The "race for quality has no finish line. So technically it's more like a death march," according to the inspirational poster that Tamara K. Salmon, senior associate counsel at the Investment Company Institute, was reading at the outset of a session Tuesday at its Mutual Funds and Investment Management Conference on the biggest operational risks fund firms face.

There were four 'process risks,' ranging from a misplaced belief in how well-run a machine a company is operating to 'we have the best people' to 'we have the best technology' to 'there is no dysfunction in our organization.' There were six 'substantive risks,' from dwindling resources to data security to inadequate procedures to headline risk to contingency planning risk to compliance risk.

But let's add one that never appears on such lists, but which the panelists for Salmon's discussion alluded to more than once. Stupidity.

The poster child for this error is AXA Rosenberg, the California investment management firm that a year ago agreed to pay $217 million to cover investor losses as well as a $25 million civil penalty, in a settlement with the Securities and Exchange Commission regarding a coding error with its risk model.

The SEC charged three of the firm's entities-AXA Rosenberg Group LLC (ARG), AXA Rosenberg Investment Management LLC, and Barr Rosenberg Research Center LLC-with securities fraud for concealing a significant error in the computer code of the quantitative investment model that they use to manage client assets.

The SEC found that the error, which was introduced into the model in April 2007, was eventually fixed for all portfolios. However, "knowledge of the error was kept from ARG's Global CEO until November 2009.''

AXA Rosenberg announced in July 2010 that chairman Barr Rosenberg resigned following an investigation into errors in the company's data systems.

The discovery of AXA Rosenberg's coding error prompted several of its institutional clients to part ways with the firm.

The only person who appears to have come out of this unscathed is the senior executive that the SEC said helped it build its case. He wasn't charged.

But saving one's own skin is not the point. Your charge is to save your company's skin.

And the only way you do that is when you see something, say something.

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