Press release from the Open University
The Responsible Financial Management webinar from The Open University Business School (OUBS) took place Wednesday 12 March. The webinar introduced video highlights from the Business Perspectives Thought Leaders Roundtable discussion that took place in London on Thursday 20 February 2014.
You can listen to what speakers had to say about key risks to organisational financial sustainability and what changes, practices and behaviours individuals and organisations could adopt to ensure responsible and sustainable management in a changing world. The one hour webinar is available to view on demand.
Facilitating the virtual event was OUBS MBA alum and Associate Lecturer Peter Wainwright, Director, Askyra Limited. The webinar panelists included Dr Devendra Kodwani, Associate Dean, Learning and Teaching, OUBS; Anthony Nutt, previously Fund Manager, Jupiter Fund Management PLC (recently retired); and John Thompson, Managing Director at Trans Capital Associates.
The Risk Theory
A lot of the discussion and comment in the recent Open University Roundtable discussion and subsequent webinar that I took part in supported my theory discussed in a previous blog, that Risk Management is as much about the people doing the managing as it is about any of the systems and controls that are put in place.
These thoughts are based on the premise that all organisations have their own identities and cultures producing tacit methodologies of ‘the way things are done around here’. Of course these cultures have developed over a period of time, kicking off with the values and beliefs of the founders and then moving along a path driven both by the sector within which they operate and the external environment. This development is highly path dependent with political, social and environmental issues thrown in from time to time, along with the odd Black Swan event just really shake things up.
Weaved into this morass of cultures and organisational values are the individual employees own range of values, which invariably have a tendency to fluctuate with their own personal circumstances as they evolve.
In these sets of individual circumstances, is some good stuff and, as happens to all of us, some bad stuff that is sometimes very difficult to deal with. During these difficult times it is very easy to lash out and blame others, and act irrationally. If we then layer on to this, that often these bad times have implications that start to adversely affect one’s personal wealth and security, it is a little easier to see that someone of previously good character, gets themselves in a position where they start to see a slight bending of the rules as not so bad after all.
Management behaving badly
This is particularly the case when these people see their superiors behaving in an unethical way themselves, operating in a cavalier fashion with low levels of trust and respect, and possibly encouraging profitable but risky behaviours in their teams.
To further illustrate this point I cite the examples of:
1. Nick Leeson and Barings, where as I understand it he was given a free hand by his superiors with the operations of both the front and back offices of the Singapore office on the back of his previously stellar performance.
2. John Rusnak and Allied Irish Bank, who didn’t feel able to admit his trading losses to his superiors, and created fictitious trading accounts and continued to double his currency trade bets in an effort to restore his previously profitable position.
My point here is that in all that I have read about these fraudulent activities, neither set out to do it for personal gain. It was just circumstances.
I am in no way justifying these actions, just trying to understand the drivers of these behaviours, and how from a risk management perspective, we can do more to manage them.
Ultimately it is nigh on impossible to stop someone who is hell bent on cheating the system. However in organisations with highly developed cultures, working with high levels of trust and respect, and offering support mechanisms for employees at all levels, it seems to me that the likelihood of these occurrences is significantly reduced.
If you have any comments on this article or would like to discuss any aspect of it please contact me at firstname.lastname@example.org or on 0845 689 8750.
John Thompson is Managing Director and founder of Trans Capital Associates