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Risk Factors Dashboard

Once a year, publicly traded companies issue a comprehensive report of their business, called a 10-K. A component mandated in the 10-K is the ‘Risk Factors’ section, where companies disclose any major potential risks that they may face. This dashboard highlights all major changes and additions in new 10K reports, allowing investors to quickly identify new potential risks and opportunities.

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Risk Factors - JPM

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Item 1A. Risk Factors.

The following discussion sets forth the material risk factors that could affect JPMorganChase’s financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorganChase’s business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.

Summary

The principal risk factors include:

•Legal and Regulatory risks, including the impact of extensive supervision and regulation, as well as changes to or in the application, interpretation or enforcement of applicable law or executive branch actions, on JPMorganChase’s business and operations; the ways in which differences in regulatory implementation in different jurisdictions or with respect to certain competitors could negatively impact JPMorganChase’s business; the ways in which governmental policies that discourage or penalize business relationships with certain industries, or require specific business practices, could negatively affect JPMorganChase's businesses; the penalties and other repercussions that JPMorganChase could face when resolving litigation or investigations by governmental authorities; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions could negatively impact JPMorganChase’s operations and financial results; and the losses that security holders and other unsecured creditors will absorb if JPMorganChase were to enter into a resolution.

•Political risks, including the potential negative effects on JPMorganChase’s businesses due to economic uncertainty resulting from political developments.

•Market risks, including the effects that unfavorable economic and market events and conditions, political developments, changes in interest rates and credit spreads, and market fluctuations could have on JPMorganChase’s businesses, investments and market-making positions, as well as on its earnings and liquidity and capital levels.

•Credit risks, including the effects from adverse changes in the financial condition of clients, customers, counterparties, central counterparties and other market participants; the potential for losses due to declines in the value of collateral; and potential negative impacts from concentrations of

credit risk with respect to clients, customers, counterparties and other market participants.

•Liquidity risks, including the risk that JPMorganChase’s ability to operate could be impaired by constrained liquidity; the dependence of JPMorgan Chase & Co.

•Capital risks, including the risk that JPMorganChase’s ability to distribute capital to shareholders or to support its business activities could be limited if it does not satisfy applicable regulatory capital requirements.

•Operational risks, including risks associated with JPMorganChase’s dependence on its operational systems and its employees, as well as the systems and employees of acquired businesses and external parties; the harm that could be caused by a successful cyber attack affecting JPMorganChase or by other extraordinary events; the adverse effects of failing to identify and address operational risks associated with the introduction of or changes to products, services and delivery platforms or technologies, as well as risks related to data management processes; risks related to safeguarding personal information; potential adverse effects of failing to comply with applicable standards for the oversight of vendors and other service providers; and risks associated with JPMorganChase’s risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting.

•Strategic risks, including the damage to JPMorganChase’s competitive standing that could result from ineffective business strategies; risks associated with the significant competition that JPMorganChase faces; and the potential adverse impacts of climate change on JPMorganChase’s business and operations and those of its clients and customers.

•Conduct risks, including the negative impact that could result from misconduct of JPMorganChase’s employees.

•Reputation risks, including the potential negative commercial impacts that can arise from JPMorganChase’s decisions related to clients and business activities; and the failure to effectively manage conflicts of interest or to satisfy fiduciary obligations, or other factors that could damage JPMorganChase’s reputation.

•Country risks, including potential impacts on JPMorganChase’s businesses from an outbreak or escalation of hostilities between countries or within a country or region; and the potential adverse effects


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of local economic, political, regulatory and social factors on JPMorganChase’s business in certain countries in which it operates.

•People risks, including the criticality of attracting and retaining qualified employees.

The above summary is subject in its entirety to the discussion of the risk factors set forth below.

The following terms which are used in the risk factors set forth below have these meanings:

“applicable law” means the laws, rules and regulations that apply to JPMorganChase’s businesses in the jurisdictions in which it operates.

“extraordinary events” include any of the events or circumstances mentioned in the risk factor entitled “JPMorganChase’s operations, results and reputation could be harmed by occurrences of extraordinary events beyond its control.”

“governmental authorities” means governmental and regulatory agencies, legislative and judicial bodies and other governmental entities and authorities in the countries, states, municipalities, territories, regions and other jurisdictions in which JPMorganChase does business.

“penalties” means fines, penalties or other sanctions imposed by governmental authorities.

Legal and Regulatory

JPMorganChase’s businesses are highly regulated and are significantly affected by applicable law and supervisory expectations.

JPMorganChase must comply with applicable law in all of the jurisdictions around the world where it does business. Like other financial services firms, JPMorganChase is subject to extensive supervision and regulation that significantly affects the way that it conducts its business and structures its operations. The supervisory and regulatory framework also imposes requirements for JPMorganChase to implement and maintain compliance programs, and the complexity of these programs can increase its risks of non-compliance. In addition, entering into or acquiring a new business or expanding current business could increase the scope of applicable law or supervision and regulation to which JPMorganChase is subject.

JPMorganChase has in the past and could in the future be required to modify its business and operations in response to changes in applicable law, regulatory decisions or supervisory expectations, such as:

•limiting the products and services that it offers

•increasing the prices that it charges for products and services, which could reduce the demand for them

•reducing the liquidity that it provides through market-making activities

•paying higher taxes or other governmental charges

•absorbing losses arising from fraudulent transactions perpetrated against its clients and customers

•disposing of certain assets, and doing so at disadvantageous times or prices

•forgoing business opportunities that it might otherwise pursue, or

•otherwise restricting its business activities.

