The importance of internal controls ... a little side trip due to current events: This is an article that highlights the importance of internal controls in managing financial functions (and by extension to managing all business functions). Can you read this article:
Societe Generale SA, a major French financial institution, has suffered a 4.9 billion euro (more than $7 billion) loss due to internal control breakdowns that allowed one trader (in these situations, always described as a`"rogue trader" for some reason) to take on far more risk than was prudent. A number of prior incidents of this type are mentioned in the article. A prior incident, not mentioned in the article, caused the actual failure of Barings Bank some years ago. Volkswagen had a similar incident in its history. Many other such incidents have occurred ... usually, of course, not of this magnitude.
Please give me your thoughts on the article.
It is pretty easy to see how Societe Generale SA was blindsided by the actions of just one person. It has internal controls in place and they, for the most part, are very effective. However, one person with the knowledge of how they work was able to use that information and circumvent the system.
At just 31 years old, Jerome Kerviel was able to parlay his administrative know-how of the internal control measures into a small fortune - one that he lost in ...
Thoughts on the article http://www.bloomberg.com/apps/news?pid=20601087&sid=a2NmAKy7H6sY&refer=home