Are People Your Biggest Risk?

I’m very much looking forward to seeing the results in a couple of months of our latest snapshot survey around risk management. Having spent a couple of years managing a trading firm, I developed a new and deep respect for risk management. Suddenly, everything had risks attached to it – sometimes quantifiable and other times not, and the biggest of all of these risks for me ended up being employee risk. I think I visibly aged over those two years as I discovered that being responsible – legally and financially responsible – is a heavy burden that stays with you 24 hours a day, seven days a week, and 365 days a year – even on the beach in Greece!

In over 30-years of employment I have seen any number of situations in which employees, from the CEO on down, put the business at risk. I could tell you quite a few stories over a beer or two and we would laugh, but at the time, it was no laughing matter. From the office director hired above me who lasted exactly a week after booking a trip by private jet (and an extra night in a top class hotel) to a Friday afternoon client meeting accompanied by two other ‘professionals’ to the young junior employee who joined my project team in Hamburg and promptly disappeared in the red light area for four whole days! These are extremes of course, but the point I make is serious. When you hire someone you had better make a good choice.

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Much more likely scenarios involve traders trading profitable trades on their own account and pushing losing positions onto the official books, sleepy employees who accidentally replace a formula with a value in a critical spreadsheet, or whose work practices are less than efficient or above board. What about the IT manager with an axe to grind – the one who is the only one in the company who really understands your network security and data storage? Attracting and retaining top class employees is a must, but ensuring that employees are motivated to respect procedures, rules, and boundaries is significantly more difficult.

Of course good hiring practices can help minimize such risks but in truth you also need to ensure proper training, having in place comprehensive policies and procedures, audit trails, four-eye verification, and regular evaluations as well as other HR processes. Despite all of this, rogue employees have been responsible for many of the larger issues in our industry.

Are employee risks the largest? Fill out our survey and let us know….

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