These types of changes could increase JPMorganChase’s costs or reduce its revenues. In addition, any failure by JPMorganChase to comply with applicable law or meet supervisory expectations could result in:

•increased regulatory scrutiny

•enforcement actions by governmental authorities

•the imposition of penalties

•increased exposure to litigation, or

•reputational harm.

Furthermore, regulators or governmental authorities could adopt new interpretations of applicable law or supervisory expectations, and in certain circumstances, JPMorganChase could be required to demonstrate that prior conduct complies with these new interpretations. This situation could increase the risks associated with non-compliance and result in the imposition of penalties or enforcement actions. In addition, the business or operations of financial services firms such as JPMorganChase may be negatively affected by executive orders or other executive branch actions that seek to regulate those businesses or operations.

Differences in the supervision and regulation of financial services firms could require JPMorganChase to modify its operations and incur higher operational and compliance costs.

Various factors could influence the scope of applicable law and supervision for a firm that provides financial services, such as the size of the firm, the businesses in which it engages and its jurisdiction of organization. For example:

•larger firms such as JPMorganChase often face more stringent supervision and regulation

•certain competitors, such as financial technology companies, may not be subject to banking regulation, or may be subject to less stringent oversight, or

•the regulatory and supervisory framework in a particular jurisdiction may favor locally-based firms.

A highly-regulated financial services firm such as JPMorganChase can be vulnerable to competition from firms that are less regulated or unregulated. In addition, differences in regulatory implementation between the U.S. and other countries could adversely affect JPMorganChase’s businesses. For example, a national financial services regulator may impose requirements


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that are stricter than a global standard, which could create competitive disadvantages for those firms, such as JPMorganChase, that are subject to the enhanced regulations. Furthermore, certain authorities outside the U.S. have adopted applicable law that could conflict with or prohibit JPMorganChase from complying with applicable law in other jurisdictions, which could create conflict of law issues and could increase risks associated with non-compliance.

Regulatory initiatives outside the U.S. have required and could in the future require JPMorganChase to significantly modify its operations or legal entity structure in the places in which those initiatives are implemented, such as requirements for:

•establishing locally-based intermediate holding companies or operating subsidiaries

•maintaining minimum amounts of capital or liquidity in locally-based subsidiaries

•implementing processes within locally-based subsidiaries for complying with applicable law

•separating (or “ring fencing”) core banking products and services from markets activities

•the orderly resolution of financial institutions

•executing or settling transactions on exchanges or through central counterparties (“CCPs”), or depositing funds with other financial institutions or clearing and settlement systems, and

•governance, control, conduct of business and compensation standards.

Differences, inconsistencies and conflicts in applicable law related to financial services have required and could in the future require JPMorganChase to:

•divest assets or restructure its operations

•maintain higher levels of capital and liquidity

•incur higher operational, compliance, capital and liquidity costs

•become subject to penalties

•limit the products and services that it offers, or change the prices that it charges for those products and services, or

•forgo business opportunities, including acquisitions or principal investments, that it otherwise would have pursued.

JPMorganChase faces significant legal risks from civil and governmental proceedings, including litigation, investigations and enforcement actions.

JPMorganChase is named as a defendant or is otherwise involved in many civil and governmental legal proceedings, including class actions, derivative actions and other litigation or disputes with third parties, as well as investigations and enforcement actions by U.S. and non-U.S. governmental authorities, including criminal proceedings. Actions currently

pending against JPMorganChase could result in judgments, settlements or penalties adverse to JPMorganChase, and any such resolution of legal proceedings could materially and adversely affect JPMorganChase’s business, financial condition or results of operations, or cause serious reputational harm.

Resolving an investigation by a governmental authority could subject JPMorganChase to significant penalties and other repercussions.

Governmental authorities conduct both routine and targeted examinations of JPMorganChase and its subsidiaries, and JPMorganChase’s businesses and operations are subject to heightened regulatory oversight. Furthermore, a single event involving a potential violation of applicable law could give rise to numerous and overlapping proceedings, including by multiple governmental authorities in the U.S. as well as non-U.S. authorities. In addition, if another financial institution violates applicable law relating to a particular business activity or practice, this will often give rise to legal proceedings related to the same or similar activity or practice by JPMorganChase.

JPMorganChase typically incurs higher operational and compliance costs when addressing the requirements of such resolutions, including devoting substantial resources to remediation.

These types of admissions could lead to negative consequences such as:

•disqualification from doing business with certain clients or customers, or in specific jurisdictions

•greater exposure in litigation, and

•reputational harm.

These resolutions could have significant


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collateral consequences for the subject financial institution, including:

•loss of clients, customers and business

•restrictions on offering certain products or services, and

•loss of permission to operate certain businesses, either temporarily or permanently.

JPMorganChase expects that the following trends will continue:

•it will be subject to heightened regulatory scrutiny and pervasive investigations and enforcement actions by governmental authorities, as well as criticism or litigation from clients or customers who claim that they have been harmed by actions taken by JPMorganChase in order to comply with applicable law

•governmental authorities will forgo opportunities to resolve investigations with informal supervisory actions, and will pursue formal and punitive enforcement actions with respect to actual or deemed violations of law

•resolutions of investigations and enforcement actions will result in the imposition of significant penalties, and

•governmental authorities will be more likely to bring formal enforcement actions against JPMorganChase if it has previously been subject to other investigations or enforcement actions by governmental authorities.

