The full story of how Société Générale incurred losses of around £3.7bn following the activities of a 'low level' derivatives trader has yet to be written. However the possibility of flaws in the bank's system of internal controls has already been the subject of much press speculation. As this report emphasizes, simply building and implementing your control systems is not the end of the job; they need constant review. And you also need to have an awareness that people (whether with malevolent intentions or otherwise) may well try to circumvent the controls.

This report was first published last year by the Professional Accountants in Business Committee (PAIB) of the International Federation of Accountants (IFAC). In producing this series of interviews with chief financial officers, and other leaders, the PAIB has provided you with an opportunity to see how other organisations view their internal control systems and how they have ensured that they are as robust as possible. One of the most valuable features of this report is the opportunity to share the CFOs' experience and to read their practical suggestions in the form of the 'key lessons' box at the end of each interview.

Even before recent events, the original IFAC version of this report was the most downloaded paper produced by the PAIB committee in 2007. Because risk management is consistently one of the top 10 issues highlighted by our annual technical needs survey, we felt that this was a useful document to distribute to as wide an audience as possible.

The Financial Services Authority is currently urging banks to review their controls in light of the Société Générale furore. This could be a useful exercise for all of us, whatever sector we operate in.

Published by the Business and Management faculty (SR20 - March 2008)

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