From the dusty archives…Barings Bank. Thought to ponder: How do you prevent a rogue from taking down your business?
A sad anniversary – 2/24 – The Guardian – Barings collapse at 20: How rogue trader Nick Leeson broke the bank
Twenty years ago Barings Bank was taken down by one trader, Nick Leeson. The bank was founded in 1762. It was London’s oldest merchant bank.
Barings was 233 years old when it failed.
The article reminds us that in 1993, his trading generated £10M of profits, which was 10% of the consolidated net income. In 1995, the bank learned he had lost £827M. He was able to hiding his huge and growing losses for quite some time.
I think that The Collapse of Barings, by Stephen Fay, was the first book I read on banking fiascos.
Question to ponder:
How do you set up the controls so that one person can’t destroy your business or ministry?
I’ve been thinking about that for a long time.
Consider the trading desks at multiple TBTF banks that were manipulating posted rates in just about everything that could be manipulated. How do you prevent traders from doing that? The behavior of lots of rogues has cost big banks multiple billions of dollars and trashed the reputations of huge organizations.
Consider from another direction the HSBC fiasco regarding their willful assistance to money launderers and tax-evaders. Let’s sidestep the even bigger question of how you create an ethical culture. If you are senior management, how do you create internal controls so that someone doesn’t give journalists confidential data on your top 100,000 customers which that person believes will show you have been doing what that person thinks is bad stuff?
There is a long list of examples.
Phrased another way: How do you keep rogues from destroying your organization?