For the WorldCom case, what was one of the causes of the failure?

WorldCom was one of the largest U.S. telecom companies before its collapse in 2002due tofraudulent accounting practices and poor risk management.

The companyexpanded aggressively through acquisitionsbutfailed to integrate them properly, leading tofinancial mismanagement and accounting fraud.

WorldComacquired over 60 companies in a short periodwithout proper integration.

Thismasked financial problemsand led to$11 billion in fraudulent accounting adjustments.

PRMIA and risk management frameworks stress thatpoor integration after rapid acquisitions increases operational and financial risks.

Option A ("Risk models and mortgage underwriting")→ Incorrect becausethis describes the 2008 financial crisis, not WorldCom.

Option B ("Lack of a CRO during IPO")→ Incorrect becauseWorldCom was well-established before its fraud—CRO absence was not the main issue.

Option D ("Unauthorized derivatives trading")→ Incorrect becauseWorldCom’s failure was due to fraudulent accounting, not derivatives.

Step 1: Understanding the WorldCom CaseStep 2: Why Option C is CorrectStep 3: Why the Other Options Are Incorrect

PRMIA Corporate Governance Guidelines– Discusses risks of poor post-merger integration.

SEC Investigation on WorldCom (2002)– Identified fraudulent accounting due to failed acquisitions.

PRMIA Risk References Used: