Risk management systems and controls

The UK Financial Services Authority (FSA) has published Market Watch 25 (pdf), which focuses on firms' reviews of their systems and controls in light of the Société Générale (SG) 'rogue trader' incident.

Market Watch highlights the measures firms should consider when reviewing the systems and controls which protect them against 'rogue trader' risk.

Amongst other areas, Market Watch looks at:

• Front office culture and governance, in particular are traders encouraged to take two-week continuous holidays, and appropriate segregation of front office staff from middle and back office functions;
• The use of suspense accounts;
• The quality of management information, both routine and outside normal parameters; and
• Elementary IT precautions, such as whether access to systems is password dependent.