Appendix B Human Risks

Inevitably a trading organisation relying on human beings is going to be subject to human risk. Here we list some of the common risks.

Too much knowledge in one person

If an individual is particularly good at his job because of his greater knowledge, experience or application, it is often tempting to give him more responsibility and a greater share of the overall burden of work. Other people do not study his area of expertise, because they know he can be relied upon. This causes a knowledge risk, where an area of the trading lifecycle is left solely in the hands of one individual. If that individual should leave the firm or become ill, there will be nobody to replace him. Although it may seem like a waste of resources, it is always important that every area has sufficient back up. Too many organisations have failed to recognise their reliance on one person until it is too late and he has departed.

Not enough knowledge

This is one of the greatest risks to any organisation. Sometimes the management of a particular trading area becomes convinced that a type of trade or trading strategy is foolproof and certain to bring in risk-free profits. Trading commences and suddenly the lack of proper understanding is exposed to great cost. It may seem absurd that financial entities specialising in financial products with strict internal and external controls should be able to engage in trading that is misunderstood, but it happens surprisingly frequently. Even ...

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