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Write a 4 page essay on Negative Decisions.Download file to see previous pages... (Hoch, p. 26)The case with Barings Bank is one of the most vivid examples of how wrong decisions may affect a stable a
Write a 4 page essay on Negative Decisions.
Download file to see previous pages...(Hoch, p. 26)
The case with Barings Bank is one of the most vivid examples of how wrong decisions may affect a stable and seemingly reliable company. The theory and experience of decision-making state that the person should foresee all possible consequences of his actions in order to avoid possible catastrophe. It is evident that Nick Leeson omitted this regulation. He made a strategic error in his decision and this led to a collapse, which caused the bank experience trading losses that exceeded $1 billion.
This accident happened in 1992, in the middle of July. It started with an error made by one young trader, working in Singapore office of the Barings Bank. This young specialist had to buy the contracts, but he sold these contracts instead, by mistake. Due to this error the bank had losses for about $30000, and the company had to cover these losses. Lesson decided to cover up this error.
The question here is whether Leeson should have revealed this mistake to supervising managers or hided it. As it has been said above, he decided to hide it, wishing to help and support one of his employees. This was the first stage in a series of mistakes on many levels that resulted in collapse of the bank. What has started with an attempt to conceal employee's mistake, resulted in multiple attempts to hide his own mistakes in derivative market, and this deception together with many negative decisions led the bank to crash. As the experts comment similar situations, "How did a back office clerk in his 20s become responsible for bankrupting one of the world's oldest merchant banks The answer: many bad decisions" (Hoch, p. 40).
It is evident that this manager cannot be fully responsible of what happened to company. His own mistakes that he tried to hide were evidently known to supervising managers, but these errors produced the same wrong decisions as he had once made, and supervising managers allowed him to act independently and provided him with the holes to slip through.
It is known that Nick Leeson started his working career as the manager who was responsible for fixing the mistakes of other traders. These were the mistakes connected to calling out the orders to sell or buy. As a rule, these mistakes are usually noticed and fixed within a day and a night in special departments. Leeson had a capability to detail and scrupulous working, so this feature had helped him in getting this job three years before he made his fatal decision. Soon after he started working, he was sent to Jakarta branch to examine heaps of papers accumulated in one of the offices.
Then in 1992 Nick Leeson was suggested a positionoif a manager responsible for running futures subsidiary in Singapore office of the Barings Bank. During a term of 3 years that passed after his appointment, the losses caused by his own trading mistakes exceeded $1 billion. He confessed he had deceived the Barings Bank and SIMEX (Singapore International Monetary Exchange). Leeson was arrested, and sentenced to 6.5 years of imprisonment.
The fist question that comes to mind while observing this case is how this manager concealed his errors and deception for so long. In case his mistakes had revealed in time, this wouldn't have resulted in catastrophe. It is possible to define several strategic mistakes in the process of decision-making that led to collapse.
Overwhelming emotions.
