Magazine article Risk Management

The Real Enron Risk: Energy Traders. (Risk Reporter)

Magazine article Risk Management

The Real Enron Risk: Energy Traders. (Risk Reporter)

Article excerpt

While government, political, judicial, legal, media and financial professionals have been probing into the root causes of Enron's collapse, the beast was before us the entire time. This was a predictable event when you consider the character and inherent risk profile of energy traders.

Successful energy traders possess powerful, dynamic and provocative personas. Their substantial intellectual gifts equip them to outpace competition by quickly conjuring and capturing lucrative deals within the complex hedge markets. This, however, has a dangerous flipside.

Research from CDR Assessment Group in Tulsa, Oklahoma, on energy traders--including some former Enron employees--reveals their profiles to be startlingly similar to those of incarcerated felons. The notable differences are that the traders tend to be more ambitious, energetic and resourceful. But like criminals, traders have an astonishing insensitivity to the welfare of others. Charm is often mistaken for care and sincerity and, with their ability to manipulate, energy traders can pull off the best of charades.

High-performing energy traders thrive on being on the edge, breaking rules and boundaries and scoffing at procedures. They have a tendency to be deceitful, reckless, oppositional and impulsive. These traits can be perilous without constraint.

Energy traders and incarcerated felons also have similar risk factors--negative personality traits that manifest themselves as ineffective coping strategies ingrained by adulthood. Energy traders tend to be emotionally volatile, cynical, detached and saboteurial. In fact, traders have more high risk traits than convicts. This translates into a variety of habitually dysfunctional behaviors that, over time, reveal themselves in the workplace, especially when stress levels are high.

A case in point: A number of traders left Enron for another organization. Later, this organization contracted with another ex-Enron executive to help design a curriculum for a trader's training academy. This individual successfully negotiated a deal with a senior vice president (also a former Enron trader) to be compensated $30,000 per month for one year, in a limited and unspecified role. …

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