Research Task

ECMT 3180:

Business Risk Management

[Individual Assignment]

Seoung-Suk Lee

308230868

Question 1 (20 marks)

Read the three attached documents in relation to the Exxon Valdez disaster of 1998.

The first is an extract from Wikipedia; the second is taken from the company’s web site, and the third is a newspaper article which appeared after the publication of the National Transportation Safety Board report into the disaster.

a) (10 marks) Using this information, identify any similarities or common elements between this disaster and the fraud at Societe Generale discussed in Chapter 1 of the Lecture Notes.

The two events are recorded as the largest ever of its kind in both cases. The Exxon Valdez oil spill off the coast of Alaska was the largest ever oil spill to hit US shores in history until the current BP oil spill in the Gulf of Mexico whilst the trading loss incident at Societe Generale in January 2008 remains the largest ever rogue trader loss in history.

In both events the companies laid blame on the individuals involved to control damages by blaming the oil spill on the Captains inebriation and the trading losses due to the rogue trader activities of the junior trader. But in both cases the fault and cause of the incidents are due to problems in the companies risk control management.

In the case of the Exxon Valdez oil spill, although the company blamed the incident on the drunken captain, subsequent investigations found multiple factors that led to the incident. A broken sonar system which was left unrepaired and a fatigued and over worked crew who had not been given sufficient nor even mandatory rest as well as failure to manage and supervise such conditions as well as the lack of a safety plan whilst sailing in unsafe waters.

In the case of the Societe Generale, the firm characterised the junior trader as a rogue trader who acted on his own behalf, the incident is to be also blamed on multiple factors which led to it. Kerviel...