Why cultures fail: The power and risk of Groupthink

Click the button below to access the full article.

20% Discount Offer

We are offering a 20% Discount to an annual subscription to Journal of Risk Management in Financial Institutions that includes FOUR 100-page issues both in print and online.

Subscribe online here and use discount code JRMCROLI20 to receive your 20% Discount.

Abstract: Why do terrible things happen under the watch of good leaders? Why do very smart, dedicated, well-meaning leaders make horrific mistakes? Can these problems be foreseen? How and why do these problems happen? How is it that a robust system of checks and balances designed to prevent these situations fails? Are these problems likely to happen again? In this paper, the power and risk of Groupthink is explored by examining two cases (London Whale and Sales Practices) at JPMorgan Chase and Wells Fargo. Through specific examples, the paper demonstrates that what happened at these organisations can happen in any company.

Keywords: conduct risk, Groupthink, London Whale, Sales Practices, culture failure, cognitive biases

Yousef A. Valine is an award-winning author, and Executive Vice President and Chief Risk Officer of First Horizon National Corporation. He has leadership responsibility for oversight of risk management and compliance activities across the firm. Prior to joining First Horizon, Valine was Executive Vice President of Wachovia Corporation for 24 years. He served as the head of the Institutional Risk Group and also as Chief Operating Officer of the Risk Management Division.