Sumitomo

1. Executive Summary 3

2. Sumitomo Context 3

3. Question One: Analyze the reasons that led to the copper-trading debacle at
Sumitomo Corporation 3
3.1. Analyses of the reasons 3
3.1.1 Assignment of Decision Rights 4
3.1.2 Reward & Incentive Systems / Compensation 5
3.1.3 Evaluation & Monitoring 5
3.2 Discuss the importance of proper supervision and effective control
systems to manage risks in a trading firm 5
3.3 What steps should Sumitomo have taken to avoid huge losses
in copper trading? 6
3.3.1 Assignment of Decision Rights 6
3.3.2 Reward & Incentive Systems / Compensation 7
3.3.3 Evaluation & Monitoring   Control Mechanisms 7

4. Question Two: How Hamanaka’s unauthorized trading activities led to major
losses at Sumitomo 8
4.1 General Introduction 8
4.2. Introduction and context 8
4.2.1. Introduction 8
4.2.2. Comparison to other classic financial and corporate scandals 9
4.3. Financial trading losses Sumitomo incurred 10
4.3.1. Sumitomo’s losses and payments 10
4.3.2. Other parties’ losses and payments 12

5. Question three: The role of regulatory agencies in preventing major
scams like Barings, Sumitomo and Daiwa has always been debatable.
What steps should regulatory authorities take to prevent the occurrence
of such debacles in future? 13
5.1. History 13
5.2. Steps to take (Analysis and Recommendations) 14
5.3. (Senior) Management 16
5.4. Supervisory entities 16
5.5. Markets 17
5.6. Costs 17
5.7. Conclusion 18

6. Question Four: Self regulation versus government regulation. In many industries there is a debate regarding the relative merits of self-regulation versus government regulation as mechanisms to control unethical conduct. Present the major pros and cons of
the two f
orms of regulation in the light of this case...