When resolving an investigation or enforcement action by a governmental authority, the subject financial institution typically must satisfy new or enhanced regulatory requirements or restrictions. If JPMorganChase fails to meet the requirements of any such resolution, or to maintain risk and control processes that meet the heightened expectations of its regulators, it could be required to, among other things:

•enter into further resolutions

•incur additional penalties or judgments, or

•accept material restrictions on, or changes in the management of, its businesses.

In addition, JPMorganChase could incur higher costs when resolving investigations and enforcement actions involving newly-acquired businesses, companies in which JPMorganChase has made principal investments, parties to joint ventures with JPMorganChase, and vendors with which JPMorganChase does business.

As a participant in the financial services industry, it is likely that JPMorganChase will continue to experience a high level of litigation and investigations by

governmental authorities related to its businesses and operations.

JPMorganChase conducts business in certain jurisdictions in which the application of the rule of law is inconsistent, extralegal or less predictable, including with respect to:

•the absence of a statutory, regulatory or interpretative basis for engaging in specific types of business or transactions

•applicable law or judicial orders that are ambiguous, conflicting, or inconsistently applied or interpreted

•actions by or at the direction of governmental authorities or officials

•uncertainty concerning the enforceability of intellectual property rights or contractual or other obligations

•challenges associated with competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive

•the threat of investigations by governmental authorities, civil litigations or criminal prosecutions that are arbitrary or otherwise contrary to established legal principles in other parts of the world, and

•the termination of licenses or other permissions required to operate in the relevant jurisdiction, or the suspension of business relationships with governmental entities, leading to lost revenue.


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JPMorganChase's business and operations could be negatively affected by governmental policies that discourage or penalize doing business with certain industries or that require specific business practices.

JPMorganChase’s businesses and results of operations could be adversely affected by actions or initiatives by governmental authorities or officials that:

•seek to discourage financial institutions from doing business with companies engaged in certain industries, or conversely, to penalize financial institutions that elect not to do business with such companies, or

•mandate specific business practices for companies operating in the relevant jurisdiction.

Governmental policies may differ or conflict across jurisdictions, which could lead to negative consequences for JPMorganChase regardless of the course of action that it takes or elects not to take, including:

•prohibitions or restrictions on doing business within a particular jurisdiction, or with governmental entities in a jurisdiction

•the threat of enforcement actions, including under antitrust or other anti-competition laws, and

•reputational harm.

The regulatory requirements concerning resolution plans and the evaluation of JPMorganChase’s resolution plan by the banking regulators could change over time.

If the Federal Reserve and the FDIC were both to determine that a resolution plan submitted by JPMorganChase has deficiencies, they could jointly impose more stringent capital, leverage or liquidity requirements, or restrictions on JPMorganChase’s growth, activities or operations.

Holders of JPMorgan Chase & Co.’s debt and equity securities will absorb losses if it were to enter into a resolution.

Federal Reserve rules require JPMorgan Chase & Co. (the “Parent Company”) to maintain minimum levels of unsecured external long-term debt and other loss-absorbing capacity with specific terms (“eligible LTD”) to recapitalize JPMorganChase’s operating subsidiaries if the Parent Company were to enter into a resolution either in a bankruptcy proceeding under Chapter 11 of the U.S. Bankruptcy Code, or in a receivership administered by the FDIC under Title II of the Dodd-Frank Act (“Title II”).

As a result, the Parent Company’s losses and any losses incurred by its subsidiaries would be imposed first on holders of the Parent Company’s equity securities and thereafter on its unsecured creditors, including holders of eligible LTD.

A. and its other subsidiaries, and only after any claims of priority and secured creditors of the Parent Company have been fully repaid.

However, the FDIC has not formally adopted or committed to any specific resolution strategy.

If the Parent Company were to approach, or enter into, a resolution, none of the Parent Company, the Federal Reserve or the FDIC is obligated to follow JPMorganChase’s preferred resolution strategy, and losses to unsecured creditors of the Parent Company, including holders of eligible LTD, and to holders of equity securities of the Parent Company, under whatever strategy is ultimately followed, could be


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greater than they might have been under JPMorganChase’s preferred strategy.

Political

JPMorganChase’s businesses could be negatively affected by economic uncertainty resulting from political and geopolitical developments.

Political developments in the U.S. and other countries could cause uncertainty in the economic environment and market conditions in which JPMorganChase operates. Certain governmental policies or actions could significantly affect U.S. and global economic growth and cause higher volatility in the financial markets, including:

•monetary policies and actions taken by central banks, including any sustained large-scale asset purchases, any suspension or reversal of those actions, and changes in interest rate levels

•fiscal policies, including with respect to taxation and spending

•foreign policies that emphasize national interests

•economic or financial sanctions

•the implementation of tariffs and other trade policies

•requirements to relocate business activities or operations

•deployment of the military

•changes to immigration policies, or

•actions or inactions by a government related to emergencies.

