Are we positioning compliance and risk management correctly?
The collapse of Barings Bank was initially described as a wake-up call that nobody would ever forget.
We know that with the passage of time, that was never the case. Complacency overrules history time-after-time. Unfortunately, we have moved from financial disaster to financial disaster with little regard for compliance and risk management. Or what has happened in the past. The fact that my illegal trading at Barings is now down to #14 on a list of all time losses presents a telling indictment of that fact.
Compliance and Risk Managers now populate banks in their hundreds. In my time, one hand was more than enough to count those in these essential supervisory roles. But, whether there are hundreds or only a handful, getting the message across to Directors and Traders about the importance of these roles is just as difficult as it ever was.
As I travel the world delivering keynote speeches at various events, Compliance Officers and Risk Managers will thank me that their jobs have more bite than they used to. Conversely, traders will bellyache about how complicated compliance and risk have made it for them to do what they are supposed to do; make money. All my fault apparently!
Sitting on a conference panel discussion recently with one of the people acquitted from the Libor rate-rigging trials, it struck me that the industry is going about this all wrong. Here was the obvious case.
This gentleman, based on the transcripts that the FCA were referring to was bang to rights, already convicted in their eyes and facing some serious jail time. Transcripts though, in general, are little more than 60% accurate and cannot put things in the right context. What may be a joke, can look completely different when its transcribed from a phone conversation: the context is all wrong. The disparity between the two proved the undoing of the prosecution’s case in this instance and rightly so.
But it begs the question. Are we positioning compliance and risk management correctly?
An innocent man very nearly went to jail; and fortunately, the rules, the regulations, the voice recordings saved him in this instance. Compliance and Risk Management is as much there to protect the individual as it is the firm.