period February to May 2004. However, it was an unsuccessful attempt because rival companies choose to not pass additional costs to their customers. Same case for United who also doubt on the decisi on of increase the pricing as Continental gives up the price increasing after a week due to the reason of other carriers are not responded to do so. This paper repeats the Carter et al. (2002) results: fuel hedging airlines trade at a premium. Cobbs and Wolf (2004) also suggest a positive correlation coefficient between fuel hedging and the firms value by illustrating price/revenue ratio and hedging ratio of airlines. Southwest is the largest fuel hedger who is hedged 82% of the fuel price and the price to revenue ratio is above 1.00. The second and third largest hedger is JetBlue and Airtran Holdings who are also having price to revenue ratio more than 1.00. Both United and Continental are remaining unhedged for the fuel price. Thus, their price to revenue ratio is relatively low. United is only achieving 0.01 while Continental is below 0.10. For EPS estimation in 2004, Southwest and JetBlue have positive value because both are the largest hedgers. Based on the findings from ind ustry survey, hedging is creating value which is like higher price to revenue ratio, lower price, positive EPS. Non-hedging airlines fuel cost were at or above the average spot fuel price. Southwest, JetBlue and Delta were the largest fuel hedgers in United Stated domestic airlines in 2003. Their actual fuel cost were in-line or below the average spot price of New York Harbor and U.S Gulf Coast. According to Southwests CEO statement, Southwest would face $8million loss due to rising in fuel prices if they not hedged their position. Southwest uses a combination of call options, collars, and fixed price swap agreements to hedge its jet fuel exposure. Whereas, JetBlue hedge its fuel consumption through swap agreement and crude oil option contracts and outsources its fuel management services. Dynamic hedging strategies enable Southwest and JetBlue- the industry hedging leader to save on fuel expenses and create competitive advantages compared to other carriers. Although hedging in creases firm value, there are still involves significant amount of hedging costs. For example JetBlue and Southwest limit their hedging operations in the past three years due to the reason of insufficient cash flow to finance the futures margin deposits and option premiums. Delta forced to close the positions of the fuel price hedging as to generate cash are needed for operations. In addition, many airlines (American, Continental Northwest and United) have to deal with liquidity issues which limit their ability to fully hedge their jet fuel consumption and protect themselves from oil price fluctuations. d) Jet fuel prices have been substantially volatile throughout the last decade. It drive airlines to hedge their fuel consumption to protect themselves from fuel price rising. For instance, the impact of fuel price changes drove United Airlines entered into options contracts to protect against increases in jet fuel prices (Carter et al., 2002). Jet fuel hedging is valuable for airline companies according to previous literature studies: US airlines which engage in fuel hedging activities increase in firms values (Carter et al.,2002; Cobbs and Wolf, 2004; Lin and Chang, 2008); Kvello and Stenvik (2009) study on European airlines hedging also has consistent results with US airlines. In the study of Carter et al. (2002), regression analysis is using to test whether there are hedging premium for the airlines that are using derivatives to hedge exposure of jet fuel price. The result showed 12%-16% statistically significant that hedging is creating vale for a firm. Fuel cost is one of the largest costs for airlines. It is more volatile than other courier expenses (Cobbs and Wolf, 2004). Hedging is considered as one of the ways to protect the airlines from the unfavorable price movements. For examples, in 2003, Korean Airlines entered into forward fuel contract which reduce their average fuel price paid by 34% and reported a gain of Won 282 million. Through dynamic hedging activities, Qantas offset 73% of their 2003/04 increased fuel price paid (Morrell and Swan, 2006). Thus, hedging activities is a tool to stabilize overall costs and reduce the volatility of profitability. Then, firms future expenses and earnings are able to predict, resulting in a more stable airlines financial markets. Investors are more confident to the stock price of airlines after hedging as earnings of airlines are more volatile if there is no any hedging activity. Carriers may face threat of bankruptcy if fuel prices keep increasing. For examples, Legend Airlines and National Airline s seek for insolvency protection because of rising fuel cost in 2000 (Cobbs and Wolf, 2004). Hedging aids in reducing the cash flows or accounting profits volatility, minimize risks, diminishing the probability of bankruptcy (Kvello and Stenvik, 2009). In 2003-2005, rise in fuel prices drove several airlines into bankruptcy. However, SouthwestÂÂ  was able to weather the changes in fuel prices by using extensiveÂÂ  fuelÂÂ  hedgingÂÂ  program (Ingrassia and Fleischer, 2006). Trempskis (2009) study note that Southwest and JetBlue Airlines- the