These types of political developments, as well as heightened geopolitical tensions, could:

•erode investor or consumer confidence in the U.S. economy and financial markets, which could potentially undermine the status of the U.S. dollar as a safe haven currency

•provoke retaliatory countermeasures by other countries or otherwise heighten tensions in trade or diplomatic relations

•increase the risk of targeted cyber attacks

•increase concerns about whether the U.S. government will be funded and will be able to service its outstanding debt

•result in periodic shutdowns of the U.S. government

•influence investor perceptions concerning government support of certain sectors of the economy or the economy as a whole

•influence monetary policy actions of the Federal Reserve to moderate the economic impact of political developments, including decisions on interest rate levels and asset purchases and sales

•adversely affect the financial condition or credit ratings of clients and counterparties with which JPMorganChase does business, or

•cause JPMorganChase to forgo business opportunities that it might otherwise pursue.

These factors could lead to:

•slower growth rates, rising inflation or recession

•disruptions in labor markets

•greater market volatility

•a contraction of available credit and the widening of credit spreads

•U.S. dollar currency fluctuations

•lower investments in a particular country or sector of the economy

•large-scale sales of government debt and other debt and equity securities

•reduced commercial activity among trading partners or disruptions to supply chains, or

•the formation of or changes in political or economic alliances or treaties.

Any of the foregoing potential outcomes could cause JPMorganChase to:

•suffer losses on its market-making positions or in its investment portfolio

•reduce its liquidity and capital levels

•increase the allowance for credit losses or recognize higher net charge-offs

•hamper its ability to deliver products and services to its clients and customers

•weaken its results of operations and financial condition or credit ratings, or

•become subject to prolonged litigation.

Market

Adverse economic and market events and conditions could negatively affect JPMorganChase’s results of operations and investment and market-making positions.

JPMorganChase’s results of operations could be negatively affected by the occurrence or persistence of adverse changes in any of the following:

•the U.S. and global economies

•investor, consumer and business sentiment, or confidence in the financial markets

•inflation, deflation, recession or employment

•the availability and cost of capital, liquidity and credit

•levels and volatility of interest rates, credit spreads or market prices of currencies, securities and


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commodities, and the duration of any such changes, and

•economic and geopolitical effects of extraordinary events beyond JPMorganChase’s control.

In addition, JPMorganChase’s investment portfolio and market-making businesses could suffer losses due to unanticipated market events and conditions, including:

•severe declines in asset values

•unexpected credit events, credit rating downgrades and large counterparty losses

•disruption of trade routes and supply chains globally

•events or conditions that cause previously uncorrelated market factors to become correlated (and vice versa)

•the inability to effectively hedge risks related to market-making and investment portfolio positions, or

•other market risks that may not have been adequately considered when developing, structuring or pricing a financial instrument.

JPMorganChase’s consumer businesses are particularly affected by U.S. and global economic conditions, including:

•the distribution of personal and household income

•unemployment or underemployment

•changes in housing prices

•the level of inflation and its effect on prices for goods and services

•consumer and small business confidence levels

•prolonged periods of exceptionally high or low interest rates, or significant changes to interest rates

•changes in the value of collateral such as residential real estate and vehicles, and

•changes in consumer spending or in the level of consumer debt.

High unemployment levels could reduce personal and household income, which could degrade consumer credit performance if consumers struggle to service their debts. Adverse economic conditions could also lead to an increase in delinquencies, an increase in the allowance for credit losses or higher net charge-offs,

which could reduce JPMorganChase’s earnings. In addition, JPMorganChase’s earnings from its consumer businesses could be adversely affected if customer demand for the products and services offered by its consumer businesses is diminished by sustained low growth, low or negative interest rates, inflationary pressures, or recessionary conditions. Furthermore, governmental policies and actions, including those relating to pricing of products, taxation, medical insurance, education, immigration, and housing, or those that impact employment status, could reduce consumer disposable income and decrease JPMorganChase's earnings from its consumer businesses.

Unfavorable market and economic conditions could adversely affect JPMorganChase’s wholesale businesses.

Market and economic factors can affect the volume of transactions and advisory engagements for which JPMorganChase is engaged and the related revenue from those activities. These factors could also influence the willingness of other financial institutions and investors to participate in capital markets transactions that JPMorganChase manages.

Furthermore, any significant and sustained deterioration in market conditions could reduce fee revenue due to lower transaction volumes, including when clients are unwilling or unable to refinance their outstanding debt obligations. Additionally, the profitability of JPMorganChase’s capital markets activities could be impacted if it needs to dispose of portions of credit commitments at a loss or hold larger residual positions in credit commitments that cannot be sold at favorable prices.

The fees that JPMorganChase earns from managing client assets or holding assets under custody for clients could be diminished by declining asset values or other adverse macroeconomic conditions. Similarly, adverse macroeconomic or market conditions could prompt outflows from JPMorganChase funds or accounts, or cause clients to invest in products that generate lower revenue. Substantial and unexpected withdrawals from a JPMorganChase fund could also hamper the investment performance of the fund, particularly if the outflows create the need for the fund to dispose of fund assets at disadvantageous times or


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prices, and could lead to further withdrawals based on the weaker investment performance.

An adverse change in market conditions in particular segments of the economy, or sustained changes in consumer behavior that affect specific economic sectors, could have a material adverse effect on clients of JPMorganChase whose operations or financial condition are significantly impacted by the health or stability of those segments or economic sectors, as well as clients that are engaged in related businesses.

