China's Control Problem

When it emerged last week that China Minsheng Banking Corp. had sold $436 million in suspect wealth-management products, fears rose of a collapse in the loosely regulated market for such products. It now looks like a more mundane case of forgery involving a branch manager. But that's not exactly reassuring: In fact, it suggests a different kind of systemic risk.

Internal controls -- such as auditing, document verification and risk management -- are part of the dull machinery of financial markets, which most people never notice. Yet such tedious tasks are vitally important. What can start as corner-cutting at one business unit can quickly spiral into a threat to the whole company and beyond.