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Societe General

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    http://www.youtube.com/watch?v=4umCFROYkz

    http://www.youtube.com/watch?v=4umCFROYkzEhttp://www.youtube.com/watch?v=4umCFROYkzE
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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

    http://www.youtube.com/embed/gNa8329ilyQhttp://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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