Goldman Sachs 2012 Annual Report Download - page 106

Management’s Discussion and Analysis
Certain Risk Factors That May Affect Our
Businesses
We face a variety of risks that are substantial and inherent
in our businesses, including market, liquidity, credit,
operational, legal, regulatory and reputational risks. For a
discussion of how management seeks to manage some of
these risks, see “Overview and Structure of Risk
Management.” A summary of the more important factors
that could affect our businesses follows. For a further
discussion of these and other important factors that could
affect our businesses, financial condition, results of
operations, cash flows and liquidity, see “Risk Factors” in
Part I, Item 1A of our Annual Report on Form 10-K.
‰Our businesses have been and may continue to be
adversely affected by conditions in the global financial
markets and economic conditions generally.
‰Our businesses have been and may be adversely affected
by declining asset values. This is particularly true for
those businesses in which we have net “long” positions,
receive fees based on the value of assets managed, or
receive or post collateral.
‰Our businesses have been and may be adversely affected
by disruptions in the credit markets, including reduced
access to credit and higher costs of obtaining credit.
‰Our market-making activities have been and may be
affected by changes in the levels of market volatility.
‰Our investment banking, client execution and
investment management businesses have been adversely
affected and may continue to be adversely affected by
market uncertainty or lack of confidence among
investors and CEOs due to general declines in economic
activity and other unfavorable economic, geopolitical or
market conditions.
‰Our investment management business may be affected
by the poor investment performance of our
investment products.
‰We may incur losses as a result of ineffective risk
management processes and strategies.
‰Our liquidity, profitability and businesses may be
adversely affected by an inability to access the debt capital
markets or to sell assets or by a reduction in our credit
ratings or by an increase in our credit spreads.
‰Conflicts of interest are increasing and a failure to
appropriately identify and address conflicts of interest
could adversely affect our businesses.
‰Group Inc. is a holding company and is dependent for
liquidity on payments from its subsidiaries, many of
which are subject to restrictions.
‰Our businesses, profitability and liquidity may be
adversely affected by deterioration in the credit quality of,
or defaults by, third parties who owe us money, securities
or other assets or whose securities or obligations we hold.
‰Concentration of risk increases the potential for
significant losses in our market-making, underwriting,
investing and lending activities.
‰The financial services industry is highly competitive.
‰We face enhanced risks as new business initiatives lead
us to transact with a broader array of clients and
counterparties and expose us to new asset classes and
new markets.
‰Derivative transactions and delayed settlements may
expose us to unexpected risk and potential losses.
‰Our businesses may be adversely affected if we are unable
to hire and retain qualified employees.
‰Our businesses and those of our clients are subject to
extensive and pervasive regulation around the world.
‰We may be adversely affected by increased governmental
and regulatory scrutiny or negative publicity.
‰A failure in our operational systems or infrastructure, or
those of third parties, could impair our liquidity, disrupt
our businesses, result in the disclosure of confidential
information, damage our reputation and cause losses.
‰Substantial legal liability or significant regulatory action
against us could have material adverse financial effects or
cause us significant reputational harm, which in turn
could seriously harm our business prospects.
‰The growth of electronic trading and the introduction of
new trading technology may adversely affect our business
and may increase competition.
‰Our commodities activities, particularly our power
generation interests and our physical commodities
activities, subject us to extensive regulation, potential
catastrophic events and environmental, reputational and
other risks that may expose us to significant liabilities
and costs.
‰In conducting our businesses around the world, we are
subject to political, economic, legal, operational and other
risks that are inherent in operating in many countries.
‰We may incur losses as a result of unforeseen or
catastrophic events, including the emergence of a
pandemic, terrorist attacks, extreme weather events or
other natural disasters.
104 Goldman Sachs 2012 Annual Report