Another Example of the Value of Risk Management

It seems that some financial institutions have not fully learned the lessons from past rogue trading incidents such as the ones that occurred at Societe Generale and Barings. Officials at UBS announced today that they are facing massive losses at the hands of a lone trader. Here’s what BBC reported this morning.

Police in London have arrested a 31-year-old man in connection with allegations of unauthorised trading which has cost Swiss banking group UBS an estimated $2bn (£1.3bn). Kweku Adoboli, believed to work in the European equities division, was detained in the early hours of Thursday and remains in custody. UBS shares fell 8% after it announced it was investigating rogue trades. ZKB trading analyst Claude Zehnder said the news would damage confidence in UBS. “They obviously have a problem with risk management.”

This is yet another example of the value of having a strong risk and control program. While it is difficult to control external events, companies can certainly implement proper internal controls to protect from massive losses such as this one.

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About Wheelhouse Advisors
Wheelhouse Advisors LLC is the publisher of The ERM Current™, an online publication and blog dedicated to providing the latest updates on current trends in Enterprise Risk Management & Control. Wheelhouse Advisors provides cost-effective Enterprise Risk Management & Control solutions to both large and mid-size corporations. To learn more about Wheelhouse Advisors, please visit our web site at www.WheelhouseAdvisors.com.

4 Responses to Another Example of the Value of Risk Management

  1. I fail to see how you can respond to news of a massive loss with a heading like “Another Example of the Value of Risk Management”!!! Given the level of investment into controls and governance in a major bank, this event might rather prompt an article with a heading like “Another example of the failure of Risk Management!

    • Thanks for the comment. Yes, it is certainly a failure of risk management that is not implemented in the correct manner. Too often, large, complex financial institutions claim to have invested in the proper controls, when in reality it is the first item on the expense cutting room floor. It appears that in pursuit of profits, this is what happened with UBS in this case.

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