
Academic case study.
Helga Drummond, an organisational theorist, uses the Barings collapse as a case study in escalation of commitment, the process by which decision-makers continue investing in a failing course of action because they have already invested in it.
Her analysis applies to both Leeson and the bank. Leeson's initial concealment of a small loss committed him to further concealment, and each subsequent loss made abandoning the position more costly than doubling it. Barings' management, having committed to the Asian trading expansion and having received reported profits from it, had reasons to avoid examining the operation closely. Drummond argues that the standard explanation, which attributes the failure to inadequate controls, describes a symptom: controls existed on paper and were not enforced because enforcing them would have raised questions management preferred not to answer.
She draws on the organisational behaviour literature on escalation, on sensemaking and on the social construction of risk, and she uses documentary sources including the Bank of England report and the Singapore inquiry. The book is academic and written for organisational theorists rather than for practitioners. Its contribution is treating the collapse as a decision process rather than as a control failure, which changes what a reader should look for in their own organisation.
Risk and governance professionals who want the Barings failure analysed as a decision process rather than as a control breakdown.
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