Belated reflections

In the months during my recovery from a stroke late last year. I have occasionally contemplated posts which I should have liked to have written. One which comes to mind involves Chase's billions of dollars of losses from trades placed by its London unit. The risk management for which the bank's CEO James Dimon was responsible. As I watched a steady drumbeat of daily coverage of the mess on Bloomberg television. I would rail, unheard. "Have we learned nothing from decades of risk management disasters?"

 Recalling discussions with old colleagues from my days as the first Research Director at then-independent consultancy Oliver Wyman & Co. In large financial entities like Chase the reporting structure of the risk management function is every bit as important as the technical tools and metrics. In this instance all one needs to understand regarding the reporting structure design flaw. Is to ask, with the bank's pugncious CEO as risk manager for the unit which young junior officer was capable of, saying, when necessary, "No," to Dimon regarding the positions which have come to prove so costly and embarrassing?

 It disappoints me that evidently no board member thought to have an objective review and recommendation of the arrangement undertaken by an outside party. Even there, however, which risk management consultant would want to make an enemy of such a powerful rainmaker as the Chase CEO? In truth? Sadly probably few if any.

 Imagine such a senior consulting partner defending such an assignment to his partners. What would be the upside to becoming silently blacklisted from further work at Chase?

Regardless of the financial outcome. If the recommendation was to remove Dimon as the London unit's ultimate risk manager there would be the imagined affront to the CEO. Moreover if the recommended replacement risk manager sustained a loss. The presumption would be that the consultant should have let Dimon remain in place as the London unit's senior risk manager.