An Assessment Into The Bankruptcy Examiners Report...

The purpose of this memo is to provide an assessment into the Bankruptcy Examiner’s report regarding the risk management failure as it relates to Leman Brothers. The fundamental reason for the failure is based on the change in corporate strategy of 2006 in which Lehman decided to shift from a â€Å"moving† or securitization business to a â€Å"storage’ business, with the firm making and holding longer-term, risk investments. This â€Å"strategic positioning† was fully supported by the board, although the chief risk officer and certain senior risk management executives had expressed concerns about the extent of the change to the firm’s â€Å"risk appetite.† Strategy Impact: While investment banks are in the business of taking calculated risks they must consider risk within the firms’ risk appetite. In March 2006 Lehman Brothers adopted a new business strategy to grow its proprietary business from a lower risk brokerage model to a higher risk, capital†intensive banking model with a focus on expanding three specific areas of principal investment: commercial real estate, leveraged loans and private equity businesses to consume more capital. This strategy was risky due to the firm’s high leverage and small equity. This impacted their risk taking significantly because this strategy was generally riskier and more illiquid than their traditional lines of business. â€Å"As some Lehman officers described it, Lehman shifted from focusing almost exclusively on the â€Å"moving†business – a business strategy ofShow MoreRelatedThe Solution of New Century Financial Corporation9605 Words   |  39 Pagessuch companies as Budweiser and American Family Publishing. HAI LÚA’s fifty-year-plus career in television made him one of the most rec- ognized celebrities in that medium. Understandably then, the American public was shocked when press reports in June 2007 revealed that HAI LÚA was more than $600,000 past due on his home mortgage payments. The $5 million mort- gage on HAI LÚA’s Beverly Hills mansion was held by Countr ywide Financial Corporation. Unfortunately, millions of everydayRead MoreThe Solution of New Century Financial Corporation9616 Words   |  39 Pagessuch companies as Budweiser and American Family Publishing. HAI LÚA’s fifty-year-plus career in television made him one of the most rec- ognized celebrities in that medium. Understandably then, the American public was shocked when press reports in June 2007 revealed that HAI LÚA was more than $600,000 past due on his home mortgage payments. The $5 million mort- gage on HAI LÚA’s Beverly Hills mansion was held by Countr ywide Financial Corporation. Unfortunately, millions of everydayRead MorePhar Mor Case8496 Words   |  34 Pagesover $1 billion in losses, and caused the bankruptcy of the twenty-eighth largest private company in the United States. The massive accounting fraud went largely undetected for nearly six years. Several members of top management confessed to, and were convicted of, financial-statement fraud. Former members of Phar-Mor management were collectively fined over $1 million, and two former Phar-Mor management employees received prison sentences. Phar-Mors management, as well as Phar-Mor creditors and investors