Written on 25/07/2023

The FT is currently running a 30 minute film about Crispin Odey’s fund - telling a familiar tale of power, greed, hubris and downfall, such as fill the pages of the Old Testament, and the City for many centuries.  But it is also a tale of undetected risk in balance sheets.  Counterparty risks can lie undetected in all company balance sheets.  There is no FRS guidance on accounting for the risk that counterparties will not deal with you.  Nigel Farage lost his bank account with Coutts this week for not being representative of Coutts's inclusive culture, but the bigger story is how Crispin Odey’s corporate investors pulled their accounts due to poor publicity. 

Your business will at some stage, run into stormy waters, including poor publicity, and that is the moment when you will need your counterparties onside.  You need to be aware of this risk, and consider how you might control this risk.  You satisfy counterparties by putting in robust external controls such as a file checking regime and an annual external audit.  Follow external guidance and you really cannot go wrong.  Ignore the guidance (or sack the ethics committee as Odey decided to do) and you magnify the risk.

The amazing thing about Odey, is that he was not even on the FCA register as a Senior manager since 2020, just a certified person, and that too was removed in June 2023.  So he was barely on the radar.  But the firm carried his name, and regardless of approved roles, he was controlling the business. 

As the FT said in their film about Odey, “It wasn’t the company in the end, it wasn’t the courts, it wasn’t the police, it wasn’t the regulator, it was a bunch of journalists.”

After Woodford, everyone said, “never invest in a company named after its founder.”  And the collapse of this firm this month is a marker of how standards have risen.  Culture and our regulator has introduced counter-party risk into financial markets.  

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