Implementing Enterprise Risk Management: Case Studies and Best Practices

CHAPTER 23 Control Complacency Rogue Trading at Société Générale

STEVE LINDO

Principal, SRL Advisory Services

This case study is divided into two parts. Part One seeks to bring alive the circumstances leading up to the June 2010 public trial involving Société Générale, the French banking group, and Jérôme Kerviel, the equities trader whose positions caused Société Générale to lose €4.9 billion (U.S.$7.2 billion) in January 2008. Part One concludes with an exercise in which the reader is asked to form his or her own opinion on who was to blame for the losses, based on the information contained in Part One. Part Two reveals the actual outcome of the trial and offers additional study materials for the reader. A Classroom Guide, available separately to instructors wishing to facilitate interactive discussion of the case study in a classroom setting, identifies key risk management lessons from the case study and provides a session plan.

PART ONE: KERVIEL'S TRIAL—A MEDIA CIRCUS

On Tuesday, June 8, 2010, the criminal trial of 33-year-old Jérôme Kerviel began in Paris's Palais de Justice. The charges against him were forgery, abuse of trust, and illegal use of computers, brought by the Paris public prosecutor. Since the date he was charged, January 28, 2008, Kerviel had been free on bail and preparing his defense.

Despite the long time lapse between the January 2008 events that had caused Société Générale's losses and the commencement of the trial, media attention was at a fever ...