Answered You can hire a professional tutor to get the answer.
Complete 5 pages APA formatted article: Investment Risk Management. On 14th September 2008, 158-year-old investment bank Lehman Brothers Holdings which was basically a global financial service provide
Complete 5 pages APA formatted article: Investment Risk Management. On 14th September 2008, 158-year-old investment bank Lehman Brothers Holdings which was basically a global financial service provider became bankrupt, shaking the entire financial industry. . There are various important factors which played a special role in causing such a huge financial failure for the firm. The poor mortgage-related investment was a very major reason which caused this failure as the real estate portfolio of the company was in very awful shape. The liabilities of the firm were more than the assets. The firm's major sources of revenue were coming from the government, corporate industry along with other giant clients to whom financial advice was given related to financial transactions along with acting as an underwriter to the clients.
The leverage policy of the organization was a major reason why the bankruptcy took place which basically includes terrible regulations of the firm. Market satisfaction was another important factor was it made the firm too much confident about their financial policies along with lack of financial operation’s transparency. The mortgages were not priced correctly before lending them out. The credit default swap market also had a huge impact on the failure along with misrepresentation in the financial statements also acting as a key cause in the bankruptcy. High level of the asset to equity ratio along with extreme high-level short term debt financing basically caused major problems for the company.
The company was so many dependants on the short term debt that it had to face the risk of runs. Systemic risk was faced by Lehman brothers. There were many recommendations given as to how the risk should have been controlled by many financial experts however for such risks which caused this financial catastrophe. The search for the buyer should have been started way before it actually was, bailing out Lehman Brother could have been another beneficial step. Proper steps should have been taken to avoid capital inadequacy. .
