DENVER – Jordan Belfort, the real “Wolf of Wall Street,” told an audience here at the RIMS annual conference that he knows many kinds of risk – including the “lapse of ethical judgment.”
Belfort, who spent nearly 2 years in prison for stock market fraud that resulted in investors losing about $200 million, gave the opening keynote April 28 at the conference.
Belfort said his speaking fee from RIMS – and most of the fees he generates from books, seminars, and other revenue streams – go to paying restitution. Rather than be consumed by guilt, he said he chose to be active in his remorse by paying restitution.
A self-described, born-entrepreneur and salesperson, Belfort told the packed room he learned about risk early in his career. One of his first business ventures went under because he hadn’t considered the risks related to overexpansion, undercapitalization, and his employees.
Now, he says, he knows about all kinds of risk – reputational risk, the risk of losing everything, of not asking obvious questions and of ignoring common sense, and finally, the risk of “one lapse of ethical judgment.”
That’s where risk begins, he said. After the first lapse, he says he resumed doing the right thing, but “my ethical line moved. And then the next time, it moved further.”
“After a year I found myself doing things I thought I would never do, and it all seemed perfectly ok,” he said.
Belfort said he believes a real danger about risk is when people assume someone else has done the real thinking and analysis rather than do it for themselves. This may have happened in the years leading up to the 2008 financial crisis.
“You have to be asking yourself, how could a [global financial crisis] happen? People didn’t mean to blow things up,” he said.
He recalled his reaction to his first subprime borrower – that it didn’t make sense to him, but someone else must have figured it out, so it was ok – and the practice was replicated throughout the financial system.
“Everyone thought someone else has it figured out,” he said. “As a risk manager, you have to be certain that someone has it figured out. It comes down to human beings not using common sense when they are underwriting.”
Among his other pieces of advice for the risk audience, whether experienced or novice:
—Dig below the surface. Don’t buy the party line.
—Master the art of ethical persuasion and communication.
—Success without ethics and integrity is failure.
Patricia O’Connell writes for the Advisen Risk Network. She has more than 15 years of experience writing about a variety of business subjects, including strategy, the C-Suite, and management. She is the former news editor at Businessweek.com, where she oversaw coverage for the daily web site.
