Answer: Barings' risk management models were flawed.

**Explanation:** **Correct Answer: C** - Barings' risk management models were flawed **Why this is the exception:** - The Barings Bank collapse was primarily due to operational failures and lack of oversight, not flawed risk management models - Leeson's trading was unauthorized and hidden, so the bank's official risk models weren't even being applied to his positions **Reasons that DID contribute:** - **A**: Leeson was trying to recover losses from unauthorized trading - **B**: Barings had poor oversight and segregation of duties - **D**: Leeson controlled both front office (trading) and back office (settlement) functions, allowing him to hide losses The collapse was fundamentally an operational risk failure, not a model risk failure.

Author: LeetQuiz Editorial Team