Enterprise Risk Management — Integrated Framework Executive Summary September 2004 Copyright © 2004 by the Committee of Sponsoring Organizations of the Treadway Commission. All rights reserved. You are hereby authorized to download and distribute unlimited copies of this Executive Summary PDF document‚ for internal use by you and your firm. You may not remove any copyright or trademark notices‚ such as the ©‚ TM‚ or ® symbols‚ from the downloaded copy. For any form of commercial exploitation
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MBA Topic: Barings Bank Scandal 1995 Professor: Dr. Goran Ridic Student: Dinka Lujinovic Sarajevo‚ 2014 Content Contents Introduction 5 Research methodology 6 Nick Leeson 6 Barings Bank 8 Nick Leeson and the collapse of Barings Bank 9 Risk Management and Internal Control 9 Conclusion 12 Reference list 13 Introduction Barings Bank was established in 1762 by Francis Baring. It was known as John and Francis Baring Company and was one of the oldest merchant banks in United Kingdom
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Barings Bank & the “Rogue Trader” Founded in 1762‚ Barings Bank (previously known as Baring Brothers & Co.) was the oldest merchant banking company in England. Barings collapsed on February 26‚ 1995 as the result of the activities of one of its traders‚ Nick Leeson‚ who lost $1.4 billion by investing in the Singapore International Monetary Exchange (SIMEX) with primarily derivative securities. This was actually the second time the bank had been faced with bankruptcy. Following the collapse‚ Barings
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Analysis The history of Baring traces back to 1762. Once remarked as one of the six great powers in Europe‚ it was the oldest merchant bank in the United Kingdom at the time of its collapse (Robert 2002). Initially its main business was financing foreign trade. After the deregulation of financial market in 1986‚ Barings expanded aggressively into derivative trading and recruited some extreme risk takers. Aiming at being the pioneer in speculative derivative trading‚ The Bank appointed Nick Leeson who
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collapse of Barings Bank was one of the biggest financial failures in modern history. The events that transpired changed the way risk management and proper corporate structure would be viewed by the world. This case study will chronicle the events that took place‚ identify the failures‚ and recommend how these events could have been avoided. To chronicle the events‚ books and articles of the event were read to understand how Nick Leeson’s activities caused the fall of Barings Bank. Failures such
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Nick Leeson’s strategy to earn trading profits on derivatives was to trade futures on the Nikkei 225 stock index and the Japanese government bonds. This strategy would have either provided huge gains or huge losses. This went completely against what Barings was expecting him to do. He opened a secret trading account to avoid being caught. 2. What went wrong that caused his strategy to fail? Leeson oversaw trading and back office functions meaning there ws no checks and balances. That’s a big
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This story begins with a former back office clerk being promoted to a derivatives trader for Barings Bank’s Singapore Branch and ends with the collapse of a 232-year old banking empire. As we began researching this assignment‚ we all asked the same question‚ "How does a 28 year old trader bring about the collapse of a 232-year old banking empire?" To understand how this debacle came about‚ one must have a basic understanding of the nature of a derivative and what they are designed to do. Initially
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CHAPTER 9 CASE: The Fall of Barings Bank The story of Barings Bank shows how overconfidence‚ coupled with poor internal control‚ can even bring down an historic financial institution. Below we provide a few teaching points. Nick Leeson seemed to have all the characteristics of an overconfident trader. As described in the chapter‚ excessive trading‚ lack of diversification‚ and too much risk were obviously present. Self-attribution bias seemed to play a major role. One commentator notes
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of operations: If the managers of Baring bank would have instituted internal audit of operations then they would have been able to uncover Leeson teeming and lading acts‚ Fraudulent cover up and grave misjudgment made while undertaking his duties.However this was not in place and their isn’t evidence of any manager who undertook to review Leesons work as they viewed Leeson to be independent. 4. Background Review: Due to the fact that the management of Baring Bank had created a wrong impression of
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Commodities Trading: Nick Leeson‚ Internal Controls and the Collapse of Barings Bank __________________________________________________________________________________________ Commodities Trading: Nick Leeson‚ Internal Controls and the Collapse of Barings Bank By Sam Bhugaloo Page 1 of 21 Commodities Trading: Nick Leeson‚ Internal Controls and the Collapse of Barings Bank __________________________________________________________________________________________ Table of Content
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