Question
In 2012, a trader in JP Morgan Chase's London office, nicknamed the London Whale, ran a portfolio of esoteric derivative investments. The trader was part
In 2012, a trader in JP Morgan Chase's London office, nicknamed the London Whale, ran a portfolio of esoteric derivative investments. The trader was part of a team whose mandate was to hedge the bank's operating risks. But the whale's investment strategies turned out to be flawed, and the size of these transactions was so great that they affected world credit markets. The whale's trades ultimately lost money on a massive scale, and the company sustained the following financial impacts:
- Investment losses of $6.2 billion.
- JP Morgan Chase received fines of more than $1 billion by U.S. and British regulators.
- Senior executives were stripped of $75 million in compensation after an internal investigation.
- The company had to pay one hundred and fifty million to settle a shareholder class action lawsuit.
- A loss in stock market value of $14.4 billion in the two days after disclosing the problem.
- The company's reputation as a careful risk manager was also damaged. In 2012, research company Interbrand found that the value of JP Morgan's brand had dropped 8 percent, to $11.5 billion.
Analyze the above case and plan for the crisis and recovery model. Explain the positive and negative effects of handling this crisis as part of JP Morgan Project Manager.
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