Please don’t shoot the regulators
Do you recognize the name Oswald Grübel? Mr. Grübel was until recently CEO of the Swiss Banking Group UBS. He was brought in a few years ago to repair the damage done by subprime losses. Although he was a very keen risk manager, more “stuff” happened. The bank reported a $2.3 billion loss due to rogue trading on September 15.
UBS’ loss has exposed big weaknesses in its risk management system, which he described not long ago as “one of the best” in the industry.
Mr. Grübel is reported to have stated that by focusing on pay and not culture, UBS failed to align the interests of staff, investors and clients in a way that might deter breeches of procedure.
This sounds familiar: it echoes the conclusions of the reports that have been submitted in the wake of the DEEPWATER HORIZON disaster. We in the shipping industry can readily appreciate that risk and safety management procedures are vital in many cases, not just banking, and not just shipping.
The generally accepted doctrine after such incidents is that they result from procedures that were permeated by failure to assess and control operational risks.
The cure is often stated to be that companies must tighten risk controls until the possibility of failure is vanishingly small. The final U.S. government / Coast Guard report on DEEPWATER HORIZON, underscoring the U.S. presidential commission’s earlier report, implies this by emphasizing the failure to emplace human and technological risk controls.
But is that the whole story?
No risk management system is foolproof.
Companies – and governments – that put all their trust in risk controls, be they technical or human, will almost certainly run a new and very dangerous risk: that complacent warm fuzzy feeling that “the problem’s solved”. Stay tuned for my next risk installment.
This article has been initially published at www.claymaitland.com