Tag Archives: Financial Crisis

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

The Role of HR: To Out The Megalomaniacs?

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

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

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

The New Paradigm: Major Central Banks Don’t Fail

Warren Buffet has called the Federal Reserve, the US central bank, “The Greatest Hedge Fund In History”.  That is because the Fed as it is commonly known has persisted in printing money and buying $85 billion in bonds each month in order to artificially support the US and by extension the global financial markets.

This is quite possibly the recipe for another financial disaster. Continue reading

The top five unlearned lessons of the financial crisis

The above entitled article on Reuters was written by Bethany McLean, one of the authors of the book “The Smartest Guys In The Room”, which eventually became an Academy Award nominated documentary about the wiles of Enron.

The article makes for exceptional reading and is a must for those involved with the banking industry and especially those involved in risk, audit, finance and compliance. I highly recommend it to all. Please use the link below to access it.

The top five unlearned lessons of the financial crisis

Are We On The Verge Of Another Financial Crisis?

Are we on the verge of another financial crisis?

It is a question well worth asking as the prices of stocks and property have been sky high by central bankers flooding the markets with cheap money.

What should risk professionals do?

The first question for risk managers, internal auditors and finance professionals is; how much of the cheap and plentiful liquidity provided by Quantitative Easing, or QE as it is known, has gone into inflating asset prices—stocks, bonds and housing?

The second question is: how far will asset prices fall when the Fed and the Bank of England start to “taper” or reduce their QE and how will that impact my institution? Continue reading

Human Risk 4: Steve Ballmer, The Decline Of Microsoft

This is the fourth in a series of articles on Human Risk. The first three can be found here, here and here.

Microsoft CEO Steve Ballmer, who took over from Bill Gates in 2000, recently announced that he will be resigning within 12 months. The fact that Microsoft’s shares jumped almost 8% on the news is testament to the widely held belief that Ballmer is primarily responsible for the decline of Microsoft relative to its much nimbler rivals such as Google and Apple.

By some estimates as much as $24 billion was added to the market value of Microsoft on Ballmer’s announcement. This is proof, if ever any was needed, that culture and risk are twin sides of the same coin. The only question is; what if any, were the specific cultural issues that caused one of the most important organisations in modern history to decline in value and competitiveness? Continue reading

Human Risk 3: Why Banks, Organisations Must Rethink Their Approach

This is the third in a series of articles on Human Risk. The first two can be found here and here.

It is commonly acknowledged that a primary cause of the last financial crisis was the poor culture and values within the banking industry—superstar bosses with big egos, greed and the failure to challenge management have all been identified as having played a major role. This assertion has been supported with reference to the likes of Fred Goodwin of RBS, Dick Fuld of Lehman Brothers and Stan O’Neal of Merrill Lynch who have all been named in Time magazine’s list of 25 People to Blame for the Financial Crisis.

If personal skills and attributes were indeed a major cause of the financial crisis then we must conclude that the failure of HR was as much to blame as the failure of traditional risk management. Continue reading