1) The role financial instruments played in the downfall of Enron

Equity

i) People keep the equity because of following two reasons

(1) Organization pay good dividends
(2) Equity is getting appreciated at much faster pace
ii) In case of Enron, they violated accounting principles to achieve the above two goals so
the people hold Enron shares
(1) Enron moved their debt to SPE(Special purpose entities) to show better balance sheet
(2) Mark-to-market – Enron shows all the expected future unearned revenue as their
current revenue by discounting it
iii) The main reason of all this is deregulation

2) The broader market effects resulting from the rise and fall of Enron
a) Arthur Anderson was the number one Accounting Audit firm which was not able to survive
after the demise of Enron.
b) After this big fall, people got skeptical and there were several follow up scandals like
WorldCom, Tyco, etc.)
c) US congress need to enforce Sarbanes-Oxley Act

3) Recommendations of risk mitigation techniques that could have been applied to minimize
Enron’s risk profile
a) Use of multiple accounting standards like US GAAP, IFRS.
b) Internal controls detecting the frauds
c) Transparency
d) Fairness

References:

e) https://www.researchgate.net/publication/330758267_THE_ROLE_OF_FINANCIAL_MARKETS_I
N_THE_CASE_OF_ENRON