The Project Book

CHAPTER 6 SAFEGUARD THE FUTURE

In 1995, long before the global financial crisis (GFC), one man — Nick Leeson — managed to bankrupt the UK’s oldest merchant bank, Barings.

Leeson had been sent to Singapore as a market trader aged 25, and almost immediately he made a bad trade. Rather than come clean and admit his error, he created a dummy account and ‘hid’ the debt generated by the trade in there. For the next two years, he made similarly poor short-term decisions, until he had accrued a debt in the dummy account to the value of US$400 million. This was the end of 1997, when the bank was worth around US$500 million. Leeson had another opportunity to admit his failings, but once again he chose to gamble. He lost.

On 23 February 1998 he sent a fax to his boss announcing his resignation as a result of poor health. He then holed himself up in a hotel room in Malaysia. By that stage the debt stood at an incredible US$1.3 billion.

Barings never recovered. The bank collapsed, investors lost their money and many of Leeson’s co-workers lost their jobs. Leeson was eventually arrested in Frankfurt and sentenced to six and a half years in a Singaporean prison.

The same short-term thinking lay behind the GFC in 2008, and it’s seen in organisations every year.

When money is tight at financial year-end, the first affected are usually employees, who face reduced training budgets, travel bans and hiring freezes, all three of which are critical to morale, productivity and delivery of key projects. ...