Rogue Trader - Research Paper Example

Moreover because of the high popularity of Leeson, the Bank allowed him to make his own trade settlement, which is highly unauthorized and risky in terms that the risk limit of loss is violated and the bank, has to pay margin money on a continuous basis to make up for the loss involved. Moreover the negligence of the Barings Bank management and huge dependence on Leeson caused the bank a huge loss of $1.7 billion (Krawiec, 23-26; Rogue Trader). The internal control mechanism of the Barings bank was completely inefficient.

It could be viewed by the fact that the Government body of the organization did not set any fixed limit for the position taking like position in intraday, in overnight position. Moreover the salary of the top management official were linked excessively to the speculated profit which promoted the top management official under the guidance of Leeson to take excessive position in derivative trades even risking the loss limits when led to huge losses incurred. Moreover the absence of any formal internal audit system allowed the bank to take unauthorized path of settling the huge loss in the error account (Rogue Trader).

Thus there is a complete setback in the ethical standards of the bank, as the bank was more tied to the greed of the top officials putting on a huge risk for the bank as well as for its customers. The risk assessment mechanism of the bank was highly inefficient. The movie Rogue Trader shows that there was no proper outline of the risk assessment mechanism in the Barings bank. The top officials did not set any limit about the risk tolerance level of the bank. Moreover positions taken by the officials in risky derivative trading under Leeson and drainage of money for making up for the margin calls promoted huge financial losses.

Without proper internal audit system in place the reported loss was