Case Study 1 Societe Generale

1238 WordsNov 20, 20145 Pages
Case Study 1 Analyzing Managerial Decisions: Societe Generale Quinneka Carter September 9, 2014 Managerial Economics Dr. Murphy Yes, I agree with Societe Generale’s comment by stating that Kerviel’s actions were irrational and senseless. He was willing to take risks and readily available to make factitious trades. Kerviel was a rogue trader; he made unauthorized transactions on behalf of the company. Other than a larger bonus, personally, Kerviel expected to gain respect and his “financial genius” to be recognized. He appeared to be an intelligent trader however, he poorly executed possibly good decisions. A one man show caused the company billions of dollars that made history as the largest financial fraud of $7.14 billion of dollars. The company was aware of several of Kerviel’s transactions; however, failed to investigate. Gapper (2011) stated trader’s bosses want to believe them – that legitimizes the bank’s success and the fact that everyone is paid a higher bonus….Rogue traders thrive by taking large bets on markets while pretending to be doing something safer, such as arbitrage or hedging (Gapper, 2011). Societe General’s overlooked Kerviel’s risky investments and rewarded him instead; the company appears to be aware and directly involved in illegal trades. Societe Generale’s organizational architecture was definitely off balance and contributed to the largest financial fraud in history. The bank overlooked the importance decision rights; one of the three aspects of an organizational architecture. Research shows, “traders at Citigroup’s Mexican subsidiary Banamex fired two bond traders after discovering rogue trading in 2012” (Compliance Reporter, 2014, p.49). Compliance reporter (2014) mentioned that Banamex was working to “identify any areas where they need to strengthen our controls through stronger oversight or improved processes” (p.49). Based

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