09 JanLessons Learned – Let’s start at the beginning
Banks are amazing places. 24. Years, not the TV show with Kiefer Sutherland as the redoubtable Jack Bauer. That’s how long I have been in the investment banking business for. No guns, not even bad guys, Islamic financing but no Islamic terrorists. But still, on reflection a lot of very amazing things happened in those years. Actually, as upset as the world-at-large may be about banks and bankers in early 2012, I would in all earnestness tell you that we should all be grateful that banks are not responsible for roads and cars. Chaos would not even begin to describe how bad it would be.
I am an Operations guy, which is sort of like a plumber; making sure the place works every day. The title of this blog: “Lessons learned” is drawn from a phase of my career at Goldman Sachs. If you are in the financial services industry, you will have perhaps heard the phrase “Operational Risk”; there are lots of very fine definitions for this (see: http://en.wikipedia.org/wiki/Operational_risk), but put simply, this is about the stuff that does go or might go wrong day-to-day, not the markets moving but the plumbing working. During my time at Goldman Sachs, before we all called it Operational Risk, we had a very thorough process to look at the things that did go wrong. Back then Goldman was a partnership; the Operations partner, an ex McKinsey partner, used to work for a gentleman called John Thain who worked for the then managing partner, Jon Corzine. The Ops partner wanted me to make sure that his organisation learned from things that went wrong, because he did not want his head handed to him by his boss. Neither Thain nor Corzine have covered themselves in glory post days at Goldman Sachs. Apportioning blame and figuring out exactly where things went wrong for those two is something I will leave for wiser heads than mine, however, I would bet some money that there were some basic operational oversights in both cases.
My desire in writing this blog is to share some of those lessons learned. They are about some very basic, proverbially fundamental, aspects of how to run a bank properly. They are as valid today, as they were when they happened. They are as valid at any institution as they were at the one they happened at. When I ran the Operations Incident Review process at Goldman, we tried with “Lessons Learned” to help our global management group understand that what happened in Equities in Frankfurt could apply to Fixed Income in Hong Kong. There were always many voices in the choir chanting: “It’s different here, we are not Equities in Frankfurt”. Well, there were indeed lessons to be learned. Work should be fun, so I as I share the stories, I will try to add some humour, but jokes apart, all this stuff really happened.