In the wake of the Kweku Adoboli rogue trading incident, people are understandably excoriating "lax" compliance and risk management processes at UBS. But it would be unfair to some degree to state that the bank was wholly naïve to the threat of rogue activity.

Like other banks, UBS focused more on resources and executive talent than on the issue in the aftermath of the Jerome Kerviel affair, which made clear that such incidents carry a lot of PR risk as well as direct financial risk. At UBS, according to Financial News, a high-level risk committee, which comprised no less than four board directors, met nine times for an average of five and a half hours and had three additional calls lasting 50 minutes to discuss and monitor procedures. Other committees dedicated to risk oversight and compliance at the bank met even more frequently, often with the chief risk officer, Maureen Miskovic, and even CEO Oswald Grübel, to discuss risk management and audit processes.

There's no reason to think that the bank was ignoring the issue. Across the industry, the conventional wisdom was that all banks had strengthened the risk management function, though there is obviously more work to be done. The arrival of Miskovic from State Street was hailed as something of a risk management hiring coup. Now she and Grübel find themselves under pressure to explain how all this happened. To some degree, it underscores again that an employee with strong knowledge of the compliance system---Adoboli worked in the back office before become a Delta One trader---and a yearning to commit crime will always be able to find a way to game the system.

For more:
- here's the Financial News article
- here's a look at the UBS risk team

Related articles:
UBS rogue trader Kweku Adoboli: Shades of Jerome Kerviel  
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