Answer to Question #227775 in Management for Yusuf

Question

Give an analysis of risk management failures and corporate governance that led to the collapse of Northern Rock Bank in 2007/2008. What do you think could have been done differently to avoid the collapse of the bank? Your analysis should include the historical perspective of the bank.

Answer 1

The high-risk, reckless business strategy of Northern Rock, with its reliance on short- and medium-term wholesale finance and a lack of adequate insurance and a catastrophe to arrange stand-in capacity, preordained that it was unable to handle the liquidity pressures retained upon it by the subzero of universal capital markets 2007/2008.