Culture is less what a manager says than what the people around them experience when deciding whether to tell them the truth. Information travels up the hierarchy in edited form, and the higher it gets, the better it looks.
On the evening of 24 March 2021 the chief executive of Credit Suisse’s investment bank and the group’s chief risk officer learned of a client called Archegos. According to the report that the bank’s board commissioned and published, neither of them recalled having heard the name before.1
The next day the bank issued margin calls for more than $2.8 billion. The client could not meet them. The final loss came to around $5.5 billion.2
That is how the situation looked from the top. Two experienced people who know how to read risk learn of a major exposure the day before it turns into a loss. From the outside it looks like inattention. From the inside it looked like calm, because until that moment nothing suggested otherwise.
Now the same from below.
The second reading: what could be seen two floors down
Archegos was a one-man family office. It had no formal risk management, and its positions were extremely concentrated and extremely leveraged.
The bank had that information. The report says so plainly. The risk systems identified the acute risks and people systematically ignored them.3 Nobody was facing a risk that could not be measured. The systems had measured this one, displayed it and flagged it repeatedly.
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