#99-42-B
"The Key to Risk Management: Management"
Abstract: The Barings, Daiwa Bank and Sumitomo Corp. financial debacles in the mid-1990s suggest that management failures rather than misfortune, errors, or complexity are a major source of the risk of financial debacles. These errors are systematic and are a concommittant of the structure of trading and of human nature. Risk management systems must take these facts into account. Two years after this chapter first appeared, John Rusnak, a trader at Allied Irish Bank’s US subsidiary lost US$691m in unauthorized trading.
JEL Classification: D82, F31, G29, L29, M14
Keywords: risk management, foreign exchange, principal-agent, failure
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