Free

The Discursive Management of Financial Risk Scandals - Case Study Example

Comments (0) Cite this document
Summary
The reporter states that Hamilton (2003) noted that Enron was established in the mid-1980s by Kenneth Lay after the merger of Houston Natural Gas with InterNorth. The hiring of Jeffrey Skilling as the finance boss led to the transformation of the organization’s culture…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER94% of users find it useful
The Discursive Management of Financial Risk Scandals
Read TextPreview

Extract of sample "The Discursive Management of Financial Risk Scandals"

Enron Case Study Number Enron Case Study Hamilton (2003) d that Enron was established in the mid-1980s by Kenneth Lay after the merger of Houston Natural Gas with InterNorth. The hiring of Jeffrey Skilling as the finance boss led to the transformation of the organization’s culture. Part of the changes brought by the executive were exploiting accounting loopholes, filing inaccurate financial reports and using special purpose entities (SPE) to conceal the company’s heavy debts running into billions of dollars. Hamilton proposes that the company’s financial department and other key managers not only misinformed the company’s board of directors and auditors on high-risk financial reporting practices, but also urged the entire management to disregard ethical leadership.
Hamilton (2003) attributed Enron’s failure to a culture of conceit that led the society in general and economists in specific to buy the idea that it had the capacity to handle complex corporate risks in a successful manner. As such, Enron’s corporate culture was less concerned about advancing the ethics of respect and honesty. These important values were overlooked in a systematic process which saw the firm shift its focus to the doctrine of subsidiarity and maximization of profits at any cost. By keeping each Enron division autonomous from the others, Hamilton (2003) noted that the financial manipulators and their closest internal associates only were aware of the bigger picture of Enron’s financial position.
I agree with Hamilton on the reasons for Enron’s downfall. This is especially true considering that overreliance on decentralization by a large company in an environment where there are inadequate operational and pecuniary controls is normally associated with failure. In addition, the seemingly diverted, hands-off company board including the chairman was a recipe for financial failure, as they could not initiate adequate checks and balances on the executive managers such as Skilling (Ailon, 2012). As a consequence, the accounting staffs, auditors, and company lawyers equally failed in their mandates. Eventually, the company’s complex financial records became so confusing to the public, the shareholders and even the spin-doctors, hence the failure.
In spite of Enron’s dramatic move to formally admit bankruptcy in 2001, the failure did not occur by accident. According to Temple (2014), there were several presuppositions to the event including a business culture that spawned greed and scam while maintaining cosmetic value rather than real value. Following the merger, the company’s assets tremendously expanded to an extent that it was ranked seventh among the top-ten American companies in terms of revenue. Managing the massive assets usually does not want any form of risky investments and misrepresentation of financial statements as Enron did before its collapse.
Conclusion
Enron’s failure was due to risky investment moves, decentralization and manipulation of financial reports. These practices were arguably triggered by an immensely competitive business culture that compensated short-term profitable gains irrespective of their impacts on the long-term gains. The complex financial management culture and amoral practices which were inherent in it such as using accounting controls to misrepresent revenue and costs to show favorable performance clearly heralded the collapse. The fiasco can also be attributed to the ineptness of the company’s board. The chairman and other board members failed to ensure executive accountability, especially in the wake of Mr. Skilling’s risky corporate practices.
References
Ailon, G., (2012).The Discursive Management of Financial Risk Scandals: The Case of Wall Street Journal Commentaries on LTCM and Enron. Qualitative Sociology, 35(3), 251- 270.
Hamilton, S., (2003). Values and the Virtuous Manager: The Enron Collapse. Lausanne: International Institute for Management Development.
Temple, C., (2014).The REAL Cause of Enron’s Collapse. Retrieved from http://nationalinvestor.com/241/real-cause-enrons-collapse/ Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“The Discursive Management of Financial Risk Scandals Case Study”, n.d.)
The Discursive Management of Financial Risk Scandals Case Study. Retrieved from https://studentshare.org/social-science/1686375-case-study-of-p294-enron-hamilton
(The Discursive Management of Financial Risk Scandals Case Study)
The Discursive Management of Financial Risk Scandals Case Study. https://studentshare.org/social-science/1686375-case-study-of-p294-enron-hamilton.
“The Discursive Management of Financial Risk Scandals Case Study”, n.d. https://studentshare.org/social-science/1686375-case-study-of-p294-enron-hamilton.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF The Discursive Management of Financial Risk Scandals

Financial Risk Management

...?Download the original attachment ? Financial Risk Management Introduction: Many financial and non-financial organizations currently report the significance of value-at-risk (VaR), a risk that calculates for possible losses. Domestic uses of VaR and other complicated risk measures are on the increase in many financial institutions, where, for instance, a banks risk group can set VaR limits, both probabilities and amounts, for fund management and trading operations. At the business level, managers use VaR as a standard summery of market...
11 Pages(2750 words)Essay

