Using the Enron and Northern Rock case studies and with reference to Essay

Using the Enron and Northern Rock case studies and with reference to the accounting, legal and regulatory issues arising in both cases compare and contrast their routes to failure - Essay Example However, according to The Forbes, lack of transparency was the most important reason in comparison to the reckless financial engineering, risk taking, and lending (Denning, 2013). This paper aims to review the two renowned corporate failures including Enron and Northern Rock. The comparison and contrast of the two corporation failures are produced with respect to financial engineering, the role of regulatory bodies, and corporate governance. Enron was established in 1985 as a merger of Houston Natural Gas and InterNorth. The offerings of the company included marketing of electricity and natural gas. The company also offers to the delivery of energy along with other physical commodities to the world. The financial department of the company was offering services for the financial and risk management to a diverse set of customers across the globe (CNN, 2014). The accelerated success of the company in different services made Enron as one of most innovative companies of the world (Moncarz, 2006). Enron operated on two fronts. Firstly, it had footings in almost all aspects of the energy supply chain. This used to provide the company with complete information about the production to distribution aspects. On the other hand, the business had complete information about the order flow. This dual side business marked the real competitive advantage for Enron (Moncarz, 2006). The ability of Enron in managing the risk that initially brought success to the company, however this also became the reason of the demise of the company (Chatterjee, 2003). There were different reasons for the demise of Enron. Some of the most important reasons include; the corporate culture of innovation in operational, financial, and accounting disciplines and exploiting opportunities mainly from deregulated markets for success. It can be analysed as the company introduced special purpose entities to hide mounting debt to equity ratio from stakeholder. This was one of the major reasons for the