| HBS Case Collection
(Revised April 2010)
Societe Generale (B): The Jerome Kerviel Affair
This case illustrates the tension/balance that firms with complex and risky business models must consider in designing their internal controls. It describes the environment in which a derivatives trader engaged in massive directional positions on major European stocks and indexes without being detected for over a year. Although the case could be used to teach the basics of internal controls, it is likely to be more effective by eliciting a debate about how predictable the incident was, and whether or not there was anything fundamentally flawed about the company's choices in terms of strategy, control systems and culture. It also provides an opportunity to discuss the challenges of dealing jointly with a market-wide crisis (subprime) and a company-level crisis.
Keywords: Risk Management;
Financial Services Industry;