industry leaders in fuel hedging strategy never has filed for bankruptcy, thus investors perceived them as more stable firm. Hence, fuel hedging would increase investors confidence and valuation of firms. During economic downturn period or fuel prices are very high, financially troubled airlines would sale its assets (e.g. aircrafts) below market prices (Carter et al.,2002). In this context, hedging airlines are allowed to take advantages buy these assets or acquire that carrier at prices below fair value (Pulvino, 1998; Cobbs and Wolf, 2004; Kvello and Stenvik, 2009). Kim and Singal (1993) implies that typically higher fare environments are created upon completion of the acquisition. By fuel hedging, airlines reduce cash flow volatility, improve its cash position thus enhance its flexibility in investment policies during economic downturns. Froot et al., (1993) analyze that hedged-airlines have sufficient internal funds and rely less on external sources of funds to complete this profitable capital expenditures or favorable investment opportunity. For example, American Airlines acquired Trans World Airlines by utilizing its available cash and assumption of Trans World Airlines debt in 2001 (as cited it Carter et al., 2002). Involving in positive net present value investment would strengthen hedged-airlines competitive position and increase firm values. Rob Fyfe, Air New Zealand chief executive c ommented that fuel hedging not only trying to remove volatility and also provide airlines ability to compete against its rivals. Fuel hedging makes sure airlines have some parity in fuel costs with competitors and prevent competitors from undercut on prices (in case rivals obtained a lower fuel cost). Fyfe statement is illustrated with a real case scenario. Qantas Airways fuel strategy successfully enhanced its competitive advantage and obtained cheaper fuel cost, resulting in captured some market share from rivals (Ballantyne, 2009). Fuel hedging is a complex business. Unless those airlines are able to maintain a long term and consistent hedging strategy through all stages of oil price cycle, airlines wouldnt be able to benefit from hedging. In fact, many airlines hedging losses in fuel hedging have been reported. For example, Air New Zealand had a loss of $134million from fuel hedging, other airlines to suffer include China Eastern Airlines ($908million), Air China ($994million ), Taiwans China Airlines ($629million), EVA Air ($267.8million), Malaysia Airlines ($755million) and Singapore Airlines ($223.5million). Besides, it becomes more difficult and more expensive for airlines to arrange hedging deals. Many banks and finance houses that heavily involved in past hedging have either bankrupted or in financial difficulties, e.g. Lehman Brothers. As a result, many airlines hedging deals collapsed and the remaining players are nervous (Ballantyne, 2009). However, most industry leaders and airline chiefs insist that hedging is the only way to smooth out the peaks and troughs of fuel price. This exercise will continue to be an important risk management tool in their strategy (Ballantyne, 2009). e) This study found that there is a positive relationship between fuel hedging and the value of the firm. This leads our attention to the aspects of reasons for hedging and which theory supported the finding. Theory that supported the finding Source of added value from jet fuel hedging is related to the underinvestment problem. Numerous literature studies supported for the underinvestment theory (Bessembinder, 1991; Froot et al., 1993; Stulz, 1996; Carter et al., 2002; Lin and Chang, 2008). Froot et. al (1993) developed a theoretical framework for hedging and value. He indicates that airlines facing financial distress will choose to underinvest. Underinvestment cost is one of the important indirect costs of financial distress (e.g. Stulz, 1996) thus hedging activity is a tool to alleviating the problem of underinvestment. When firms have profitable capital expenditures, the external cost of fund is more expensive than the internal funds (pecking order theory), so hedging can lower the variability of internal funds and ensure airlines have sufficient internal cost of capital to complete profitable investment opportunities (Bessembinder, 1991; Froot et. Al, 1993; Mello and Parsons, 2000). Based on Froots framework, Carter et. al (2002, 2006) and Kvello and Stenvik (2009) further proved that airlines main benefit of jet fuel hedging as it comes from reduction of financial distress cost and underinvestment costs. Their studies result show that positive relation between hedging and value increases in capital investment, while higher fuel costs are consistent with lower cash flow. Hedging add value to shareholders by aiming airlines avoid underinvestment and make value-creating investment. Reasons for hedging Probability of bankrupt is easily affected by non-systematic risk and thus levies costs. This probability of bankruptcy can be defined as financial distress costs which are included direct and indirect costs. Direct costs are costs incurred in the bankruptcy while indirect costs are derived as stakeholders perceive a realistic chance of future bankruptcy. These costs are defined the performance and market value are directly linked to volatility. (Haushalter, 