Devoted to Managers and those that seek to improve their management skills

The extraordinary, but not uncommon story of how a lone, rogue individual caused the French investment bank Societe Generale to lose $7.2 billion, underscores the need for new and better controls in the industry.

It may even be worse, this guy may have been the cause of the global market sell off that evidently so concerned the Federal Reserve in the U.S., that it caused them to go into panic mode and drop interest rates by 0.75 percent. When we and others talked about that recently, there were questions on the way it was done, and the signal it may have sent to the rest of the world. Now we may understand it better, taking into consideration this fiasco that had the potential to spill over into the U.S. markets as well.

Societe Generale learned about the scandel on the weekend of January 18-19. On the following Monday when the European markets opened up, they started to deal with it by selling the positions taken by the rogue trader in the futures market. The problem was, it sent signals to European investors that a large player was now taking negative outlook on the global and European markets. That's what caused most the recent problems.

Richard Cellini, vice president of Integrity Interactive, said about the situation, “This is a 15-year-old story, or more. Banks and lawyers are very backward looking. They have this happen to them over and over again and never learn how to fix it.”

When you consider the power that one individual had that could cost his company and potentially investors around the world billions of dollars, and maybe even have forced the hand of the Federal Reserve, you know it's far past time to take care of bringing far better checks and balances into the system.

The reason some of these individuals have been able to do this over the years, is they work in places within investment banks that teach them how the internal controls work. Once they understand that and how to get around them, they have simply made these huge attempts at benefitting from it.

Some people act as if this is something that can't be contained, but that's almost unbelievable in its potential results. The answer to that would be for investors never to put their money in them again.

The truth is there is a way to do it, and that way must be found and enacted. If a few people wanted to bring the world economy down, they could do it in coordination at various key banking institutions around the world. That's something unthinkable in what it would do.

Whatever it takes to protect this from happening again, those steps must be taken. To think that this guy and others in the past are able to take billions of someone else's money and gamble it away in futures markets is a black mark on the financial industry.

As the industry has proven from the subprime mortgage fiasco, they have risk management problems that are now systemic to the industry. They need to be far better at handling other people's money and protecting it. If they aren't we'll find other, safer places to put our money.