For example, clients that rely on rental income from commercial real estate properties could be negatively affected by sustained adverse economic conditions or circumstances (such as hybrid work models) that reduce tenancies. These types of developments could depress property values, impair the ability of clients to service or refinance their loans and lead to an increase in foreclosures.

Changes in interest rates and credit spreads could adversely affect JPMorganChase’s earnings or its liquidity and capital levels.

JPMorganChase may generally be expected to earn higher net interest income when interest rates are high or increasing. However, higher interest rates could also result in:

•fewer originations of commercial and residential real estate loans

•losses on underwriting exposures or increases in client-specific downgrades

•increased financing costs for clients, which could lead to an increase in the allowance for credit losses and higher net charge-offs

•the loss of deposits, including where customers transition to higher-yielding products

•losses on available-for-sale (“AFS”) securities held in the investment securities portfolio

•less liquidity in the financial markets, and

•higher funding costs.

On the other hand, a low or negative interest rate environment could cause:

•compressed net interest margins, which could result in lower earnings on JPMorganChase’s investment securities portfolio

•adverse or unanticipated changes in depositor behavior, which could negatively affect JPMorganChase’s broader asset and liability management strategies, and

•a reduction in the value of JPMorganChase’s mortgage servicing rights (“MSRs”) asset, resulting in decreased revenues.

When credit spreads widen, it becomes more expensive for JPMorganChase to borrow.

Subsequent valuations of financial instruments in future periods, in light of factors then prevailing, could result in significant changes in the value of these instruments. In addition, when JPMorganChase disposes of a financial instrument, the price that it realizes will depend on demand and liquidity in the market at the time of disposition, and that price could be materially lower than the current fair


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value of the instrument.

Credit

JPMorganChase could be negatively affected by adverse changes in the financial condition of clients, counterparties, CCPs and other market participants.

JPMorganChase could also face losses or liability if a financial institution providing custodial services for client assets becomes insolvent.

If a CCP through which JPMorganChase executes contracts suffers a financial or operational failure or otherwise defaults, JPMorganChase would be required to replace the relevant contracts, which would increase its operational costs and potentially result in losses.

As part of its clearing services activities, JPMorganChase is exposed to the risk of nonperformance by its clients, which it seeks to mitigate by requiring clients to provide adequate collateral. JPMorganChase is also exposed to intra-day credit risk of its clients in connection with providing cash management, clearing, custodial and other transaction services. If such a client becomes bankrupt or insolvent, JPMorganChase could:

•incur losses

•become involved in disputes and litigation with CCPs, the client’s bankruptcy estate and other creditors, or

•be subject to investigations by governmental authorities.

In addition, JPMorganChase has in the past, and could in the future, experience instances in which borrowers or other counterparties engage in fraudulent activity related to the accounting, reporting or representation

of collateral. Such practices have resulted and could in the future result in losses for JPMorganChase potentially undermining the effectiveness of collateral requirements and negatively affecting JPMorganChase's financial condition and results of operations.

All of the foregoing events could increase JPMorganChase’s operational and litigation costs, and JPMorganChase could suffer losses to the extent that the realized value of any collateral that it has received is insufficient to cover those losses.

Transactions with governmental entities can expose JPMorganChase to enhanced sovereign, credit, operational, legal and reputation risks. These types of actions have in the past caused, and could in the future cause, JPMorganChase to suffer losses or hamper its ability to conduct business in the relevant jurisdiction. In addition, JPMorganChase could incur losses if applicable law limits its ability to resolve disputes and litigation when a client in that jurisdiction defaults or otherwise fails to make agreed-upon payments.

JPMorganChase could suffer losses if the value of collateral declines.

During periods of market stress or illiquidity, JPMorganChase’s credit risk could increase when:

•JPMorganChase fails to realize the estimated value of the collateral it holds

•collateral is liquidated at prices that are insufficient to recover the full amount owed to it, or


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•counterparties are unable to post collateral for operational or other reasons.

Furthermore, borrowers may under-maintain or misrepresent the condition or existence of collateral, or at liquidation, collateral could be subject to competing claims, limiting JPMorganChase's ability to recover amounts owed, or disputes with counterparties concerning the valuation of collateral could increase during significant market stress, volatility or illiquidity. JPMorganChase could suffer losses in these situations if it is unable to realize the fair value of collateral or to manage declines in the value of collateral.

JPMorganChase could incur significant losses arising from concentrations of credit and market risk.

JPMorganChase could be exposed to greater credit and market risk if groupings of its clients or counterparties, or obligors on securities and other financial instruments:

•engage in similar or related businesses or in related industries

•operate in the same geographic region, or

•have business profiles that could cause their ability to meet their obligations to be similarly affected by changes in economic conditions.

More broadly, widespread defaults on consumer debt could lead to recessionary conditions in the U.S. economy, and JPMorganChase’s consumer businesses could earn lower revenues in such an environment.

Furthermore, the interconnectivity across credit markets increases the risk that the significant expansion of private credit could worsen losses among non-bank lenders and their borrowers, particularly if stress or defaults spread to broader funding and credit markets. Such developments could impair asset valuations, reduce market-wide liquidity, disrupt borrowers’ ability to refinance, and increase default rates, especially if non-bank lenders have weaker underwriting standards, loans are less liquid, or transparency is limited.

