2- Sumitomo and perhaps others, paid people based on financial performance that they now say was incorrect for ten years. This may lead to lawsuits but at a minimum they must restate their financial position. They must also deal with a new reality for paying everyone including all the innocent bystanders.

3- Involvement in a number of lawsuits or even potential lawsuits will be costly and extraordinarily time consuming. It will take time away from other money making activities. The firms involved face extreme adverse publicity and will be forced to respond. Several entities may be facing additional regulations or reporting requirements. Others face the challenge of determining what regulations are appropriate.

4- Sumitomo and perhaps others have a position that is at best tough to manage and at worst unmanageable given their skills.

5- These positions may be outside company limits or capital allocations and need to be reduced to bring their diversification in line.

6- Several firms face rising funding costs when they may want to be unwinding swaps and using real debt.

7- Sumitomo and others have obvious procedural weaknesses if there is a debate over authorization of trading.

8- And last but not least, Sumitomo has lost a large portion of its capital base.

These seven obvious problems are a huge challenge but unfortunately they represent only a portion of the problems to be addressed. Most people stop at this point and begin solving problems while never returning to find the hidden problems. We will continue to find what else could be lurking under this disaster including both old causes and new problems resulting from the losses.

It is useful to organize this search for other problems by using a model and there are many available. However I use one for trading risk management that has proven to cover all the needed areas. It begins with questions about culture and moves through compensation, structure, leverage, limits, liquidity, and procedures.