One recurring theme from the analysis of any company reporting losses is that the management were totally unaware of the risks which their institutions were running.
To be effective, risk management and risk controls rely on the people operating them.
As has been well documented all too often corporate culture is dominated by fear and greed and these together make for a toxic combination.
When strategies fail and businesses lose their way these two elements come very much to the fore.
Fear can often lead to individuals embarking on an even more reckless course of action in the misguided belief that it will all come right – the gambler’s doubling up mentality.
At the same time recklessness is often driven by greed; the larger the risk the greater the reward should it prove to be a successful course of action.
Against this background it is incumbent on the management to ask the uncomfortable questions and not merely rely on the assurance that all is well and going to plan.
The old adage that if something looks too good to be true it invariably is still rings true.
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