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Published on April 17, 2008

The recent Societe Generale scandal reinforces the need for financial institutions to strengthen their operational risk management (ORM). Fraud is just one of many operational risks that financial institutions need to manage. Interestingly, if one looks at the history of banking failures, a number of them, such as Barings and National Australia Bank, have been due to poor ORM. However, few financial institutions had a structured approach to ORM until only recently when the Basel Capital Accord II required financial institutions to allocate capital for operational risk and a framework for operational risk management.

On April 29, a seminar on fraud risk will be held in Bangkok and is worthwhile for all financiers and market watchers to attend.

KPMG Thailand is organising "Mitigating Fraud Risk in Financial Institutions" on Tuesday, April 29, at the Peninsula Hotel.

Bank of Thailand governor Tarisa Watanagase and former BOT governor MR Pridiyathorn Devakula have accepted to address the seminar along with KPMG specialists in this field.

The seminar will be conducted in English.

The speakers from KPMG are IG Chandran, partner in charge of advisory from KPMG Phoomchai Business Advisory, who will speak on "Rogue Traders: Barings and Societe Generale: What Went Wrong?". Tim Bass, executive director of KPMG Phoomchai Business Advisory, will speak on "Threats to Cyber Security : Issues and Insights", while John Lee, head of Financial Services and Financial Risk Management (For Malaysia and Asia Pacific), will speak on "Combating Fraud Using ORM: How to?".

KPMG said in its statement that the latest incarnation of a "rogue trader" has cost a bank billions, but other investment banks hoping to avoid the same fate need to address fraud as a major strategic risk. Although traders who lose millions making unauthorised trades generate headlines almost every year, industry observers say few banks have instituted changes to catch fraudulent trading activity before it spirals out of control. Banks set up fraud risk management programmes but they rarely change as their business models change.  

"Rogue traders usually do not act like other types of criminals, making traditional fraud detection methods worthless," KPMG said.

The Nation