2000). Hedging is allowed company to hedge against the fluctuation of the cash flow or accounting profit. Thus, it will reduce the probability of going to bankruptcy. Hence, the costs are lower and value of company is increasing. In the exhibit 5, Jet fuel price of Southwest, JetBlue and Delta are lower than average spot price of New York Harbor and U.S Gulf Coast. Thus, the findings are showed the hedging lowering the costs which are consistent with the theory of financial distress costs. Based on agency costs theory, agenc y conflicts arise when there is the divergence of interest of principal and agent. Thus, company should go for hedging to reduce the costs and increase the value of the company. Dobson and Soenen (1993) concluded that hedging reduce the fluctuation of cash flows and leads to probability of uncertainty also reducing. Consequently, the costs of external financing become lower. Furthermore, cash flow is more smoothing through exchange risk hedging when the firm is leverage. Based on the findings, the airliness value are enhancing after the hedging. In the theory of incentive structures, Smith and Stulz (1985) compensation scheme is influencing the managers choices in hedging. Managers are acted in the interest of shareholders who are always maximizing the wealth of shareholders. Managers manage the risk is to reduce the agency costs. However, interest rate risk and currency risk are not able to manage and control. Thus, managers are not likely to engage in hedging even though there are compensation scheme. Yet, the hedging may reduce the other unrelated financial risks of the company value. Indirectly, this is strengthening the relationship between share price and management performance. In the market imperfections, the external financing is more costly and cause the risk to the companies. This is consistent with the study of Froot et. al. (1993) suggested that market imperfections is explained why external funds are more high costs as compared to internal costs. In addition to internal financing, the companies are highly dependent to the external financing to funds their investments. Froot et. al. (1993) also concluded that the costs are higher when a company is facing difficulty to finance funds from external and this will result in the shortfall of their cash flow by assuming other things equal. Thus, the companies should go for hedge to prevent the fluctuation or shortfall of their cash flow. Company that facing market imperfection is more likely to hed ge against the risk in their companies and this theory is supported by Haushalter (2002).

Macroeconomics - Problem Set - 2855 Words

(5) An explanation that may explain the lower labor supply in Europe besides taxes is one that Europeans may place a higher weight on leisure relative to working in their preferences than their American counterparts. This would mean that the indiï ¬â‚¬erence curves lean more towards the leisure axis than they lean towards the consumption axis, as is the case in Figure 3. Thus, when the price of leisure falls (i.e. leisure becomes more aï ¬â‚¬ordable), Europeans are more willing to substitute out of consumption (and labor supply) and into leisure. Problem Set 2: Suggested Solutions 2 Taxes in the Real Intertemporal Model (40 Raw Points) Taxes in the Real Intertemporal Model This problem studies the eï ¬â‚¬ects of a permanent (lump sum) tax†¦show more content†¦The eï ¬â‚¬ects of this change can be seen in the graph of the labor market in Figure 4(a). A decrease in lump-sum taxes increases the wealth of households and decreases the need to work. Thus, for a given real wage, the labor supply curve shifts in. In order to restore equilibrium in the labor market, the real wage increases from w1 to w2 and the equilibrium level of labor falls from N1 to N2 . Hence, a permanent tax cut yields lower employment in the labor market. As a consequence, the ï ¬ rm produces less output at ï ¬ xed level of  ¯ capital stock (K) and total factor productivity (z) . This eï ¬â‚¬ect is a movement along the production function in the downward direction, as seen in Figure 4(b). Tracing the change over to the aggregate output market shown in Figure 4(c), the aggregate supply curve shifts to the left for every r from Y1s to Y2s . The labor market and the aggregate output market are linked via the ï ¬ rms production function. Figure 4: The Real Intertemporal Model (a) The Labor Market (b) The Production Function 4 2 (c) The Aggregate Goods Market 3) Next, we study the eï ¬â‚¬ect of such a tax decrease on the intertemporal consumption choice in isolation; therefore, use the â€Å"consumption today – consumption tomorrow† diagram to illustrate the eï ¬â‚¬ects of a lump-sum tax decrease on the optimal consumption path, c and c . Make sure you illustrate income and substitution eï ¬â‚¬ects. To make your life simple, assumeShow MoreRelatedEconomics Affects Our Daily Life1576 Words   |  7 Pagesclassified into two main branches, which are macroeconomics and microeconomics. Macroeconomics refers to study of economic aggregates (aggregate demand, aggregate supply etc.) while Microeconomics refers to study of behavior and performance of individual parts of economy such as firm or household. Macroeconomics Macroeconomics includes studying the determination of national output and its growth over the long time. 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History, but goes deeper to touch on matters Free Essays

