Do banks have adequate risk management policies?

Most parties agree that recent stock market fluctuations, market instability and rogue trading scandals have been exacerbated by poor risk management practices. Kweku Adoboli, a former investment trader at UBS bank in Switzerland, has been accused of losing more than $2 billion for the bank - capital that may have been prevented were an adequate fail-safe or risk management policy been in place. However, a number of industry leaders and analysts are beginning to question whether banks and large investment firms have the necessary tools to prevent such trading activities. Wolfgang Fabisch, CEO and co-founder of b-next and a veteran of operational risk, recently told EuroMoney that many boards overlook the risk policies and often reject measures to fund such policies - programs that may have prevented the $2.3 billion loss at UBS. "There is perhaps not enough understanding among the boards of directors of the kind of risks that need to be managed," Fabisch told the source, "and cost-cutting has led to a reduction in funding for compliance and risk management."