If JPMorganChase is unable to reduce positions effectively during a market dislocation, this could increase both the market and credit risks associated with those positions and the level of risk-weighted-assets (“RWA”) that JPMorganChase holds on its balance sheet. These factors could adversely affect JPMorganChase’s capital position, funding costs and the profitability of its businesses.

Liquidity

JPMorganChase’s ability to operate its businesses could be impaired if its liquidity is constrained.

JPMorganChase’s liquidity could be impacted by factors such as:

•market-wide illiquidity or disruption

•actions by governmental authorities, including changes in regulatory requirements relating to liquidity or capital

•actions taken by the Federal Reserve to reduce its balance sheet, which could reduce deposits held by JPMorganChase and other financial institutions

•inability to sell assets, or to sell at favorable times or prices

•default by a CCP or other significant market participant

•unanticipated outflows of cash or collateral

•unexpected loss of deposits, including due to deposit pricing or migration to other investment products

•higher than anticipated draws on lending-related commitments, and

•lack of market or customer confidence in JPMorganChase or financial institutions in general.

A reduction in JPMorganChase’s liquidity could be caused by events beyond its control. For example, JPMorganChase’s funding costs could increase and its access to traditional sources of liquidity could be


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limited during periods of market stress, low investor confidence or significant market illiquidity.

Alternative funding could be more expensive or limited. JPMorganChase’s funding costs could also be negatively affected by actions that it may take in order to satisfy regulatory requirements, including those relating to:

•liquidity and funding

•its resolution plan, or

•the pre-positioning of liquidity in certain subsidiaries outside the U.S.

More generally, if JPMorganChase fails to effectively manage its liquidity, this could constrain its ability to fund or invest in its businesses and subsidiaries, and thereby adversely affect its results of operations.

JPMorgan Chase & Co.

The Parent Company, JPMorgan Chase & Co., is a holding company that holds the stock of JPMorgan Chase Bank, N.A. and an intermediate holding company, JPMorgan Chase Holdings LLC (the “IHC”). In addition to holding the stock of other JPMorganChase subsidiaries, the IHC owns other assets and provides intercompany lending to the Parent Company. The Parent Company must contribute to the IHC substantially all the net proceeds that it receives from securities issuances.

The ability of JPMorgan Chase Bank, N.A. and the IHC to make payments to the Parent Company is limited. JPMorgan Chase Bank, N.A. is subject to regulatory restrictions and requirements relating to the dividends that it can pay to the Parent Company, and the IHC is prohibited from paying dividends or extending credit to the Parent Company if certain capital or liquidity thresholds are breached, or if limits are otherwise imposed by the Parent Company’s management or Board of Directors.

As a result of these arrangements, the Parent Company is generally dependent on receiving dividends from JPMorgan Chase Bank, N.A. and dividends and borrowings from the IHC in order to:

•pay interest on its debt securities

•pay dividends on its equity securities

•redeem or repurchase outstanding securities, and

•fulfill its other payment obligations.

The capital and liquidity thresholds to which JPMorgan Chase Bank, N.A. and the IHC are subject could result in the Parent Company seeking protection under bankruptcy laws or otherwise entering into resolution

proceedings sooner than if such limitations did not exist.

JPMorganChase’s liquidity and cost of funding could be adversely affected by downgrades in its credit ratings.

JPMorgan Chase & Co. and certain of its principal subsidiaries are rated by credit rating agencies, which evaluate general, firm-specific and industry-specific factors when determining credit ratings, including:

•expected future profitability

•risk management practices

•legal expenses

•regulatory developments

•ratings differentials between bank holding companies and their bank and non-bank subsidiaries

•assumptions about government support, and

•economic and geopolitical developments.

JPMorganChase has experienced credit ratings downgrades in the past, and there is no assurance that JPMorganChase’s credit ratings will not be downgraded in the future. Furthermore, any such downgrade could occur at a time of broader market instability, limiting JPMorganChase’s options for responding.

A downgrade in JPMorganChase’s credit ratings could curtail its business activities and its profitability, including by:

•reducing its access to capital markets

•materially increasing its cost of issuing and servicing securities

•triggering additional collateral or funding requirements, and

•decreasing the number of investors and counterparties that are willing or permitted to do business with or lend to JPMorganChase.

Any rating downgrade could also increase the credit spreads charged by market participants for taking credit risk on JPMorgan Chase & Co. and its subsidiaries. This could, in turn, adversely affect the value of debt and other obligations of JPMorgan Chase & Co. and its subsidiaries.

Capital

JPMorganChase’s ability to distribute capital to shareholders, and to support its business activities could be limited if it does not satisfy applicable regulatory capital requirements.

JPMorganChase is subject to various regulatory capital requirements, and the amount of capital that it is required to hold under those requirements could increase at any given time due to factors such as:


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Part I

•actions by banking regulators, as well as changes in applicable law or how applicable law is implemented by banking regulators

•changes in the composition of JPMorganChase’s balance sheet or developments that could increase RWA, such as increased market risk, customer delinquencies, client credit rating downgrades or other factors, and

•increases in estimated stress losses as determined by the Federal Reserve under CCAR, which could increase JPMorganChase’s SCB.

Although more likely in times of stress, JPMorganChase may use its regulatory capital buffers allowing capital ratios to decline below regulatory requirements, subjecting it to restrictions on capital distributions and discretionary bonus payments to its executive officers.

