It gets a bit murkier with executive positions, in my opinion, since the unlimited upside does start coming in to play.
As developers and engineers we’re responsible for letting management know if a project is not on track. What they choose to do with that information is their problem.
Discussion: https://news.ycombinator.com/item?id=21849977 (but not many folks discussing the layoffs).
As it says there, in the short term productivity drops, as you'd expect - in the long run, quality and productivity increase.
And even for structural and mechanical engineers, not everything requires reporting. Even when the project is subject to it, any number of institutional and social factors can make that essentially impossible.
What items might we see on such a list? Oh, I don't know... 100% test coverage, perhaps?
In the UK this is called Governance. Fancy word for what is, effectively, liability avoidance.
I’ve done a lot of work in banks and this story sounds very, very familiar to me. Change the details of the system and it could be any number of projects that I’ve personally worked on. I’ve been brought into a number of projects like this at the ‘near completion’ stage, and each time I’ve reported on what I thought the risks were, suggested how they should address them, and advised them to delay delivery until they do. Some of those projects worked out well, some of them completely bombed, but I’ve never been put in a situation where I was made even partially accountable for somebody else’s poor decision making. So if your question is “how do I protect my own interests when my boss wants to be an idiot?”, then that’s the serious answer for how you do it.
Also IT skills are very transferable between industries so your best employees would avoid sectors with high risk without increased compensation