Bloomberg News

Goldman’s Cohn Says Firms Burned by Poor Controls, Not Products

September 25, 2011

Sept. 25 (Bloomberg) -- Goldman Sachs Group Inc. President Gary Cohn said poor risk-management, not sophisticated products, is to blame for financial-company losses and failures.

“If you don’t invest in risk-management, it doesn’t matter what business you’re in, it’s a risky business,” Cohn said today at a panel discussion in Washington sponsored by the Institute of International Finance.

The cause of financial-company collapses dating back to Barings Plc or Drexel Burnham Lambert Inc. has “never been sophisticated products, it’s been a risk-management issue or a separation of duties problem” in which a trader was able to manipulate operational controls in the back office, Cohn said.

Goldman Sachs has a “robust separation of duties in our organization” between traders and back-office administrators so that traders can’t manipulate operational controls, he said. “We have just continuously reiterated a farther divide in how those people interact to make sure we’re protecting the assets of the firm.”

While Goldman Sachs allows employees to change jobs and move into the trading business from the back office, Cohn said the New York-based company ensures that those traders lose access to administrative processes they had in the back office.

--Editors: Peter Eichenbaum, David Scheer

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net


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