Avoiding the Pitfalls of Single System Dependence: Lessons from the JP Morgan Incident

Avoiding the Pitfalls of Single System Dependence: Lessons from the JP Morgan Incident

AU Energy Compliance, Compliance, NT Energy Compliance
In today's fast-paced business environment, companies often rely on a single system or process to ensure quality oversight and control. However, this can lead to significant risks and problems, as demonstrated by the JP Morgan incident in 2012. The JP Morgan incident involved the bank's use of a single system, used by its trading operations in London known as the 'London Whale', to compute VaR (Value at Risk). This system, contained in a single Excel file, failed to accurately identify and assess the VaR associated with the bank's portfolio of complex financial instruments, leading to a multi-billion dollar loss. A task force report noted 'Spreadsheet-based calculations were conducted with insufficient controls and frequent formula and code changes were made.' The incident highlights the dangers of relying on a single system…
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