UBS CEO Oswald Grübel has resigned on 24 September 2011, after the recent unauthorized trading scandal, which has caused the bank to suffer from US$2.3billion losses arising from unauthorized transactions. Sergio Ermotti, a veteran Merrill Lynch executive, has been named as the interim CEO to lead the company.
Despite achieving impressive turn-around and strengthened UBS’ fundamentals during his tenure, Oswald Grübel stepped down after the unauthorized trading done by the rogue trader, 31-year-old Kweke Adoboli.
The board and the management of this Swiss bank are in the midst of investigating this scandal.
This entire incident re-emphasized the importance of having a strong internal controls system in place. CEO might not be the individual designate the internal controls in-place. However, a CEO needs to ensure that strong internal controls are in place to prevent/ identify unauthorized transactions. Hence, it appears to the public that Oswald Grübel has stepped down as he assumed the responsibility of unauthorized trading occurred.
There are five key elements in an internal control system, namely:
a. control environment,
b. risk assessment,
c. control procedures,
d. information & communication, and
It’s evident that CEO need to be heavily involved in “information & communication” and “monitoring” components. To illustrate, there must be proper channel for all necessary information to be heard / listened by senior management,. It’s also crucial to ensure that appropriate level of monitoring activities been carried out.