Failures in Governance

National Australia Bank (NAB hereafter) is a ranked among the four largest banks in Australia based on customers served and market capitalization. Just a few years back, NAB was the largest financial institution in Australia. The bank commanded respect among investors. The company was also considered a threat to other banks considering the fact that it had the ability to acquire them. NAB was also able to expand to the international market enhancing its ability to compete in the domestic market (Thomson & Jain, 2006).

However, this is no longer the case. The bank experienced large scale mishaps, one of which is the major discussion in this paper, which led to substantial losses. This has also continued to dent the bank’s reputation in the market, hence its inability to maintain its strong position. In January 2004, NAB publicly announced that it incurred losses worth A$360 million as a result of false transactions and misrepresentations by traders. These misrepresentations started small and increased due to routine approvals of misrepresented transactions by superiors, lax internal controls in place at NAB and the attitude of management towards misrepresentations. This issue was initially raised by a junior employee at the currency options desk.

Although management at NAB was not directly involved in the scandal, it started small and continued to grow as a result of the tone at the top in the organization, where making profits were seen as important and were to be pursued. In line with this, we recommend that NAB should strengthen its internal control function and educate employees on the importance of following set procedures and the sanctions that may come with not adhering to the policies and NAB should also establish a strong risk management system. Other corporations can also learn from this occurrence at NAB by implementing our recommendations and creating good tone at the top with respect to culture and actual practices in the company.