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UCD-STAFFORDBEER  January 2008

UCD-STAFFORDBEER January 2008

Subject:

Re: Risk Management: International Banking

From:

Stuart Umpleby <[log in to unmask]>

Reply-To:

Forum dedicated to the work of Stafford Beer <[log in to unmask]>

Date:

Fri, 25 Jan 2008 23:35:52 -0500

Content-Type:

text/plain

Parts/Attachments:

Parts/Attachments

text/plain (79 lines)

How often is "the system" reassessed by "devious thinkers"?  Perhaps
we need new kinds of auditors who check not only "the books" but also
look for "circuit breakers" (I think these were installed in the stock
markets after 1987) and "fail safe mechanisms."  Probably inspection
criteria need to be reassessed from time to time.  Bridges are
inspected, but did not prevent the Minneapolis bridge collapse.
Perhaps someone needs to be assigned to check on the follow up to an
inspection.  For example, I think New Orleans did a simulation of a
hurricane about 6 months before Katrina, but still people did not seem
to know what to do.  Maybe we need to have more "games" (like flight
simulators) for the operators of complex systems.  I believe that Abt
Associates is a large consulting firm that started by doing games and
simulations.
  Perception and where we focus our attention is very much a part of
the problem.  Everyone who worked with computers knew about the "year
2000 problem" in the 1960s, but it "took us by surprise" in the 1990s.
 A problem with complex systems is that solutions are easier and
cheaper to implement far in advance.  But convincing people that
action is necessary is easier when a crisis is immanent.  Simulations,
like the global models, help to initiate a conversation.
   Efforts to penetrate computers have created a job category for
computer security.  Perhaps every organization that operates a complex
system should have a "complexity auditor."  This would be a great job
for someone planning to quit and "bring it down."  Sigh.  :-(
   I once had a conversation with the man who was in charge of the
computers for the US Dept. of Treasury.  His computers wrote all of
the checks for the Fed. govt. -- social security, office furniture,
bombers, buildings, student loans, govt salaries, etc.  He said if
people knew how the fed. govt operated, there would be "blood in the
streets."  I asked him to be more specific.  He replied, "Enough
said."  Those inside know some of the vulnerabilities.  Process
improvement and redesign should be on-going.


On Jan 25, 2008 9:19 PM, Roger Tessier <[log in to unmask]> wrote:
> I have been intrigued by the discussions of safety in air travel, but
> the front pages of my newspaper over the last few days make me wonder
> what deep (or even obvious) insights the VSM offers with respect to
> the immediate disaster at one of the world's largest banks, and the
> world economy.
>
> As I understand it, a junior trader at Societe Generale SA (apologies
> for missing accents) managed to lose his employer some $7 Billion
> through fraudulent trades over an extended time. The story points out
> that he had previously spent 5 years in the back offices, where he
> learned all about the "six-layer security system" that prevented such
> things, but then he switched jobs and became a trader, at roughly
> $150K per year.
>
> The story also suggests that the drastic drop in world stock market
> values over the last few days was caused, or at least triggered, by
> the French bank desperately dumping its holdings for cash, rather
> than the credit collapse related to the pathological US sub-prime
> mortgage market.
>
> How could such a person with so little authority cause such massive
> disruption? Wasn't this all supposed to be fixed after Leeson/Barings
> and Kidder Peabody and Sumitomo and WorldCom and Enron and so on?
>
> So what's really going on here?
>
> The system seems to be deeply flawed, and that's scary, given its
> scope. Are we afraid?
>
> For more information go to: www.metaphorum.org
> For the Metaphorum Collaborative Working Environment (MCWE) go to:  www.platformforchange.org
>



-- 
Stuart Umpleby, Research Program in Social and Organizational Learning
2033 K Street NW, Suite 230, The George Washington University,
Washington, DC 20052
www.gwu.edu/~umpleby, tel. 202-994-1642, fax 202-994-5284

For more information go to: www.metaphorum.org
For the Metaphorum Collaborative Working Environment (MCWE) go to:  www.platformforchange.org

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