Explanation:

Correct Answer: D - There was ambiguity concerning who was responsible for performing specific oversight functions

Why this is correct:

• Barings Bank had poor organizational structure with unclear reporting lines
• Leeson reported to multiple managers in different locations, creating confusion about oversight responsibilities
• This ambiguity allowed his unauthorized trading to go undetected

Why other options are incorrect:

• A: Barings' bankruptcy wasn't primarily due to liquidity issues; it was due to massive trading losses that exceeded the bank's capital
• B: Leeson actually used a short straddle strategy (selling options), not a long straddle
• C: Leeson held long positions (not short) in Nikkei 225 futures, betting the market would rise

The key failure was operational - poor internal controls and unclear accountability structures.