Group 8

THE COLLAPSE OF BARINGS BANK

roup 8. SMP 2007. IIM Ahmedaba

Analysis –

Criminal omission and commission

Organization
Aspiration
 Regain the lost glory
 Make good profits and create share holder value
 Explore new opportunities

Preparation
 Lack of knowledge of the business
 Inadequate monitoring mechanism
 Lack of supportive organization structure
 Inadequate risk analysis and correction mechanism
 Lack of an advisory, Guiding panel
 Communication mechanism with customers
Organization
Actions:
 Lack of efficient monitoring of key transactions
 No response to internal audit reports
 Lack of communication between senior management
(treasurer)
 No active communication with clients.
 Inadequate staffing of key operations.
 Confusion in top management
 Ignored risk management guidelines
 Did not control financial exposure to speculative trading
 Overlooked critical signs and assumed success.
Organization
Consequences
 Intended: large profits, regain image
 unintended: large losses, bankruptcy

Recommendations:
 Knowledge of the business (learn)
 Adequate monitoring mechanism and systems.
 Supportive organization structure
 Adequate monitoring, risk analysis and correction
mechanism
 Limits on capital exposure
 Employee training and orientation
 Proper advisory panel
Individual Employee
Aspirations:
 Become a trader
 Be famous

Preparation:
 Inadequate training in Skills of trading
 Inadequate ethical orientation

Actions:
 Unprofessional, unskilled actions
 Cover up mistakes by fraud
 Multiplying mistakes rather than correcting
Individual Employee
Consequence
 Intended: Became a trader, name and Rewards.
 Unintended: Undue advantage, fraud, Loss of
financial value and values.

Recommendations
 Acquire knowledge and Skill
 Self checks and control (Ethical orientation)
 Awareness of consequences on self and company
Regulators
Aspirations
 Easy transactions
 More opportunities for trade and growth
 Investor benefit

Preparation:
 No Clear guidelines to Industry, Handholding.
 Did not have well defined reporting mechanisms for
banks
 Inadequate monitoring mechanisms
 No efforts to upgrade Industry knowledge on checks and
procedures
Regulators
Actions:
 Banks not clear on financial exposure
 Do not follow adequate risk prevention

Consequences:
 Intended: promoted exploitation of new
opportunities
 Unintended: Loss of shareholder value, Bank
closed down, public confidence loss

Recommendations:
 Clear guidelines to Industry
 Self reporting mechanisms for banks
 Defining adequate monitoring mechanisms
 Continuously Upgrade Industry knowledge
Investors
Aspirations:
 Earn maximum profits
 Informed exposure to risk

Preparation:
 Check credentials of the bank in the respective sector
 No active monitoring of the status of the bank
 account and funds utilization
Investors
Actions:
 Did not receive information in time from the bank
 Continued holding funds in the bank

Consequences:
 Intended: None
 Unintended: Fate of funds questionable?

Recommendations:
 Basic knowledge of the sector
 Active monitoring and communication with the bank.
 Demand for updates
 Selecting risk appetite
Exchange
Aspirations:
 Facilitate efficient trade
 Adequate safeguards against fraud

Preparations:
 A trading facility
 Did not have adequate monitoring mechanisms,
guidelines to detect fraud and suspicious dealings.
 Did not require companies to report fund utilization
and exposure
Exchange
Actions:
 Secret accounts
 Large and suspicious transactions go unnoticed
 Companies over leverage

Consequences:
 Intended: Encourage trade and distribution of capital
 Unintended: Fraud and loss of investor confidence and
wealth
Exchange
Recommendations:

 All suspicious and large transactions should be

monitored
 Define guidelines for the kind of exposure companies
can assume in relation to their capital exposure
 Monitor trading trends
Thank You
Group 8