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Did UBS employ adequate risk management policies?

Oct 03, 2011 Mike Garretson

In the wake of the UBS rogue trading incident, which cost the Swiss bank an estimated $2 billion and a substantial sum of bad press, a number of regulators, political leaders and business magnates came out in criticism of the institution's lax risk management policies. Such accusations seem fair at first glance. After all, how could any organization that claims to adhere to strict investment standards and fail-safe procedures defend itself against the notion of one trader losing $2 billion in investments over a given time period? However, reports have surfaced showing the bank actually extended fairly stringent risk management tactics and processes. The question is how such an incident was allowed to unfold. According to the FierceFinanceIT, a high-level risk committee, consisting of at least four board directors, met nine times for an average of five and a half hours and had three calls that lasted 50 minutes to monitor procedures. Industry leaders maintain that risk management procedures have been on the uptick since the 2008 financial collapse. "It underscores again that an employee with strong knowledge of the compliance system … and a yearning to commit crime will always be able to find a way to game the system," writes Jim Kim for the source.