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Notes on a Scandal: Lessons in Operational Risk Management from Societe Generale

Source: Diamond Management & Technology Consultants
Date: February 2008
Type: White Paper
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Overview: Lightning can, in fact, strike twice and banks that want to avoid being rocked by a Société Générale-scale fraud incident need to move beyond stop-gap measures and build a culture of operational risk management. Diamond Management & Technology Consultants examines facts that have emerged from the Société Générale situation, and the probable causes of fraud point to deficiencies in operational risk management. While details are still surfacing, Société Générale, or SocGen, appears to have lacked three essential ingredients in establishing a resilient operational risk environment: automated processes, an internal controls culture, and strong IT access controls. Without these three elements in place, not even a 2,000-person risk division could stop a rogue trader, who is allegedly responsible for the loss of 4.9 billion euros at SocGen, the second-largest French bank.


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