Therefore, it had been proceeded by the takeover that although there is no possibility for making considerable assessment of the worth of FAI. HIH had huge reliability on information available publicly which did not end up disclosing considerable under- reservation for the insurance business of FAI. The decision for proceeding with the takeover had been taken up hastily after considering insufficient investigative and preparatory work scantly. There had been complete failure of the directors for considering the posed risks in the takeover. The losses estimated to arise from the takeover of FAI was 590 million dollars (Napier 2010).
An additional element in the decease of HIH was diversion across the management of HIH over the business with the aspiration of unwinding the erratic and disordered systems of accounting handed over by the FAI (Codina 2009).
The analysis clearly shows that the major reason for failure of HIH is due to its negligence of proper accounting practices, lack of responsibility shown by board of directors and absence proper performance measurement system. Besides the negligence in due diligence in acquisition of FAI makes the balance sheet overly leveraged which in turn leads to its failure (Penelope 2002). There are many instances which predicted these behaviours as UK operations were established without taking any consideration from the board to check its compatibility as there is no evidence of participation of board in any of the meetings. There were no defined limits of the authority of senior managers and the chief executive officer or they were ordinary breached (Shailer 2004). The lack of defining and enforcing limits to the management and executive authority had been witnessed a couple of times in the tale of HIH. The importance of establishing and implementing operational limitations of authority can be perceived by the instance of HIH’s entry in the film finance insurance.
Similarly, acquisition of US business was done without any due diligence which in turn causes huge losses of $620 million for the company. Besides during acquisitions of FAI most of the directors that are 5 out of 12 were not present to discuss the final acquisitions plan (Thavabalan 2003). These show the negligence of board of directors to carry out their responsibilities to move business forward which in turn lead to failure of HIH.