Any failure by or inability of JPMorganChase to maintain the required level and composition of capital, any decision by JPMorgan Chase to use its regulatory buffers allowing capital ratios to decline below regulatory requirements or unfavorable changes in applicable capital requirements, could have an adverse impact on JPMorganChase’s shareholders by:

•reducing the amount of common stock that JPMorganChase is permitted to repurchase

•requiring the issuance of, or prohibiting the redemption of, capital instruments in a manner inconsistent with JPMorganChase’s capital management strategy

•constraining the amount of dividends that can be paid on common stock, or

•curtailing JPMorganChase’s business activities or operations.

Operational

JPMorganChase’s businesses could be adversely affected by the failure or disruption of operational systems on which they depend.

JPMorganChase’s businesses rely on its operational systems to process, record, monitor and report large amounts of information continuously, accurately, securely, and in a timely manner. These operational systems include financial, accounting, transaction execution, reporting and settlement, data processing and other systems, as well as supporting devices. The effective functioning of these operational systems depends on a variety of factors, including JPMorganChase’s ability to:

•properly design, install, maintain, and train its employees on the use of its systems

•populate its systems with accurate, complete, up-to-date and uncorrupted information

•upgrade its systems on a regular and timely basis in line with technological advancements and evolving security requirements

•maintain the security and operational continuity of its systems, including by carefully managing any changes introduced to its systems

•prevent unauthorized access and the misuse of access to its systems, and

•adhere to applicable law relating to its systems, particularly in regions where JPMorganChase may face a heightened risk of malicious activity.

JPMorganChase has experienced and expects that it will continue to experience failures and disruptions in the stability of its operational systems, including:

•degraded performance of data processing systems

•data quality issues

•disruptions of network connectivity

•malfunctioning software

•disruptions in its ability to access and use the operational systems of third parties, and

•interruptions in service from third-party service providers.

These incidents have resulted in various negative effects for customers, including:

•the inability to access account information or transact through ATM, internet or mobile channels

•the exfiltration of customer personal data

•the recording of duplicative transactions, and

•extended delays for call center services.

There can be no assurance that these and other types of operational failures or disruptions will not occur in the future.

JPMorganChase’s ability to effectively manage the stability of its operational systems and infrastructure could be hindered by many factors, any of which could have a negative impact on JPMorganChase and its clients, customers and counterparties, including:

•challenges in maintaining and upgrading systems and infrastructure as the speed, frequency, volume, interconnectivity and complexity of transactions and other information flows continue to increase

•attempts by third parties to defraud JPMorganChase and its clients and customers, which continue to increase, evolve and become more complex, as well as increased volumes of these attempts during periods of market disruption or economic uncertainty


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•errors made by JPMorganChase or another market participant, whether inadvertent or malicious, which could cause widespread system disruption

•weaknesses or shortcomings in operational systems that may not be detected in a timely manner

•isolated or seemingly insignificant errors in operational systems that could compound, or migrate to other systems, becoming larger issues

•failures in synchronization or encryption software, or degraded performance of microprocessors, which could cause disruptions in operational systems or in the ability of systems to communicate with each other, and

•third parties that may try to block the use of key technology solutions by claiming that the use infringes on their intellectual property rights.

JPMorganChase also depends on its ability to access and use the operational systems of third parties, including:

•custodians

•vendors, including providers of security, technology and data and cloud computing services, and

•other market participants, such as clearing and payment systems, CCPs and securities exchanges.

The inaccessibility, failure or other disruption of an internal or external operational system upon which JPMorganChase’s businesses depend could adversely affect JPMorganChase and its clients and customers, and result in unfavorable ripple effects in the financial markets, including:

•delays or other disruptions in providing services, including the provision of liquidity or information to clients and customers

•impairment of JPMorganChase’s ability to execute transactions, including delays or failures in the confirmation or settlement of transactions or in obtaining access to funds or other assets required for settlement

•the erroneous execution of funds transfers, capital markets trades or other transactions

•financial losses, including due to loss-sharing requirements of CCPs, payment systems or other market infrastructures, or as possible restitution to clients and customers

•higher operational costs associated with replacing services provided by a system that has experienced a failure or other disruption

•limitations on JPMorganChase’s ability to collect data needed for its business and operations

•loss of confidence in the ability of JPMorganChase, or financial institutions generally, to protect against and withstand operational disruptions

•significant exposure to litigation and penalties, and

•reputational harm.

JPMorganChase’s interconnectedness with clients, customers and other external parties could be a source of significant operational risk.

JPMorganChase could be exposed to operational risk if it is unable to access and use external operational systems, including during failures or cyber attacks related to those systems or other third-party systems. Similarly, retailers, payment systems and processors, data aggregators, and other external parties with which JPMorganChase’s customers do business could increase JPMorganChase’s operational risk. This is particularly the case where activities of customers or other parties are beyond JPMorganChase’s security and control systems, including through the use of the internet, cloud computing services, and mobile devices or services.

JPMorganChase’s interconnectivity with clients, customers and other external parties continues to expand, which increases the risk of failure or cyber attacks with respect to the systems of those parties.

Cyber attacks could take many forms, and may be designed to:

•introduce computer viruses or malicious code (i.e., “malware”) into JPMorganChase’s systems.