It is not customary for there to be exchanges between us concerning my growing interest in art and my consequent enrollment in an art school. I however hope not to offend you, not by sharing what has become so intimately entwined with my heart. I’m not going to amuse you by attempting a funny portrait of you, but discuss a classic that I recently encountered, and that does not only touch your favorite subject, Â  History, but goes deeper to touch on matters of humanity, of war and the fight against such atrocities as happened on the Third of May, 1808. We will write a custom essay sample on History, but goes deeper to touch on matters or any similar topic only for you Order Now I have been careful enough, dear, to attach a photo of the portrait for you. Franscisco Goya, the artist who created this masterpiece is considered a key figure in the word of paintings. On this painting he created the background of a dark early morning, in which a Church stood. Goya tells of the dark evil that surrounded the mass execution that occurred that morning, an atrocity against humble and innocent human beings. This is implied by the presence of a church, and demonstrated by one of the victims in the middle ground. Talking of the middle ground, you have seen the desperate faces of the victims displayed against the light from a lamp. You must, as well as I did, wonder about the genius that Goya was: What is this source of light? How can it exist in front of such seemingly horrible executioners? He crafted it so carefully that we do not have to see the faces of the executioners! After all, he must have wanted us to focus on the victims who suffer the violence, not the perpetrators, therefore raising that humane part of us to protect the harmless of the society who’ve been pitted against the armed ruthless dictators of the world. The foreground is very dramatic. The firing soldiers are killing one victim after another in cold blood. Goya must have been very skilled in his conception of principles of design, especially how he has used light to communicate his message, yet all this is done on a canvas, just (106*137 inches) Fairly large for a painting, but the depth of meaning it carries cannot be exhausted, not by time or space. I have hereby just given you a glimpse of what art we study in school and the thoughts that cross my mind as I engage the books. How to cite History, but goes deeper to touch on matters, Papers

Patient Document Tampering

Question: Discuss about the Patient Document Tampering. Answer: Introduction In the nursing practice, documentation is crucial as per The Australian Registered Nurse Standards for Practice. Documentation refers to the written or the electronic health records which provide the patients information. The Australian Registered Nurse Standards of Practice requires that the nurse on duty should record the patients details accurately, update the patient's file in time, keep it under safe custody and maintain the confidentiality of the information recorded(Kerr, Lu, McKinlay, 2013). The safe maintenance of health records of a patient facilitates effective communication between the nurse on duty and the other nurses and care providers about the status of the patient, nursing interventions carried out and the outcomes. Also, documentation promotes proper and efficient nursing care. In the case scenario, personally, as a nurse, I would examine myself for the cause of the discrepancy, inform my supervisor about the issue and other relevant top personnel to launch invest igations(Johnson, et al., 2014). Furthermore, I would come up with an incident report. In the essay, I shall identify critical issues and recommend appropriately, discuss the actions to be taken, outline the relevant parts of the Australian Registered Nurse Standards of Practice which applies to the case scenario and, discuss the potential legal and ethical implications. Main Issues that Emerge in the Case Scenario In the case scenario, the nurse on duty fails to keep the patients records safely, and as a result, somebody accessed them and tampered with the original records. The tampering with nurse's original notes is quite detrimental in the nursing care because it would lead to either the falsification of the clients information or provision of erroneous information. By doing so, it shall conflict the key role of documentation as outlined in the Code of Professional Conduct for Nurses which requires them to provide impartial, honest and more accurate information regarding the nursing care and the patient receiving the care(Kleinpell, et al., 2014). Also, through the provision of accurate and authentic information regarding the client helps to build and maintain the communitys trust and a high level of confidence in the services provided by the nurses. But, on the contrary, the nurse on duty practices against this code of professional conduct. Furthermore, the Code of Professional Conduct for Nurses in Australia requires the nurses to treat the personal information acquired from the patient in a professional way and capacity in ensuring that it is kept private and confidential. Though, in the case