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http://www.youtube.com/watch?v=4umCFROYkz
http://www.youtube.com/watch?v=4umCFROYkzEhttp://www.youtube.com/watch?v=4umCFROYkzE7/31/2019 Societe General
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Socit Gnrale is one of the largest Europeanfinancial services groups
The Group combines financial solidity with a
strategy of sustainable growth
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Socit Gnrales teams offeradvice and services to individual,corporate and institutionalcustomers in three corebusinesses:
Retail banking in France with theSocit Gnrale branchnetwork.
International retail banking, witha presence in Central andEastern Europe and Russia, in theMediterranean basin, in Sub-Saharan Africa, in Asia and in theFrench Overseas Territories.
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Corporate andinvestment banking witha global expertise ininvestment banking,
financing and globalmarkets.
Also a significant playerin specialized financing
and insurance, privatebanking, assetmanagement andsecurities services
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TOPIC Q1 2012 Q1 2011
OPERATING INCOME EUR 2.0 billion EUR 2.2billion
NET INCOME EUR 732 million EUR 916million
Corporate and
Investment Banking
EUR 1,658 million
(-13.8%)
EUR 1,924
million
Specialized FinancialServices and Insurance
EUR 849 million (-3.3% )
EUR 877million
Global InvestmentManagement and
EUR 553 million (-6.5%)
EUR 589million
OPERATING EXPENSES EUR 4,333 million(-0.8%)
EUR 4,368million
ACOUNT TAX 27.4% 27.1%
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1864 - 1893 Birth of a universalbank
1894 - 1914 The era of expansion
1914 - 1945 Operating in a world incrisis
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1945-1972 The "Guardian Angel"Bank
1973-1997 Modern times... testingtimes
1998-2009 On course for the 21st
century
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Education: Master of Finance, University of Lyon
Starting position: Risk management office, back officesystems and security systems
Ending position: Lower-level trader, Delta One- Tradeindex futures as a way to hedge company risk and
make small profits
Co-workers impressions: quiet and unassumingtrader, unimpressive education background,
motive to impress his seniors
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Job role: Purchase European stock index futures and sellothers as a
hedge
Job goal: Create small, low-risk profit stream based onlarge volume
What Kerviel actually did: Bypassed all internal controlsand made high risk unauthorized trades for a total of 50
billions euros in trades.
He bypassed controls by creating fictitious trades in atrading book to offset his trades.
How did he bypass controls:
-Learned internal controls in starting position in back office
- Exactly knew the internal checking schedule and removedall false transactions in the books minutes before check
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FridayJan 18
Sunday
Jan 20
MondayJan 21
Wednesday
Jan 23
ThursdayJan 24
Abnormaltradingdetected
PositionsIdentified
-Inform Gov of
Banque deFrance
- Postpone allcommunication
Unwinding
Begins- Unfavorable
marketconditions
UnwindingComplete
- Board Convenes
PublicDisclosure
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System vulnerabilities
Security policies
IT controls including:- General controls- Application controls
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Management|Organization|Technology
Unauthorized AccessInternal Control Breach
Managers failure to identify key error
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Kerviels ethical misconduct
Failure of internal controls
Management and Supervisors
IT Audit Controls
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There was definitely an ethical violation
Internal controls should have been stronger
The leader of Socit Gnrale should havemanaged the issue better
Management and colleagues were complicit
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What motivated Kerviel?
Were co-workers aware of his activities?
How could management not have known what Kerviel wasdoing? Did they look they other way for the sake of profits?
Was there a culture of risk taking?
How the compliance departement not have flaggedKerviels positions?
What ethical obligations does a company have to disclosethis type of incident?
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http://www.youtube.com/embed/gNa8329ilyQ
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The campaign: authentic?
The idea: nave?
The reality: difficult industry
The conclusion: culture shown through the
reaction after 2008
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