Question

Discuss the enron bankruptcy, commenting on its ramifications for risk managers and other in the finance sector

You may focus on particular aspects of the enron story

Answer 1

Enron was a company in that reached dizzying Heights only to face a dramatic collapse. The scandal is considered to be the most infamous story in American history and has become a case study for white collar crime. The company had been transferring much of its debt obligations to Offshore partnership. It was also reporting inaccurate revenues in its financial statements. In 2001 Jeffrey Skilling became the CEO of Enron and soon resigned abruptly handing over the baton to Lay. As there were rumours of accounting scandals Enron announced a 638 million dollar loss which shocked the investors.

Primarily Enron was an energy business but invested into derivatives which was sold to investors. The trouble began when the energy business was deregulated and Enron became free from government scrutiny. The company invested billions in today's derivatives and some of them failed. The prices of the stock continue to grow in spite of Huge debts building up within the company which were concealed by setting up partnerships and portraying imaginary revenues. Enron was guilty of misrepresentation to the investors where by Assets and profits were inflated and fraudulently displayed. Finally after an investigation by the Securities and Exchange Commission Enron filed for bankruptcy.