It seems that Bernard Madoff’s $50 Billion “pyramid” investment scheme is little more than a scam, albeit on a massive scale. The fall-out is likely to be global and the UK news reports state that major banks are “frantically trying to find out if they have exposure to the fraud;” which means of course that they don’t know and have been blind-sided, again. Why?
For several reasons. Here is the obvious list of likely factors:
- alleged fraudulent activity of the fund manager, Madoff
- misplaced trust by investors
- regulatory weakness
But the less-obvious factor is likely to be the widespread absence of effective information systems. Clearly regulators and investors need to look long and hard at how this fraud slipped so easily below their management radar.
Systemic failures
Similar information failures have been the signature stories of the past year or so (2007 – 2008). This isn’t just about isolated incidents, it appears systemic.
Please take a few moments to reflect on the financial crisis and ask yourself this question: Do you think that the investments in IT for governance have been largely wasted?
I do, the evidence grows stronger by the week. But I live in hope that, one of these days, people will finally wake up and realise that it’s time to invest in effective information systems.
