The Risk in Risk Management Financial Organizations & the Problem of Conformity

Banks take very large risks by herding in the same perilous directions while believing that they are safe and unique. Why and how is this the case? Gregory Vit suggests that some groups within organizations - including both fraudsters and risk governors - can manage risk by understanding the process of conformity and going against it to their advantage. This book presents a unique framework that uses four different packages of constructs and organizational logics to understand conformity and deviance within investment banks and other large organizations. Vit's proposed framework demonstrates that most organizations can improve their understanding of risk by taking a more holistic approach. Furthermore, the book assembles eight case studies of massive risk mismanagement and walks the reader through these four different (yet complementary) conceptual perspectives on risk that might explain why and how economic rationality was overridden by social forces.
With the solid theoretical framework and practical examples to help organizations better understand the forces of conformity and risk that shape their success, this book has important theoretical, academic, managerial, and societal relevance.

Banks take very large risks by consistently herding in the same perilous directions while believing they are safe and unique. This book presents a risk management framework to understand conformity and deviance within investment banks and other large organizations. It suggests that some groups understand the dynamics of this conformity to their advantage. This requires a deeper understanding of the risk in risk management. Fraudsters can game the system to their advantage legally and illegally; therefore risk managers must understand the interplay of multiple logics in order to govern and manage risk. Featuring short illustrative cases of massive risk mismanagement, this book walks the reader through four risk management perspectives (economic, institutional, evolutionary and contrarian) that explain why and how economic rationality is overridden by social forces. By understanding conformity and deviance, groups within organizations will be better equipped to manage risk and go against the tides of conformity to their advantage.

@Selected Contents: Introduction 1. The Problem of Conformity in Financial Organizations 2. The Holistic Risk Management Model-HRMM 3. Institutional Risk management Case 1: The Canadian Banking Paradigm 4. Contrarian Risk Management Case 2: The Parmalat Fraud 5. Evolutionary Risk Management Case 3: The National Bank of Australia Fraud 6. Evolutionary Risk Management Case 4: The Gaspesia Private-Public Partnership Fiasco 7. Contrarian Risk Management Case 5: The UBS Sub-Prime Meltdown Case 6: The SocGen Fraud 8. Conclusions Regarding the Risk in Risk Management

Gregory B. Vit, Ph.D. is Associate Professor (Clinical) of Strategy and Organization at McGill University’s Desautels Faculty of Management where he teaches Strategy, Managing Innovation and Entrepreneurship. Professor Vit’s industry experience spans three decades and includes working as Vice President with the Bank of America’s Global Corporate and Investment Banking Group where he specialized in international capital raising and corporate finance. He also worked as a financier in sales and structuring at TD Securities Inc.’s Capital Markets and Derivative Products Group Desk. Professor Vit is also director of the Dobson Centre for Entrepreneurial Studies at McGill University where he continues to research and write about entrepreneurial financial fraudsters within large organizations.