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.