International

Business
CASE STUDY:
NICK LEESON: THE GLOBAL
DERIVATIVES TRADING,
AND THE FALL OF BARINGS
BANK

Reported by: Precy C.Picardal

STATEMENT OF THE
PROBLEM:

Poor operational risk

control of the Barings
Bank.
SPCBA | International Business |Chapter 11: CASE STUDY (NICK LEESON,
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GLOBAL DERIVATIVES TRADING AND THE FALL OF BARINGS BANK
OBJECTIVE:

To develop a strong and

effective operational risk
management to mitigate
risk.
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GLOBAL DERIVATIVES TRADING AND THE FALL OF BARINGS BANK
AREAS OF CONSIDERATION:

SWOT ANALYSIS
STRENGTHS, WEAKNESSES,
OPPORTUNITIES AND THREATS
OF THE COLLAPSE OF THE BARINGS
BANK
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GLOBAL DERIVATIVES TRADING AND THE FALL OF BARINGS BANK
STRENGTHS:
The wide product portfolio can allow the organisation to expand the
customer base and offset the losses from one product category with
benefits obtained from the other.
Competent and committed human capital can act as a powerful
source of competitive advantage, particularly when business is
service oriented in nature.
Workplace diversity can also act as a major business strength,
particularly when the organisation intends to operate in the
international market.
The geographic presence in different regions can act as one of the
major strength of the organisation. It determines the business’s reach
to the target market and ensures the easy accessibility.
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GLOBAL DERIVATIVES TRADING AND THE FALL OF BARINGS BANK
WEAKNESSES:
Lack of organisational commitment.
Poor inventory management practices.
Less expenditure on the research and development
activities can weaken the company performance due to poor
local/international market knowledge.
Lack of proper managerial supervision.
Lack of coordination in the workplace.

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GLOBAL DERIVATIVES TRADING AND THE FALL OF BARINGS BANK
OPPORTUNITIES:
The emergence of e-commerce and social media marketing as a
trend can be a great opportunity for The Collapse of Barings Bank if it
can ensure strong online presence on different social networking
sites.
The emergence of new market segments and new niches provide
business and product line expansion opportunities.
The diminishing boundaries and rising global interconnectedness
allow the organisation to get into the international market; target
geographically dispersed customer base and increased profitability.
Reduction in the interest rates makes the fund raising and financing
at lower cost easier for the business organisation.
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GLOBAL DERIVATIVES TRADING AND THE FALL OF BARINGS BANK
THREATS:
The deteriorating economic conditions affect business performance when they
directly influence the customers' spending patterns and purchasing power.
The rise in inflation increases the cost of production and affects the business
profitability.
The growing environmental sustainability trends act as a major threat when
offered products/services are not environment friendly. It draws the negative
publicity and criticism from the environmentalists and affects the brand image in
a competitive market.
The changing regulatory framework and introduction of new stricter regulations
impose a major threat to the The Collapse of Barings Bank. It makes compliance
with legal standards more complex and challenging for the business organisation.
Inability to comply with changed regulations raises the risk of expensive law suit.

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GLOBAL DERIVATIVES TRADING AND THE FALL OF BARINGS BANK
ALTERNATIVE COURSE
OF ACTION:
ACA 1
Develop a well-structured
Operation Risk Management
Team.

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GLOBAL DERIVATIVES TRADING AND THE FALL OF BARINGS BANK
ADVANTAGES:
Helps ensure that potential risk triggers are detected and dealt with
early.
Improve the reliability of business operations.
 Improve the effectiveness of the risk management operations.
 Strengthening the decision-making process where risks are involved.
Reduce losses caused by poorly-identified risks.

DIS ADVANTAGE:
Time Constraints.

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GLOBAL DERIVATIVES TRADING AND THE FALL OF BARINGS BANK
ALTERNATIVE COURSE
OF ACTION:
ACA II
Invest in Technology-enabled
risk surveillance

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GLOBAL DERIVATIVES TRADING AND THE FALL OF BARINGS BANK
ADVANTAGES:
The automated surveillance runs constantly in the background and
flags managers when something looks unusual or suspicious.
With automated screening, banks can direct ORM staff to focus on
high-value, high-risk areas instead of having them conduct random,
narrow, time-intensive and often fruitless audits.

DIS ADVANTAGE:
Costly.

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GLOBAL DERIVATIVES TRADING AND THE FALL OF BARINGS BANK
DECISCION MATRIX
Criteria of Selection
-Effective and efficient ACA with most number of advantage
- Length of implementation
- Cost efficiency
-Degree of Relevance
- Timeliness of ACA

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GLOBAL DERIVATIVES TRADING AND THE FALL OF BARINGS BANK
RECOMMENDATION
After conducting thorough analysis, I concluded that the most
appropriate alternative course of action is the ACA #1 which is
to Develop a well structured Operation Risk Management
Team. This Team provides effective operation risk control, that
enable the company to eliminate if not lessen the risk it faces
and will encounter in the future.

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GLOBAL DERIVATIVES TRADING AND THE FALL OF BARINGS BANK