scenario, it is evident that the nurse on duty did not observe this professional guideline which requires her/him to keep the information privately and confidentially and instead left it carelessly and openly(O'connell, Gardner, Coyer, 2014). The act of the nurse on duty to leave patient's information in the unsecured area resulted in its easy access by intruders who might have tampered with it. Similarly, the tampering of the nurses original notes would lead to the strained and poor therapeutic relations between the fellow colleagues, client and her/him. Strained and poor relations arises as a result of mistrust and inner feeling that either the colleagues developed jealousy on how she/he offers her nursing care services to the client and are getting unwise mechanisms to land the nurse into problems(Melnyk, Gallagher-Ford, Long, Fineout-Overholt, 2014). The aim of fellow nurses is to see the nurse in problems with the unit supervisor or management, and if possible, the nurse gets deregistered or suspended. Besides, the patient might develop mistrust with the nurse on duty, and think that the nurse attentionally tampered with the notes. The patient will reason so that during handover, the incoming nurse should not get the right information about the care required and end up offering or prescribing different drugs which would result in dire consequences for the patients heal th(Johnstone, 2015). Such actions are against the Code of Professional Conduct for Nurses in Australia which requires the nurses to promote and maintain the trust and the privilege inherent in the existing relationship between the nurses and the patient receiving the nursing care. In the Australian Registered Nurse Standards of Practice, Standard 1 states that a nurse should think critically and undertake thorough analysis in the nursing practice to make informed decisions. In the case scenario, there are quite a number of protocols to be observed under Standard 1 in the efficient handling of the case. To start with, procedure 1.4 of the standard 1 practice require nurses to comply with the legislation, regulations, the policies and the guidelines while on duty(Bernoth, Dietsch, Burmeister, Schwartz, 2014). For instance, different health care organizations do have specific policies and their guidelines regarding the launch of complaints and investigations. Therefore, as a nurse, she/he should make a step of informing the relevant investigation bodies to examine and investigate on the tampering of the original notes. Additionally, the issue of lack of critical thinking and analytical skills emerged. In the case scenario, the nurse failed to think critically in various contexts. Firstly, the nurse would have thought to be unwise leaving the patients records carelessly and unsecured. She/he would have taken a depth reasoning and make a ruling that either some patients or other nurses may come across the health record diary or book and interfere with the information intentionally or accidentally(Kangasniemi, Pakkasen, Korhonen, 2015). The nurse would have taken into close consideration that leaving the record openly some mentally challenged patients may get it and pluck some papers containing vital patient information. The failure of the nurse to think critically and analyze the situation is contrary the with the Australian Registered Nurse Standards of Practice which requires the nurse to think critically and making thorough analysis in nursing practice. As per the standard 1, a registered nurse s hould use a variety of strategies to think and make an informed decision based on the available evidence in the provision of safe and quality nursing care within the patient-centred and available evidence at the line of work(Ralph, Birks, Chapman, 2015). Furthermore, the standard 1 requires the nurse on duty to maintain a more accurate, comprehensive and in time documentation of the assessments, care plan, and client evaluation. In addition, the issue of accountability and responsibility emerges. In the case scenario, the nurse on duty was to be held account and responsible for the destruction of the health records of the patients. He/s he should come out and explain to the investigating bodies of what happened and how it happened. The nurse should act under the Australian Registered Nurses Standards for Practice, Standard 3, which shall require her/him to prove her/his capability and capacity in the nursing care practice(Birks, Davis, Smithson, Cant, 2016). The registered nurse shall be expected to accept and take accountability for the incapacity to make informed decisions and take appropriate actions in ensuring that the clients health records are safe and updated for a better heat outcome. The nurse should be held accountable to clarify briefly on where he/she was while the destruction was taking place or where she left the document. She/he should answer interrogative questions seeking to know whether h anding over happened or not, or the tampering of the records occurred while she was still on duty. The Immediate and Subsequent Actions As a witnessing nurse, I would immediately report the matter to the unit supervisor in service. As a nurse, I would consider this as my first step in observation to the Code of Ethics for Nurses in Australia. The Code of Ethics for Nurses