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.