Integrated IT systems could have prevented the collapse of
Barings Bank, saysNick Leeson, the trader who hid £826m in losses that
led to the bank's demise in 1995.
"There were no integrated IT systems to keep track of what I was
doing," he told the closing session of the
RSA Conference 2009 in London.
"Barings was a complete mishmash of systems and relied heavily
on manual processes and was therefore incapable of assessing the
risk accurately," he said.
If there had been systems in place to share information across
the organisation, the situation that led to the bank's collapse
would never have arisen, said Leeson.
"No one was able to put all the information together, so no one
understood what was really happening, and that is why I was never
challenged," he said.
But very little has changed in the financial world since then,
with few organisations having IT systems in place that span the
whole operation, he told Computer Weekly.
"While every bank would want to mitigate risk, it is difficult
to sell that to the board because it is very costly to do," he
said.
Financial collapses like Barings have and will continue to
happen, said Leeson, until all organisations have systems in place
that link all the information together.
"What happened at Barings and subsequently at
Societe Generale and other banks is all down to poor systems
and controls," he said.
Many financial institutions are still missing the opportunity to
use integrated IT systems to monitor transactions to prevent harm
to the business in real time, he said.
IT systems alone would not solve the problem completely, said
Leeson.
There is also a real need for risk managers have the necessary
understanding of the business and the authority to take action.
"Few risk managers today have the authority they need to
challenge someone like me," he said.
Leeson believes this is one of the key changes that need to be
part of a worldwide review of the way financial risk is
assessed.