Morgan Stanley 2014 Annual Report Download - page 28

Item 1A. Risk Factors.
Market Risk.
Market risk refers to the risk that a change in the level of one or more market prices, rates, indices, implied
volatilities (the price volatility of the underlying instrument imputed from option prices), correlations or other
market factors, such as market liquidity, will result in losses for a position or portfolio owned by us. For more
information on how we monitor and manage market risk, see “Quantitative and Qualitative Disclosures about
Market Risk” in Part II, Item 7A.
Our results of operations may be materially affected by market fluctuations and by global and economic
conditions and other factors.
Our results of operations may be materially affected by market fluctuations due to global and economic
conditions and other factors. Our results of operations in the past have been, and in the future may be, materially
affected by many factors, including the effect of economic and political conditions and geopolitical events; the
effect of market conditions, particularly in the global equity, fixed income, currency, credit and commodities
markets, including corporate and mortgage (commercial and residential) lending and commercial real estate and
energy markets; the impact of current, pending and future legislation (including the Dodd-Frank Act), regulation
(including capital, leverage and liquidity requirements), policies (including fiscal and monetary), and legal and
regulatory actions in the U.S. and worldwide; the level and volatility of equity, fixed income and commodity
prices (including oil prices), interest rates, currency values and other market indices; the availability and cost of
both credit and capital as well as the credit ratings assigned to our unsecured short-term and long-term debt;
investor, consumer and business sentiment and confidence in the financial markets; the performance of our
acquisitions, divestitures, joint ventures, strategic alliances or other strategic arrangements (including with
Mitsubishi UFJ Financial Group, Inc. (“MUFG”)); our reputation and the general perception of the financial
services industry; inflation, natural disasters, pandemics and acts of war or terrorism; the actions and initiatives
of current and potential competitors, as well as governments, regulators and self-regulatory organizations; the
effectiveness of our risk management policies; and technological changes and risks and cybersecurity risks
(including cyber attacks and business continuity risks); or a combination of these or other factors. In addition,
legislative, legal and regulatory developments related to our businesses are likely to increase costs, thereby
affecting results of operations. These factors also may have an adverse impact on our ability to achieve our
strategic objectives.
The results of our Institutional Securities business segment, particularly results relating to our involvement in
primary and secondary markets for all types of financial products, are subject to substantial fluctuations due to a
variety of factors, such as those enumerated above that we cannot control or predict with great certainty. These
fluctuations impact results by causing variations in new business flows and in the fair value of securities and
other financial products. Fluctuations also occur due to the level of global market activity, which, among other
things, affects the size, number and timing of investment banking client assignments and transactions and the
realization of returns from our principal investments. During periods of unfavorable market or economic
conditions, the level of individual investor participation in the global markets, as well as the level of client assets,
may also decrease, which would negatively impact the results of our Wealth Management business segment. In
addition, fluctuations in global market activity could impact the flow of investment capital into or from assets
under management or supervision and the way customers allocate capital among money market, equity, fixed
income or other investment alternatives, which could negatively impact our Investment Management business
segment.
We may experience declines in the value of our financial instruments and other losses related to volatile and
illiquid market conditions.
Market volatility, illiquid market conditions and disruptions in the credit markets make it extremely difficult to
value certain of our financial instruments, particularly during periods of market displacement. Subsequent
valuations, in light of factors then prevailing, may result in significant changes in the values of these instruments
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