Risk management acronym of the day

By Felix Salmon
April 29, 2009

From Mimi Swartz’s 9,700-word monster article on Sir Allen Stanford:

Stanford’s now demoralized compliance department—responsible for making sure the company followed the rules—coined a new term: FUMU, for “fuck up and move up.”

I think this happens at many banks, if not quite as egregiously as it happened at Stanford. It’s the Peter Principle taken one step further: if the people in charge of promotions are themselves utterly incompetent and/or malign, they might well end up promoting fellow-incompetents rather than anybody honest or good at what they do. And it only takes one look at Stanford’s now-arrested chief investment officer to see the natural conclusion of that process.

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Comments
3 comments so far

The article says that in the course of her duties Pengergast was “using a computer-generated pie chart she created.” If that’s not evidence of utter incompetence, what could be?

Posted by bdbd | Report as abusive

My depression era parents would say “the bad money drives out the good.” I never really saw that in action until I worked at a Fortune 500 company.

But I don’t think it’s always about incompetence being rewarded for reasons of social solidarity. In a world of very, very, very high pressure to “beat the number,” people who promise real, attainable growth through smart strategy and solid execution are uninteresting to management. People who “innovate” and “make big bets” to try to Beat the Number are loved and rewarded, even when the end result (repeatedly) is failure that makes everyone else’s job harder.

I haven’t seen anyone else mention this in the Wall Street context. How would any honest trader or fund manager advance (or survive) if the dishonest (or self-delusional) ones are posting higher short term numbers through holes in the accountability system? Short answer is they don’t.

Thus the system self-selects for fools and crooks. And after a short period, those are the only inhabitants of the asylum. You know, Tim Geithner’s social circle.

Posted by DollarEd | Report as abusive

I believe the expression “fuck up and move up” was first coined in the army during the Vietnam War, and was mention in the book, The Best and the Brightest.

Posted by DavidF | Report as abusive
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