1. What governance practices could have prevented the demise of Barings Bank?
Barings Bank was founded in 1962. It is previously known as Baring Brothers & Co. It was the oldest merchant bank in England and collapsed on February 26, 1995. The bank had been faced bankruptcy for the second time because of this reason. There were several issues that it had been processed. It changed the regulatory of the development of worldwide financial transactions, indoor trading, executive remuneration and misuse of pensions fund made it strengthen through those changes. As per Hurst and Wood (1993) report, there were many countries which were located in Europe, America as well as Asia adopted an international code for different multinational firms in that location. Those principles were:
Stakeholder & Shareholders accountability.
Community fairness.
Reciprocal shore up.
Environmental apprehension.
Prevention of illegal operations and fraudulent practices.
2. Could the same practices have helped in the Societe Generale scandal?
Apparently, it was indicated that Societe Generale learnt from Barings Bank scandal which was occurring in 15 years before. It used the Barings Bank experience to solve those issues. From that scandal, Societe Generale took lots of necessary steps which were followed by it. The steps were as follows:
Biometric authentication systems should be developed to prevent merchants from taking possession of one another’s account
Development of vigilant dealings
Improvement the trading reins
3. What kind of technical, formal and informal controls would have helped Barings Bank develop a secure organization?
The following technical, formal and informal controls were taken by the bank that would have helped Barings Banks to develop a secure organization.
The development of buyer security regulations.
Advancement of the total clearing system and take action to integrate real-time arrangement and significant risk management.
The encouragement of information ration between exchanges.
There were some restriction requirements which were imposition to the register senior officers (clearing firm)with SIMEX.
The amplification of SIMEX's Market scrutiny Department.
Enlargement of the outsize trade coverage structure.
Need to monitor high-risk accounts and the members require close monitoring through compressible internal risk analysis procedures.
According to Lall & Liu (1997) the internal controls and the collapse of it included the taxing of the situation, investigation of daily completion, outskirts calls, as well as market deliberation. Pleasing to the eye SIMEX monitoring capability (p. 647). It means that the internal control system was developed through making of internal controls. The internal controls were investigation of regular trading, retraction of trading facility as well as improvements of the IT system and monitoring the SIMEX activities.
4. Were those controls in place at Societe Generale?
In some cases, Society General placed those controls. They developed the internal controls. They also implemented to prevent unauthorized trading activities. It materialized their IT systems as well as their operational controls. Moreover, it got an experience from the Barings Banks. It was a similar scandal which occurred before them. So their management utilized their previous practice to overcome these types of fraudulent activities. On the other hand, it also established corporate governance in their organization and created ethical value. This would help them accomplish their organizational activities. Societe General also took several initiatives to protect IT systems activities. It also redesigned the management structure. In addition, it established good corporate governance practice all over the organization. It enhanced the total IT system to reduce the fraud line activities. Finally, it got the way how to minimize the trading risks. And that was continuous development of IT systems.
References
Broadhurst, Arlene Idol and Grant Ledgerwood. 2000. Environment Ethics and the Corporation. Houndsmills: Macmillan.
Lall, Ashish and Ming-Hua Liu. 1997. Liberalization of Financial and Capital Markets - Singapore Is Almost There. Law and Policy in International Business, 28(3), 619-647.
