Following the disclosure of a US$2 billion loss on trading at JP Morgan's chief investment office (CIO) in London, the business board of directors is tasked with recommending changes to its risk management practices and corporate governance construction. The case provides background on JP Morgan's well-respected risk management infrastructure and discusses how the CEO focused on its historical strength in risk management to argue against the need for the USA to apply the strict regulations contained in the Dodd-Frank Act and the related Volcker Amendment.
JP Morgan Lessons Learned Case Study Solution
The function of regulation is critical. As a consequence of attempting to meet the tighter demands of these U.S. standards as well as the new Basel III treaty, the CIO took on major derivative positions that were not well understood and, rather than reducing the firm's risk exposure, really improved it. Of additional interest is the concurrent change in JP Morgan's method of computing risk, which allowed for an important reduction in risk measurement and thus an advancement in the firm's level of risk-weighted assets.
PUBLICATION DATE: September 25, 2012 PRODUCT #: W12218-PDF-ENG
This is just an excerpt. This case is about FINANCE & ACCOUNTING
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