Q1: Which types of risk have you identified in the case study? Explain why.
Analysis of the case study helps in understanding that French banking institution “SocGen” suffered the largest trading loss with that situation we can clearly see that there was regulatory problems in a bank itself as while reading the case I had a question in my mind that how losses in that a big amount could go totally unidentified and unnoticed inside the network of risk management in place at a major bank like Société Générale.
Also, it is worth mentioning about fraud risk as a risk in this kind of nature in “SocGen” was due to fraudulent behaviour of its employee.
There is also operational risk that highlights failure of an organisation in the context of day-to-day operation. As there are some categories of operational risk such as process risk, system risk, human error risk and external events risk but in this case there is human error risk as it refers to human behaviour and includes frauds, lack of integrity and honesty of employee. Also, about system risk as bank could use a system that could detect a fraud before losing that much amount of money
As well as it is worth to mentioning about compliance risk as in this case there is a breaking of regulations and laws.
We can mention about Reputational risk as this incident could have an adverse impact on a bank’s reputation and thus financial performance.