Integrated IT could have prevented Barings collapse, says Nick Leeson

Integrated IT systems could have prevented the collapse of Barings Bank, says Nick Leeson, the trader who hid £826m in losses that led to the bank's demise in 1995.

Integrated IT systems could have prevented the collapse of Barings Bank, says Nick 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.

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