Rogue Trader
A Short Essay of Rogue Trader
In the movie Rogue Trader, Nick Leeson, a trader on behalf of the Barings Bank of England, made a series of financial fraud to cover the loss he incurred in trading—up to £800 million—in the Singapore International Monetary Exchange which ultimately led to the fall of Barings Bank. This tragedy was a mixed result of the personal greed and the lack of control in Barings Bank’s system. Most of the COSO internal control frameworks were violated with the “Control Environment” and “Information and Communication” being the most critical.
The “Control Environment” requires a company to establish a tone of control system and is the fundamental of all other control components. However, the control environment in the Barings Bank was weak. There were no written codes of conduct; they seemingly did not exist. The crews in SIMEX simply follow Nick Leeson’ orders without questions; there was no sign of them referring to any code of conduct. The Bank evaluated employee performance based on the profit made. Incentives are given sorely based on financial performance, encouraging employees to do whatever to make a profit. Nick was praised in London because of the 10 million he made in one year; he received large bonus with little investigation on other aspects. The board members of the Bank also lacked a sense of control. The board did question Nick when there was doubt; however the questioning was held in a very informal dinner conversation. After Nick provided no clear answer but reassured them “everything is fine,” the board let him go easily. This tolerance allowed Nick to incur even more losses. Yet it was difficult for executives to find out the truth since there was no accounting record, except for what Nick had prepared, was presented to the board members; those in London were not aware of what was happening in Singapore. Lastly, internal auditing was neither well established nor fully enforced. There were few routine auditors assigned to
In the movie Rogue Trader, Nick Leeson, a trader on behalf of the Barings Bank of England, made a series of financial fraud to cover the loss he incurred in trading—up to £800 million—in the Singapore International Monetary Exchange which ultimately led to the fall of Barings Bank. This tragedy was a mixed result of the personal greed and the lack of control in Barings Bank’s system. Most of the COSO internal control frameworks were violated with the “Control Environment” and “Information and Communication” being the most critical.
The “Control Environment” requires a company to establish a tone of control system and is the fundamental of all other control components. However, the control environment in the Barings Bank was weak. There were no written codes of conduct; they seemingly did not exist. The crews in SIMEX simply follow Nick Leeson’ orders without questions; there was no sign of them referring to any code of conduct. The Bank evaluated employee performance based on the profit made. Incentives are given sorely based on financial performance, encouraging employees to do whatever to make a profit. Nick was praised in London because of the 10 million he made in one year; he received large bonus with little investigation on other aspects. The board members of the Bank also lacked a sense of control. The board did question Nick when there was doubt; however the questioning was held in a very informal dinner conversation. After Nick provided no clear answer but reassured them “everything is fine,” the board let him go easily. This tolerance allowed Nick to incur even more losses. Yet it was difficult for executives to find out the truth since there was no accounting record, except for what Nick had prepared, was presented to the board members; those in London were not aware of what was happening in Singapore. Lastly, internal auditing was neither well established nor fully enforced. There were few routine auditors assigned to