You know you’ve had a serious risk incident when CEO piñatas are featured at company holiday parties and the word “vaporized” is being used by investigators. That’s what the latest news from the MF Global saga will teach us.

At a recent Congressional hearing, investigators presented initial findings that a big chunk of the missing $1.2 billion could have “vaporized.” Then there was the news that a Jon Corzine piñata (filled with IOUs) was part of the festivities at holiday parties for former employees.

As bad all this sounds, the MF Global debacle really is something of a “dog bites man” story from a risk management perspective. That is, it’s no big or surprising story at all. Consider another recent headline that more or less summarizes the whole debacle:

Lax Oversight Blamed in Demise of MF Global

In our view, the more information comes out about the meltdown at MF Global, the less mystery there is. It will come as no surprise to risk management veterans that the primary reason behind the blow-up was that CEO Jon Corzine simply ignored repeated warnings from his chief risk officer. MF Global’s CRO took it on the chin before Congress, but as this previous story points out. Basically, the MF:

executive in charge of controlling risks raised serious concerns several times last year to directors at the securities firm about the growing bet on European bonds by his boss.

Mr. Corzine … responded to Mr. Roseman’s concerns that some of the scenarios were too extreme and likely impossible

A risk management executive in financial services being ignored by an executive with a higher risk tolerance? Oldest story in the book. What makes it news is the amount of missing client funds and the prominence of the CEO involved.

Of course, it’s worth asking about the auditors and their role, and whether or not the CRO fully lodged his protests before signing the 302 and 404 certificate. This is Sarbanes-Oxley gone wrong, or not providing the protections it was designed to do. It is a recurring problem.

Here’s another story on the company’s policy and how Corzine ignored them:

[Corzine] didn’t rely heavily on the risk-management department at MF Global, a system of internal oversight and controls … In order to avoid potential blowups and satisfy nervous regulators, risk-management chiefs often report directly to the CEO or board, which are responsible for refereeing disputes between traders and risk officials.

Sure, that’s the way it’s supposed to work, though too often it doesn’t. In this case, Corzine basically made his own decisions about trade, and acted as his own risk management function.

Let’s be clear, the board of directors obviously shares some responsibility here, as it approved Corzine-endorsed trades that exceeded the firm’s risk limits. And the cultural element is also not to be overlooked. The board – including the audit committee – enabled excessive risk-taking and fostered a reckless style of leadership. There was one set of rules for the CEO and another for everyone else. It says something about Wall Street culture that such large risk appetites still exist just a few years after the financial crisis. Again, this will not surprise risk management pros.

Another unsurprising element were the words spoken by an MF executive, which are commonly heard at companies that have a major risk event; speaking of the vulnerabilities created by the weak oversight, he said:

“I could kick myself for not recognizing it sooner,”

While initial news accounts implied there was some mystery about what went wrong at MF Global, it continues to strike us as strictly “dog bites man” stuff. There is a lots of blame to go around and the reasons for the collapse of MF Global are among the most common in enterprise risk management.