The Société Générale Fiasco - Lessons in Risk Management
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Case Details:
Case Code : FINC052
Case Length : 24 Pages
Period : 2005-2008
Pub. Date : 2009
Teaching Note :Not Available
Organization : Société Générale
Industry : Banking & Financial Services
Countries : France
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Excerpts Contd...
Why did it happen?
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According to industry experts, in the case of Société Générale and other fraud cases conducted by rogue traders, the common factor was the failure of systems and controls. In several such cases, an independent verification was not carried out on traders' positions and trade cancellations. The fictitious transactions were not monitored and reconciliations were not carried out.
The investigations were carried out by Société Générale and PricewaterhouseCoopers and an independent team consisting of Jean-Martin Folz, the former chief executive of Peugeot Citroen, Jean Azema, chief executive of insurance company Groupama , and Antoine Jeancourt-Galignani, chairman of the real estate company Gecina...
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The Aftermath
As a result of the fraud, provisions for risky loans, and US sub-prime crisis, the profit of Société Générale's investment banking unit fell by 79% to € 139 million during the first quarter of 2008. Due to the decline in trading income, the revenues of the unit also went down to € 1.6 billion. The loss caused by the fraud was taken in the bank's books for the year 2007...
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Exhibits
Exhibit I: Overview of Société Générale and Delta One
Exhibit II: About Turbo Warrants
Exhibit III: Jérôme Kerviel - Reporting Structure
Exhibit IV: Movements of German Dax, FTSE 100 and Euro Stoxx 50 (January
2006 to January 2008)
Exhibit V: Société Générale Five Year Statements
Exhibit VI: Major Corporate Scandals |
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