It was reported yesterday that a so-called “rogue trader” lost $2 billion at UBS. A BBC correspondent reporting on the incident wrote:

“The disclosure that it was [the trader’s] decision to inform his colleagues of his actions that set alarm bells ringing at UBS, rather than its own monitoring system, will add to concerns that investment banks simply aren’t capable of controlling the huge risks that their traders take.”

If huge investment banks can’t manage and control the risks that their traders take, how well do you think non-financial firms are controlling the risks that their managers take?

Not very well, I think.

And I am not even thinking about criminal behavior. I am thinking about the billions of dollars wasted every year by companies that fail to manage, monitor, and control risks associated with project spending.

It isn’t that it can’t be done or that it is too difficult; it isn’t that it costs too much; and it isn’t that there is no return on investment for doing it.

The fact is that most managers simply don’t want to make the effort to learn how to do it properly. So they settle for using best guesses or weak and meaningless systems that are often worse than guessing. They just roll the company’s dice over and over again without ever trying to understand the odds.

And then they wonder why so many promising projects fail, just as I am sure that USB shareholders are wondering how their company could lose $2 billion by “rogue trading.”

By the way, if those billions in “rogue trading” bets had been successful, do you think the trader would still have been arrested?



One excellent way to manage project portfolio risk is by using Optsee® to maximize portfolio value while controlling costs, project risks, portfolio risks, and resources. Click on the link to watch the short video “Predicting Project Portfolio Value Using Simulations” to learn more.