Class Debate: J.P. Morgan Chase and its 2012 $5 Billion Trading Loss
This debate is designed so that student can gain experience understanding multiple perspectives
surrounding a real-world event that occurred in May 2012, when J.P. Morgan Chase & Co. released
initially that ineffective risk management practices led to what was initially reported as a $2 billion loss
that eventually grew to losses in excess of $5 billion. While there is not much debate regarding whether
mistakes were made within J.P. Morgan leading up to the loss, as readily admitted by CEO Jamie Dimon,
the debate surrounds whether the Bank effectively managed the aftermath of the initial press release as
part of its comprehensive ERM process. The debate helps students to understand that when they work
for an organization they have to view the challenges through not only their personal lens but also through
the lens of the organizations that they represent. By assigning teams to one of the two positions and
requiring them to argue for their position, students learn first-hand about the challenges associated with
representing a position based on their organization’s stated position. While there can be ethical reasons
why individuals should not compromise their beliefs, most challenging issues do not have clear answers
that are black and white.
Resolved: The Board of Directors and Executive Team at J.P. Morgan Chase Effectively Managed the
Risks (operational, legal, reputational, etc.) Associated with its 2012 $5.8 Billion Loss Based
on Activities in London.
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Companies need a clear assessment and analysis from a management perspective. Management is a very crucial aspect of a company as it forms a basis for success. The JP Morgan chase case is a scenario whereby the company in question undertook a risk investment that led to enormous losses for the company.JP Morgan engaged in an insurance sale deal based on the wrong theory of secure bonds. A blip in the market meant pain to the company. Upon the blip finally happening, the company incurred an average of two billion dollar loss.
Poor planning and poor decision making cost the company a lot. In the case of JP Morgan Chase, it’s notable that poor planning and risky undertakings had grave implications for the company (Heikkilä et al., 2010). Another challenge from management is misinformation about investments. Miss-information about rates, bond maturity, and market dynamics causes enormous hits to a company in terms of losses. Another challenge is a lack of coordination and cohesiveness in a company. A company that is marred with battles and struggles between employees and management is a failing company. These battles are drivers of no peace and harmful working environments.
Management solutions entail having a precise analysis of investments and assessments of hazards and risks involved. Such research cautions and warns the companies from undertaking a risky investment without a clear plan on how they shall navigate should the investment fail (Konwar et al., 2018). Companies need to maintain a balance in management to have a conducive environment for work. Suitable management structures have a clear understanding of the employees. It’s essential to have employees who focus on the same goal. Secondly, a company needs to balance how it treats its customers, employees, and investors. Equality is a crucial management aspect. Everyone is as important as the other in a company and should be listened to and considered.
Heikkilä, A. M., Malmén, Y., Nissilä, M., & Kortelainen, H. (2010). Challenges in risk management in multi-company industrial parks. Safety Science, 48(4), 430-435.
Konwar, M., Bose, D., Gogtay, N. J., & Thatte, U. M. (2018). Investigator-initiated studies: Challenges and solutions. Perspectives in clinical research, 9(4), 179.