Morgan Stanley 2014 Annual Report Download - page 38

local laws in a particular market could have a significant and negative effect not only on our business in that
market but also on our reputation generally. We are also subject to the enhanced risk that transactions we
structure might not be legally enforceable in all cases.
Various emerging market countries have experienced severe political, economic and financial disruptions,
including significant devaluations of their currencies, defaults or potential defaults on sovereign debt, capital and
currency exchange controls, high rates of inflation and low or negative growth rates in their economies. Crime
and corruption, as well as issues of security and personal safety, also exist in certain of these countries. These
conditions could adversely impact our businesses and increase volatility in financial markets generally.
The emergence of a disease pandemic or other widespread health emergency, or concerns over the possibility of
such an emergency as well as natural disasters, terrorist activities or military actions, could create economic and
financial disruptions in emerging markets and other areas throughout the world, and could lead to operational
difficulties (including travel limitations) that could impair our ability to manage our businesses around the world.
As a U.S. company, we are required to comply with the economic sanctions and embargo programs administered
by OFAC and similar multi-national bodies and governmental agencies worldwide, as well as applicable anti-
corruption laws in the jurisdictions in which we operate. A violation of a sanction, embargo program, or anti-
corruption law could subject us, and individual employees, to a regulatory enforcement action as well as
significant civil and criminal penalties.
Acquisition, Divestiture and Joint Venture Risk.
We may be unable to fully capture the expected value from acquisitions, divestitures, joint ventures, minority
stakes and strategic alliances.
In connection with past or future acquisitions, divestitures, joint ventures or strategic alliances (including with
MUFG), we face numerous risks and uncertainties combining, transferring, separating or integrating the relevant
businesses and systems, including the need to combine or separate accounting and data processing systems and
management controls and to integrate relationships with clients, trading counterparties and business partners. In
the case of joint ventures and minority stakes, we are subject to additional risks and uncertainties because we
may be dependent upon, and subject to liability, losses or reputational damage relating to, systems, controls and
personnel that are not under our control.
For example, the ownership arrangements relating to the Company’s joint venture in Japan with MUFG of their
respective investment banking and securities businesses are complex. MUFG and the Company have integrated
their respective Japanese securities businesses by forming two joint venture companies, MUMSS and
MSMS. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Other
Matters—Japanese Securities Joint Venture” in Part II, Item 7.
In addition, conflicts or disagreements between us and any of our joint venture partners may negatively impact
the benefits to be achieved by the relevant joint venture.
There is no assurance that any of our acquisitions or divestitures will be successfully integrated or disaggregated
or yield all of the positive benefits anticipated. If we are not able to integrate or disaggregate successfully our
past and future acquisitions or dispositions, there is a risk that our results of operations, financial condition and
cash flows may be materially and adversely affected.
Certain of our business initiatives, including expansions of existing businesses, may bring us into contact,
directly or indirectly, with individuals and entities that are not within our traditional client and counterparty base
and may expose us to new asset classes and new markets. These business activities expose us to new and
enhanced risks, greater regulatory scrutiny of these activities, increased credit-related, sovereign and operational
risks, and reputational concerns regarding the manner in which these assets are being operated or held.
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