Just because you can do something doesn’t mean you should. That’s the lesson all Canadian bankers have learned this past month, courtesy of Bank of Montreal’s commodities traders. But there’s another lesson that must be heeded by everyone in the financial services industry: things can get awfully risky when you aren’t paying attention.

BMO’s buttoned-down bankers got a quick and painful education in the vicissitudes of the trading business last month after they uncovered some massive trading losses in their commodity derivatives book. Initially pegged at between $350 million and $450 million, at last count the bank was estimating the loss to be $680 million, and it was preparing to restate its first-quarter financials as a result.

The precise source of BMO’s trading losses is unclear at this point. But what is clear is that the bank built up this part of its business quickly, and to a much greater level than its rivals. BMO’s explanation — that the loss occurred because market volatility dried up and the bank didn’t anticipate the impact of such an event on its portfolio — suggests a case of myopic risk management.

What often seems to occur in these scenarios is that a firm finds itself in a business that’s making it lots of money, and then loses sight of accumulating risks. Many times the company might emerge unscathed, but occasionally the worst happens.

This condition is by no means unique to BMO. Several banks learned the same lesson through their dealings with Enron Corp., taking part in dodgy transactions with the firm because the payoff was so big, even if the purpose of the deals was unclear.

Nor is this sort of myopia limited to banks and financial services firms. Individuals can make the same sort of mistake. Advisors who piled their clients into Portus Alternative Asset Management Inc. products without understanding the risks, for example, and brokers who indiscriminately loaded clients’ portfolios with lousy income trusts probably had to shunt aside any doubts about the products’ complexity, sustainability and suitability at some point. In some ways, that is worse than the banks’ sins. At least, the banks have to take their own lumps; advisors that make such gaffes are doing so with other people’s money.

Whether you’re a big bank seduced by exotic derivatives-trading profits or a simple sales rep dutifully pitching the hot product of the month, the question you must ask first is not “Can I do this?” but “Should I do it?”