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American International Group (AIG), one of the stellar insurance companies of the US, saw its fortunes slide downhill after it reported consecutive quarterly losses on account of sub-prime mortgage security exposure in the form of credit default swaps. It had to seek a huge federal bail out package to meet its mounting losses, which inexorably led to a ratings downgrade and loss of confidence, raising questions as to whether it would be able to honour its payment obligations. The case reflects a collective failure of corporate leadership and risk management systems. It also focuses on the consequences that arose when a business digressed from its core business into unknown, exotic lines of business without understanding the risks, and without adequate risk management systems in place. The case discusses the leadership travails at AIG, the remedies which were adopted, and the difficulties faced in managing such a huge and complicated organisation.