Case Study: Knight Capital Americas LLC

It took 19 years to build Knight Capital Americas LLC into the largest market maker on the New York Stock Exchange, but on August 1, 2012, it took only 45 minutes for the firm to be wiped out by an information technology (IT) problem: a change in the company's software caused it to lose more than $450 million dollars in less than an hour. Although it was ultimately saved from bankruptcy when it was acquired two days later, the terms of the acquisition were very unfavorable to the company's shareholders.

Questions:

1. Could it have been prevented by better management?
2. What different procedures for change control, event response, etc. should have been in place that was not?
3. What lessons does this story hold for how firms should be managed and governed?
4. And what does it say about our ability to manage risk in large modern corporations operating in increasingly fast-moving and complex global markets?

Answer rating: 100% (QA)

It is difficult to say definitively whether or not the Knight Capital incident could have been preve... View the full answer