Friday, January 25, 2008

Operational Risk - Societe General Fraud!

Dear Friends,
I was planning to write this post last week, but today It’s the right time to do that! And the reason is the Societe General… do you know what these two words mean? I confess that I didn’t know it, but it’s only the second bigger French bank, and today it’s notice in all newspapers of the world.

The Societe General Bank was victim of a “massive” fraud from an employee. The bank said the fraud was based on simple transactions, but concealed by "sophisticated and varied techniques". The losses are estimated around 5 billion Euros!! Too much zeros, but I will try:€…uuuauuuuu… see all the news in the following link:

How can be possible that only one employee makes several trades and no one else knows?! This men control the entire bank?! It’s very strange… but as Gilles Glicenstein BNP Paribas chief executive told in the above link, "there is still some information missing to understand what happened” and "the scale of the fraud is so large, there must be a complex explanation”
I initiate this post with this amazing, but real history, to write something about operational risk that I’m learning in my master BI degree. So, how these things could be possible? This Bank doesn’t have a Risk Management Unit?!

Operational risks are not only in a bank sector but in all activities, the risk is everywhere every time!! You have the risk to get fired! You have the risk of a car accident… Normally, and mainly in financial sector, all this operational losses, caused by people, systems, external factors or processes were hidden! And they were hidden because critical information could be dangerous for the health of a company. But I think that nowadays, this kind of information is not so dangerous for a company than the past, because the shareholders want TRANSPARENCY, and only with it, the shareholders put their money in the companies! And don’t forget that we are in a globalization, bad news in china can affect Europe, and bad news in Europe can affect China…
So, what is Operation Risk?!

“Operational Risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk, but excludes strategic and reputational risk.” In

Operational Risk nowadays it’s so important as credit risk and market risk, and for today I leave you with the picture below that I will describe with more detail in a next post:

So, This was the first post about RISK, I promise that I will be back tomorrow not only to write about RISK and write about my fantastic classes with the teacher Rui Gonçalves (SAS Portugal).


Amin said...
This comment has been removed by the author.
Amin said...

Dear Pedro,
It sounds great, I don't know anything about that.
So I look forward to reading more about this from you.


26 January, 2008 07:59

Anonymous said...

It is rather interesting for me to read the blog. Thank author for it. I like such topics and everything connected to them. I would like to read a bit more on that blog soon.

Hennie said...

Hi Pedro,

Looking for some about risk analysis and selfservice BI and i came on your site via Google. Great! you helped me further.



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