Morgan Stanley 2010 Annual Report Download - page 124

means, including service level and other contractual agreements, service and quality reviews, and ongoing
monitoring of the vendors’ performance. It is anticipated that the use of these services will continue and possibly
increase in the future. The Supplier Risk Management program is responsible for the policies, procedures,
organizations, governance and supporting technology to ensure adequate risk management controls between the
Company and its third-party suppliers as it relates to information security disaster recoverability, and other key
areas. The program ensures Company compliance with regulatory requirements.
Legal and Regulatory Risk.
Legal risk includes the risk of exposure to fines, penalties, judgments, damages and/or settlements in connection
with regulatory or legal actions as a result of non-compliance with applicable legal and regulatory requirements
and standards. Legal risk also includes contractual and commercial risk such as the risk that a counterparty’s
performance obligations will be unenforceable. The Company is generally subject to extensive regulation in the
different jurisdictions in which it conducts its business (see also “Business—Supervision and Regulation” in Part
I, Item 1 and “Risk Factors” in Part I, Item 1A). The Company has established procedures based on legal and
regulatory requirements on a worldwide basis that are designed to foster compliance with applicable statutory
and regulatory requirements. The Company, principally through the Legal and Compliance Division, also has
established procedures that are designed to require that the Company’s policies relating to conduct, ethics and
business practices are followed globally. In connection with its businesses, the Company has and continuously
develops various procedures addressing issues such as regulatory capital requirements, sales and trading
practices, new products, potential conflicts of interest, structured transactions, use and safekeeping of customer
funds and securities, credit granting, money laundering, privacy and recordkeeping. In addition, the Company has
established procedures to mitigate the risk that a counterparty’s performance obligations will be unenforceable,
including consideration of counterparty legal authority and capacity, adequacy of legal documentation, the
permissibility of a transaction under applicable law and whether applicable bankruptcy or insolvency laws limit
or alter contractual remedies. The legal and regulatory focus on the financial services industry presents a
continuing business challenge for the Company.
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