Thursday, April 23, 2015

Operational Risk: The vulnerability of the system


  • A solo trader and a computer programme!
  • A fraudulent mind ad a lagging regulator!
  • From Nick Leeson to Navinder Singh Sarao, financial institutions are struggling with human resource risk.
  • If you have a fraudulent mind and a manipulatable algorithm, nothing in this market is real. It is then an unreal, manoeuvrable  market where the figures are exaggerated and in control of some criminal intent trader.
  • It is a failure of values in the financial world and the helplessness of a  supervisor.From LIBOR  fixing to mis-selling to to 'flash crash' , UK  seems to be  the host to valueless finance. 

"Bank supervisors cannot prevent all fraud or illegal conduct or forestall all undesirable behavior in large, complex financial institutions. But we can help create more resilient, less complex, and better managed organizations that promote, rather than undermine, financial stability."[1]


All the BIS guidelines on operational risk cannot eradicate fraud.  Let the investors beware.

[1] Testimony by Mr William C. Dudley  President and Chief Executive Officer of the Federal Reserve Bank of New York, before the Senate Committee on Banking, Housing, and Urban Affairs Financial Institutions and Consumer Protection Subcommittee, Washington DC, 21 November 2014.

No comments:

Post a Comment