outlines all nurses should seek to make informed decisions. With that regard, as a nurse, I would inform the supervisor on duty so that we can discuss on the way forward and we should handle the matter at stake to ensure that the patient gets access to quality care(Cusack, 2015). We could be forced to start new recording of the patients information since we would not risk using the tampered document. Having the original notes plucked or deleted is quite disastrous as it may lead to using false information regarding the patient and the care required. Furthermore, relying on such altered information would result in health consequences on the side of the client, in case, nursing care relies on it. Shall report in order to uphold the Australian Code of Ethics for Nurses which directs that the nurses should value the ethical management of the patients information(Hunt, et al., 2015). Besides, as a witnessing nurse, I shall follow the appropriate channels as per the organization on the policies and the procedures for the safety reporting. I would draft an incident report regarding the case scenario. Overview of the Relevant Sections of the Australian Registered Nurse Standards for Practice that Applies in this Case Scenario. Standard 1, which states that the nurses should think critically and make analyses to make informed decisions in nursing practice. Through critical thinking, decisions shall be reached based on the available evidence. The critical thinking results in the provision of safe and quality nursing care services within the patient-centred and the evidence-based frameworks. In the subsection 1.6 of the Standard 1, it applies to this case scenario(Westbrook, et al., 2015). The subsection requires the nurse on duty to maintain an accurate, comprehensive and up to time updated documents for her/his assessments, care plan, basis of decision making, treatment actions and the evaluations made. Finally, the standard of practice applies to the handling of the case scenario. The witnessing nurse, supervisor and the investigation personnel should critically and creatively think about how to handle and arrive at a reasonable solution to the problem. Standard 3, the nurse should maintain the capability and capacity for practice. In the case scenario, the nurse on duty should be liable and be ready to be held responsible and accountable for not ensuring the safety of the patients records as per the requirement of the Standard of Practice(Harrison, et al., 2014). The subsection 3.4 of the Standard states that, the nurse should accept and be accountable for the decisions, her/his actions, and behaviours, and the responsibilities bestowed on him/her. It is true that the nurse on duty had the powers to ensure that the patients records are kept in a safe custody and should take all responsibilities in case the patient's file gets destroyed. Possible Legal/Ethical Implications There would be a possibility for the nurse to be fired/suspended or deregistered if the investigation body finds enough evidence that the nurse was incompetent, careless and irresponsible capability in practice. Furthermore, if there is adequate evidence which can justify that the nurse on duty internationally plucked the original notes with an aim to hinder either the handover process or other reasons, she would be fired and deregistered(Haw, Stubbs, Dickens, 2014). Other possible legal implication would be the family members of the patient heading to court to file on denied quality nursing care and disclosing of their patients private information. Finally, the unethical practice may emerge in which the nurse who is being held accountable, may choose to come with a falsified information in order to try to convince the supervisor and the investigation team that is the original documentation only that he confused. Lastly, the ethical implication would arise where the nurse develops m istrust with her fellow nurses by thinking that one of them tampered with the original notes to land her on problems. Also, there would be mistrust between the patient and the nursing fraternity. Conclusion It is evident that nurses on duty should practice their nursing care adhering to the Code of Professional Nurses Conduct and the Australian Registered Nurse Standards for Practice. The practice as per the Nurses' codes of professionalism aims at the building the communitys trust on their services and ensuring that safe and quality nursing care services offered. Furthermore, proper and accurate documentation of the patients information concerning his/her treatment status and the care delivered is crucial. Keeping written and electronic health records of patients facilitate effective communication between nurses and enhance comfortable handing over during nurses shifting. It is also important to maintain the documents in safe custody and is accessible by only authorized personnel such that if there is tampering of the document, there would be easy tracking. Finally, the patients information should be kept private and confidential. Through ensuring that the clients health information is kept private to other people who are not responsible for his/her care, helps to build the clients trust on the care services provided by the nurse on duty. 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