Financial Risk Management

...?FINANCIAL RISK MANAGEMENT Table of Contents Risk Management and Bear Stearns 3 Introduction 3 Risk Management: An Overview 3 Risk management policies followed by Bear Stearns 4 6 Risk Management and Bear Stearns Introduction The Bear Stearns Companies, LLC, founded in 1923, was a New York based company which was involved in investment banking, trading of securities and derivatives and brokerage activities globally all over the world. It was in the year 2008, during the global recession; J. P. Morgan Chase acquired Bear Stearns. Bear Stearns was ranked...
4 Pages(1000 words)Essay

Financial Risk Management

...? FINANCIAL RISK MANAGEMENT By Presented to FINANCIAL RISK MANAGEMENT Types of risks faced by a firm? There are numerous types of varying risks and a number of these types are comparatively or less comparatively significant in varying situations and applications (Allen, 2003, p. 79). In a number of these theoretical exemplars of financial or cost-effective procedures, their significance is very much considered when addressing them and looking for the appropriate solutions to block these risks. For instance, a number of risks or even all...
6 Pages(1500 words)Assignment

Corporate Financial Risk Management

...? Corporate Financial Risk Management Executive summary Financial derivates helps firms to mitigate risk, futures contracts are one such derivatives which help the firm hedge against potential losses as well as isolate opportunities for investment. This report is aimed at demonstrating how futures contracts can be used as a hedging strategy that would also isolate profitable opportunity for the firm. This been achieved by taking a long position on futures contracts, and the hedging strategy turn out to be profitable for the firm. Therefore, it is recommendable for the firm to hedge against price volatility by buying futures contract. Table of contents Introduction……………………………………………………………………………… 4 Designing of the hedging strategy... ...
3 Pages(750 words)Essay

Financial Risk Management

...?ROLE OF DERIVATIVES IN MANAGING RISK WITHIN A BALANCED INVESTMENT PORTFOLIO Current financial market offers wide range of financial products to takethe benefit of increased return as well as controlling risk. Finance professional have been adding value to balance sheets and portfolios with re-engineering the existing products with financial structures. Among such products financial derivatives are products that are extensively used (Bodnar, Graham, Harvey, & Marston, 2011). Derivatives, as the name implies, are financial products the value of which is derived from the other financial...
4 Pages(1000 words)Essay

Financial Risk Management

...?Financial Risk Management Introduction Money lending in different forms has always taken place in the history of mankind. Money lenders of some formor the other have existed in the market over long ancient years. In the beginning of the twentieth century, modern industry required a state regulated banking system (Hammonds, 2006). In the current financial framework, the central bank of a nation sets all the monetary policies for the economy. All the other commercial banks work under the rules and regulations of the central bank. Growth and economic development in a nation requires excessive investments, these are financed by the financial bodies in an economy. The banking and financial institutions of a country are responsible... with low...
14 Pages(3500 words)Assignment

Financial Risk Management

...? Risk Management of the of the Financial risk is faced by all individuals in their everyday life. The investors need to have knowledge about the risk involved in investment procedure. This would enable them in making appropriate investment decisions. The investors need to have diversified portfolio for reducing the performance risk. In a similar manner, it is essential for the financial institutions to implement effective risk management procedures and techniques for mitigating the financial risks. It is very important to reduce the credit...
10 Pages(2500 words)Essay

Integrated risk management (financial risk management)

...although incorrect. This is because risks have usually been treated separately for different categories. When you treat risk separately for each category it would usually mean that spate departments need to be set up for each category of risk. This is in fact a waste of more than man power and organizational resources. This is indeed a waste of risk management opportunities as we will further uncover. Derivatives and Insurance The legacy systems being used in organizations usually used three different departments for risk management. The credit risk and exchange rate risk are usually...
7 Pages(1750 words)Essay

Scandals

..., Kenneth Lay, Andrew Fastow and Jeffrey Skilling knowingly engaged in ethical misconduct. Moreover the board of directors of this organization never carried out their responsibilities seriously. The company’s chairman was also not very interested in the matters of the firm (Culpan and Trussel 2005). The financial and accounting malpractices spurred the wave of a number of stringent laws and regulations which were enforced by the American government post Enron. On the other hand, Enron made headlines in newspaper and media. The media highlighted the plight of the ordinary workers and shareholders who lost almost all their earnings due to this huge scam. Enron grossed the headlines as one of the major...
2 Pages(500 words)Essay

Financial Risk Management

...Financial Risk ManagementRisk management is an essential requirement that has to be considered in the course of carrying out any activity. This means that there are various forms of risk management in relation to the different activities that individuals are involved in. In each of these activities, the underlying factor is that risk management is aimed at reducing the effect of a risk, or at least managing it in the event that it occurs (Franke 79). In light of this, financial risk management calls...
5 Pages(1250 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Case Study on topic The Discursive Management of Financial Risk Scandals for FREE!

Contact Us