Scandal at Societe Generale: Rogue Trader or Willing Accomplice?

Case Solution

Russell Walker
Kellogg School of Management ()

This case includes the scandal that occurred at Société Générale in 2008 when a merchant, Jérôme Kerviel, lost almost € 5 billion to the well-known French bank through his unauthorized trading. The case describes Kerviel’s plans, as well as SocGen’s internal monitoring and reporting processes, organizational structure, and culture so that students reading the case can identify and discuss deficiencies in the risk management practices of the the company. The case and the epilogue also describe the reactions of the French government and Finance Minister Christine Lagarde to the scandal (for example, imposing a fine of 4 million euros and tightening regulations), prompting students to consider the role of the government in overseeing sound risk management in key industries (such as banking) that are closely intertwined with entire economies. Finally, the case encourages students to think critically during classroom discussion about whether it is really possible for a rogue trader to act alone, what elements in a work environment allow or even encourage risky behavior, and who should be responsible. in such scandals. Interestingly, this case highlights a story that is not unique. Before Kerviel’s transgressions, there were similar scandals by Nick Leeson at Barings Bank and Toshihide Iguchi at Daiwa Bank, but history has repeated itself. This case provides students with a vivid example of the dangers of internal self-inflicted risks to organizations and opens a discussion on how to avoid them.

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