Has Internal Audit Measured Up? What Do We Do Next?

The following article was first published in the Global Risk Update published by Risk Reward Limited.

Over the past few years banks have constantly been in the news, unfortunately rarely for the right reasons. A number of different scandals have hurt both the reputation and image of the industry. Foremost amongst these scandals are:

The Financial Crisis—a well documented global disaster
A Foreclosure Crisis—the reaction of banks to mortgage defaulters
Libor Manipulation—affected the most important borrowing/lending rate in the world
Rogue Trading—several episodes where unauthorised trading exposures lead to huge losses
Energy Markets Manipulation—subject of major new investigation by the SEC/CFTC
Money Laundering—a number of major banks have paid very hefty fines
Insider Trading—has involved some major figures on Wall Street and the City
Product Mis-Selling—massive fines for major banks

This does not make good reading for anyone involved in the industry but auditors in particular have real cause for concern. Continue reading

Banks, Risk, Culture: What Role Does The Culture of Society Play In Banks’ Behaviour?

The role of the wider society in shaping the culture and risk profile of banks and other organisations might be more important than most people think. Understanding that role is extremely important for bank executives and risk professionals if they are to build organisations that are sustainable, economically and competitively, in the long term. Continue reading

Why Customer Culture Is Far More Important Than Risk Culture

This is a follow up to an earlier series of articles on risk culture in banks the last of which can be accessed here.

The best institutions and organisations are those which define themselves in terms of how they have they can best serve their customers (and the wider community) and not how they intend to manage risks.

This is a lesson that bankers, regulators and governments all need to learn—the future success of the banking industry depends not on more rules and regulations but how well banks transform their customer culture. As we shall see, that has very little to do with how they measure risk. Continue reading

The Role of HR: To Out The Megalomaniacs?

Originally posted on Sagacity | HR:

question markExecutives will always be faced with business crises, but sometimes they become the actual crisis, and it falls to others – particularly Human Resources – to identify these threats to a company’s reputation and its bottom line.

Uncontrolled banking executives with megalomaniacal personalities have been identified as one of the causes of the most recent financial crisis.  With that sobering information, it begs the question:  Where was the Human Resources function in preventing – or at least mitigating the risk of – human failure?

The question was raised explicitly in author Jonathan Ledwidge’s recent book, Clearing the Bull:  The Financial Crisis and Why Banks Need a Human Transformation and on his blog.
clearing-the-bull-the-financial-crisis-and-why-banks-need-a-human-transformation

It’s a valid question.

The realization that a company has hired an executive with a dangerous megalomaniac personality, or that such a situation has developed over time with an executive, is rarely a secret to the…

View original 480 more words

Is Anglo Saxon Culture A Problem For Banking?

For some time now I have been asking myself why the world’s leading bankers have still been unable to talk directly to the masses in order to apologise for their role in creating a financial crisis in which so many people suffered and commit to doing their best in order to avoid the same thing happening again. Continue reading

Book Review: Clearing the Bull, The Financial Crisis and Why Banks Need a Human Transformation

Jonathan Ledwidge:

Book review – A very interesting review and response from an HR professional to the HR issues raised in Clearing The Bull.

Originally posted on Sagacity | HR:

How Poor Human Assets, Mission and Values Wrecked the Banking Industry

clearing-the-bull-the-financial-crisis-and-why-banks-need-a-human-transformationI recently read Clearing the Bull:  The Financial Crisis and Why Banks Need a Human Transformation by Jonathan Ledwidge.  I was pulled into the book after seeing a challenging question the author had posted on his blog:  “Where was HR during the financial crisis?”  I opened Clearing the Bull with a “ready-to-do-battle, who is this guy?” attitude.

Mr. Ledwidge starts with a brief history of the crises that occurred before the Great Recession and the macroeconomic and geopolitical environments that led to those events.  A self-declared history buff, he brings a love of studying the past in order to understand the present to the first chapters.  The author focuses on the financial crises of the last four decades. He assumes those past crises happened during the lifetimes of most current CEOs and the executives would, therefore, have been…

View original 394 more words

The Question That All Bankers Should Be Asking: Why Are We Here?

The following article was originally published in the October edition of The Journal of Business Compliance.

INTRO: Jonathan Ledwidge is an author and risk professional with more than 20 years experience in investment banking and has strong views and undeniably good questions. In this opinion article, the first under the Speakers Corner column of the Journal, he asks questions of everyone in the corporate world, not merely bankers, but industrialists, regulators and all those associated with the formation of governance frameworks, the promotion of meaningful corporate culture and their implementation. He considers the many pitfalls into which a generation of business and political leaders have fallen and the consequences these have had on regulation and internal control practices. The scandals that have come to light within the banking sector have overshadowed scandals of corruption and misselling in other industries that just as crucially require answers and reflections of the existential question: Why are we here?

“Tell me again Maximus, why are we here?” Continue reading