The document discusses the risk management failures at Société Générale, which led to significant financial losses due to fraudulent activities by a trader, highlighting the critical role of human resources in banking. It presents a theoretical framework examining the impact of occupational stress on value destruction and emphasizes the need for improved communication and trust within organizations. The research suggests addressing root causes of risks and developing new methods to mitigate human-related risks in financial services.

1. When the main risk comes from
the management process itself
1
Dr Emmanuel Fragnière, CIA
Hes-so School of Management Sierre
10th Annual GRC Summit 2016 - London

2. 11/10/2016Magali Dubosson Torbay 2

3. 11/10/2016 3
IN JANUARY 2008,
THE BANK SOCIÉTÉ GÉNÉRALE
LOST APPROXIMATELY
€4.9 BILLION
CLOSING OUT
POSITIONS OVER
THREE DAYS OF
TRADING
BEGINNING JANUARY
21, 2008,
A PERIOD IN WHICH
THE MARKET WAS
EXPERIENCING
A LARGE DROP IN
EQUITY INDICES.
Source: https://en.wikipedia.org/wiki/2008_Société_Générale_trading_loss
THE BANK STATES THESE
POSITIONS WERE
FRAUDULENT
TRANSACTIONS CREATED BY
JÉRÔME KERVIEL,
A TRADER WITH THE
COMPANY.
THE POLICE STATED THEY
LACKED EVIDENCE TO
CHARGE HIM WITH FRAUD
AND CHARGED HIM WITH
BREACH OF TRUST AND
ILLEGALLY ACCESSING
COMPUTERS, KERVIEL STATES
HIS ACTIONS WERE KNOWN TO
HIS SUPERIORS AND THAT THE
LOSSES WERE CAUSED BY PANIC
SELLING BY THE BANK.
As with every service
activity, human resources
play a key role in the
banking industry.
In these hectic times,
collaborators may have lost
their bearings.

4. Methodology
• Literature review
• A priori hypotheses.
• 35 semi-directed interviews.
• Content analysis (with the help of RQDA)
• New theoretical framework
11/10/2016 4
Dubosson M., Fragnière E., Pasquier M. and Reynard C., “How human
risk could lead to value destruction in services: an exploratory study
about occupational stress in the Swiss wealth management sector”,
XXVI. International RESER Conference, pp. 492-511, 2016.

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Job demands‒resources model (Bakker; Demerouti, 2008, 218)

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Research model developed by O’Donoghue et al. (2016) considering both employee
well-being and employee ill-being

7. Job resources
- Autonomy
- Job control/Participation
- Performance feedback
- Social support
- Supervisory coaching/
Leadership
- Learning opportunities
- Rewards Job resources
- Job content/Skill variety
- Competence/Capabilities
- Job security
Job demands
- Work pressure
- Excessive workload
- Demanding clients
- Cultural context/Climate
- Changes/Turbulence
- Organizational roles
- Role conflict
- Role ambiguity
- Poor environmental
conditions
Ill-being
- Job dissatisfaction
- Health trouble
- Psychological symptoms
(Anxiety, Depression, …)
- Negative stress
- Disengagement / Cynicism
- Exhaustion
- Burnout
Value destruction
- Extra-role lack of
performance
- In-role lack of
performance
- Decreasing financial
returns
- Lack of
adaptability/Creativity
- Customer dissatisfaction
(perception of bad service)
- Employee turnover
- Employee absenteeism
Revised model (based on Bakker; Demerouti, 2007 and
Donoghue, 2016) used for coding purposes
Hypotheses

8. It’s like Foreign Legion. You come with your weapons
and equipment. You don’t care about your employer.
Employees are like mercenaries.
(Interview 9 – chief security officer)
8

9. Human risk –
Value destruction loop
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Job
demands
Job
resources
Ill -being
Value
destruction

10. 10
Bad leadership
Lack of social
support
Work pressure
Work overload
Exhaustion
Burnout
Stress
Employee
turnover
Absenteeism
Human risk –
Value destruction loop

11. 11
Lack of job
security
Bad leadership
Changes and
turbulences
Job
dissatisfaction
Disengagement
Cynicism
Internal fraud
Human risk –
Value destruction loop

12. Concluding
comments
• Value destruction reinforces stressors as part of a vicious
circle (human risk – value destruction loop)
• There is a contagion effect
• Address the causes at the origin of the risks rather than its
consequences – development of new methods
• Need for more proximity, direct communication and
trust
• Test reliability in different industries
• Further quantitative research
12

13. Our bank is like a steamer. We regularly increase the
heat. We don’t know when it’s going to explode. But
when it will, damages will be huge.
(Interview 7 – private wealth advisor)
13

14. Including the human
factor in risk software
• We have been collaborating over the last ten years
with OXIAL to integrate our applied research on risk
management in a real risk software
• We continue to work with OXIAL engineers to build on
the notion of human risk in their software
• OXIAL GRC Solutions are unique in this respect
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15. Emmanuel.fragniere@hevs.ch
11/10/2016 15Magali Dubosson Torbay
Thank you for your attention !