Corporate (1) SECTION A [40 MARKS] Read the Case study below and answer the questions that follow. Case Insert 1: Lehman Brothers The failure of Lehman Brothers in 2008 was the largest case of bankruptcy in US history. But the failure was the beginning of a series of events that were yet to be unfolded. The news and negative effects of the bankruptcy rippled through the market. The Dow Jones Industrial Average declined by more than 500 points by the end of the trading session of the day (Mamun & Johnson, 2012). Tremendous research has been done on the failure of Lehman Brothers including the causes of failures and whether it could have been prevented. A devastating report in March 2010 recounted in minute detail the practices carried out by Lehman Brothers, an institution founded in 1850 that declared bankruptcy on September 15, 2008. Notably, the executives were accused of gross negligence in their duty of disclosure (Morin & Muax, 2011, p. 38). Lehman failed to disclose various transactions in the notes to their financial statements. This may be due to negligence of accountants and auditors that leads many to argue for the re-examination of Generally Accepted Accounting Standards (Jeffers, 2010). Many also blame the techniques that are currently used to predict firms financial distress. The numerous bankruptcies and financial difficulties that US banks went through in 2008, including the events that analysts failed to predict, indicated shortcomings in financial analysis techniques (Morin & Maux, 2011). Case Insert 2: Venda Mutual Bank As already alluded to in various reports, the investigation has revealed that the business of VBS was indeed conducted in a fraudulent manner which has resulted in the widespread impoverishment of VBS depositors for the benefit of Matodzi and his associates. The evidence that has been gathered shows that until 2014 VBS was a modest, but financially struggling, mutual bank. It was principally involved in the taking of deposits from retail depositors, including burial societies and stokvels. In turn, it mainly lent money to its clients to acquire immovable property secured by mortgage bonds. It also made short term loans to its clients against the security of the deposits they had made with the bank. Originally VBS shareholders were largely its depositors who had chosen to invest by way of paid-up shares. The PIC, which had succeeded to the pension fund of the Venda bantustan government, held a substantial shareholding in VBS. During 2013 Matodzi approached the Venda king, Toni Mphephu Ramabulana, through his advisor, Makhavhu, to put together a structure to acquire a stake in VBS. According to Makhavhu, this led to the establishment of Dyambeu Investments (Pty) Ltd ("Dyambeu"), which was owned by Matodzis company, Brilliant Telecommunications (Pty) Ltd ("Brilliantel"), Promafco (Pty) Ltd ("Promafco") owned by David Mabilu ("Mabilu") and the Vhavenda Trust ("Vhavenda") representing the Venda royal family. Vhavenda held 51% of the shares in Dyambeu with Brilliantel and Promafco each holding 24.5%. Dyambeu then purchased 26% of VBS for R6 million. https://www.resbank.co.za/Lists/News%20and%20Publications/Attachments/8830/VBS%20Mutual%20Bank%20-%20The%20Great%20Bank%20Heist.pdf 2CD QUESTION 1 (40 Marks) 1.1 With reference to the cases provided (Inserts 1 & 2), explain what you consider to be the impacts of these financial scandals (10 marks) 1.2 In light of the crises discussed, your government has requested you to provide a report on how these crises can be averted in the future based on the reviews of David Walker (UK David Walker Review). What would be your recommendations? (20 marks) 1.3 According to the EU Green Paper, good governance is based on a number of widely accepted principles. Identify and discuss any FIVE (5) principles of your choice. (10 marks) SECTION B [60 MARKS] Answer ANY THREE (3) questions in this section. QUESTION 2 (20 Marks) The key question among many organisations and researchers has been pertaining to the justification of why the sudden interest in risk management. In light of this statement, define what is meant by risk management and critically discuss the major challenges that sanction the need for a focus in risk, compliance and control structures. QUESTION 3 (20 Marks) Time and time again investigations into a wide range of crises (including some within the financial services sector) have revealed that socio-technical factors are the underlying (i.e. root/core) causes of almost all disasters and crises (Tricker, 2014). Do you agree with this statement? Explain QUESTION 4 (20 Marks) Funder (1997) defines personality as the individuals characteristic patterns of thought, emotion, and behavior, together with the psychological mechanismshidden or notbehind those patterns. In light of the statement above, critically discuss the five factor model of personality. QUESTION 5 (20 Marks) Risk management is a process which entails the recognition, identification and assessment of risk, and the development of strategies to mitigate it. As with the fundamentals of risk management as a concept in itself, managing personality risks involves recognising, identifying, assessing and mitigating risks associated with personality (Konzelmann, 2015). In light of the statement above, discuss any FOUR (4) approaches that can be used in managing personality risks