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How Individual Firms Can Prevent A Leeson Incident From Happening To Them
Finance & Accounting
Pages 10 (2510 words)
Introduction Rogue traders are traders who make unauthorized transactions. In the pantheon of rogue traders, perhaps none is more famous then Nick Leeson, who single-handedly brought down the esteemed Barings Bank (Hawkes & Wearden, 2011). Leeson was brought into Barings Bank with a dearth of qualifications, but apparently a good deal of charm, for he was well-liked by the Barings’ management.
Leeson’s double role enabled him to cover up losses and hide them from Barings’ management. Then, like a desperate gambler at the roulette table, Leeson tried to make up his losses with ever-riskier trades, until finally the bottom fell out and Barings was bankrupt because of his actions. The aim of this paper is to examine in more detail why the Leeson affair occurred. Another aim is ascertain the best way that firms can prevent another catastrophe like the Leeson affair from happening, by examining specific, concrete steps that firms may take to prevent such a thing from occurring to them. Lastly, this paper aims to examine how the United Kingdom changed its laws in response to the scandal, by examining the new regulations that have come about to address the Leeson affair. The objective of this paper is to advise firms about how to prevent a Leeson catastrophe from happening to them by showing exactly why the Leeson affair occurred, and the steps that may be taken to remedy it. By this research, firms may be able to take the steps necessary to prevent this from happening to them, and this is the objective of this project. Literature Review The collapse of Baring Bank was primarily due to one rogue trader, named Nick Leeson, who was making fraudulent transactions (Brown, 2005, p. 1591). ...
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