Time to foster a culture of admission

In this instance, an individual found himself in a position where he felt he needed to take risks with the bank's money to dig himself out of a hole. The trader now faces criminal charges and a possible spell in prison.

Undoubtedly, those who find themselves in these situations must shoulder the lion's share of the responsibility for their own and the bank's misfortune. But these trades occur in the context of an environment that discourages people from admitting their mistakes.

So while it is important that management has knowledge about and control over how the trading floor operates, it is just as important that it fosters a culture where staff feel they can own up to errors.

It is where this is lacking that people try to cover their tracks and take ever greater risks in a doomed attempt at making right the initial mistake.

An environment where staff can hold up their hands and admit to mistakes will lead to them feeling more confident in taking a reasonable level of risk, while stopping them feeling like they need to double the stakes every time they make an error that costs themselves and the bank money.

It appears that the unfortunate Terrence Gumbs of JP Morgan could not face the prospect of telling management that he had made losses. It is obviously beholden on management of any organisation that operates in a risky environment to make sure the staff know what the risks are and how to minimise them. What is less obvious and more difficult, but just as important, is that they enable staff to admit they're in trouble.

However, this is just the latest in a long line of trading scandals, and where the stakes are so high there is virtually nothing anyone can do to ensure it won't happen again.