•obtain unauthorized access to JPMorganChase’s systems or to confidential information belonging to


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Part I

JPMorganChase or its clients, customers, counterparties or employees

•manipulate or destroy data

•disrupt, sabotage or degrade service on JPMorganChase’s systems and websites, including those that provide online banking and other services

•steal money, or

•extort money through the use of so-called “ransomware.”

Threat actors that perpetrate cyber attacks include individuals or groups that are:

•sponsored by, or acting on behalf of, hostile countries or terrorist organizations

•cyber-criminals, or

•engaged in using technology to promote a political or social agenda (i.e., “hacktivists”).

Any such breach could result in serious and harmful consequences for JPMorganChase or its clients and customers.

JPMorganChase cannot guarantee that it will always detect cybersecurity threats to its systems or implement effective preventive measures against those threats. The reasons for this include:

•the techniques used in cyber attacks evolve frequently and increase in sophistication, and therefore a cyber attack may not be recognized until launched or may go undetected for extended periods

•it is possible that a third-party, after establishing a foothold on an internal network without being detected, may gain access to other networks and systems

•cyber attacks can originate from a wide variety of sources, including certain threat actors that are well-resourced and can sustain malicious activities for extended periods, and

•JPMorganChase does not have control over the cybersecurity of the systems of the numerous clients, customers, counterparties and third-party service providers with which it does business.

The cybersecurity risks that JPMorganChase faces could be intensified by factors such as:

•increased volume and complexity of cyber attacks during periods of heightened geopolitical tensions

•technological advances such as artificial intelligence (“AI”) and quantum computing that may enable malicious actors to develop more advanced social engineering attacks, including targeted phishing attacks, and

•technological advances which may counteract or nullify existing information security protections,

including cryptographic protections, potentially exposing data.

In addition, JPMorganChase could be required to make significant investments in technology in order to transition effectively to more robust security protections, including quantum-resistant encryption. Any such transition may not be completed before relevant threats become operational, and JPMorganChase’s interconnectedness with third parties who may be slower to adopt such protections could further increase its vulnerability to data compromise.

JPMorganChase could become increasingly vulnerable to cyber attacks if it does not, in a timely manner, identify and address emerging threats, known vulnerabilities or shortcomings in its cybersecurity controls, or if it fails to prioritize or complete enhancements to address them particularly in jurisdictions that could pose a heightened risk to its operations, including enhancements relating to:

•preventing unauthorized access and protecting against the misuse of access, including the maintenance and enhancement of controls related to secure software development practices and identity and access management, including controls relating to the management of administrative access to systems

•detecting, escalating and effectively addressing in a timely manner any vulnerabilities that may be present either in internally-developed software or externally-provided software or services, including vulnerabilities that could allow the attackers to exploit unknown security flaws in software and hardware (i.e., “zero-day vulnerabilities”)

•appropriate oversight of third-party vendors in support of the secure development and maintenance of internal software and systems

•controls related to technology asset management and inventory systems to prevent undetected vulnerabilities that could undermine JPMorganChase’s ability to operate an effective control process

•upgrading systems and controls to protect JPMorganChase and its clients and customers from the impact of distributed denial-of-service attacks, or to recover from outages that could be caused by a malware or ransomware attack

•the continuing migration of technology systems of customer and client-facing services, including digital banking and other internet-based products, to the cloud, and modernization of those services


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•strengthening network security and managing outbound connections to reduce the risk of data loss

•identifying, assessing and mitigating insider threat activities that could lead to the misuse of JPMorganChase’s systems or client and customer information, and

•integrating acquired businesses, including where system integration may be complex or may require extensive and lengthy remediation or enhancement of controls.

Any of the above cybersecurity risks to which JPMorganChase may be exposed could also affect JPMorganChase’s vendors or other third parties with which it does business or is interconnected, including governmental entities and other market participants. A successful circumvention of JPMorganChase’s systems of any of those third parties could cause serious negative consequences, including:

•significant disruption of or loss of access to JPMorganChase’s operational systems and those of its clients, customers and counterparties

•misappropriation of confidential information of JPMorganChase or that of its clients, customers, counterparties, employees, regulators or other parties

•disruption of or damage to JPMorganChase’s systems and those of its clients, customers and counterparties

•the inability, or extended delays in the ability, to fully recover and restore affected data, or the inability to prevent systems from processing fraudulent transactions

•demands that JPMorganChase pay a ransom to a malicious actor that has perpetrated a cybersecurity breach

•unintended violations by JPMorganChase of applicable privacy and other laws

•financial loss to JPMorganChase outside of cyber insurance policy coverage, or losses to its clients, customers, counterparties or employees

•loss of confidence in JPMorganChase’s cybersecurity and business resiliency measures

•significant exposure to litigation, investigations by governmental authorities and penalties, and

•reputational harm.

These factors could

inhibit JPMorganChase’s ability to provide rapid, full and reliable information about the cyber attack to its clients, customers, counterparties and regulators, as well as the public. Furthermore, it may not be clear how best to contain and remediate the harm caused by the cyber attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these factors could further increase the costs and consequences of a cyber attack.

JPMorganChase may not always identify or recognize the full extent of operational risks that could arise from:

•the introduction of a new product or service, including platforms for the delivery or distribution of products or services

•the acquisition or integration of, or investment in, a new business, product or portfolio, including the development of any related technological capabilities

•the adoption of a new technology, or

•changes to existing products, services, delivery platforms, businesses and technologies.

Any significant failure by JPMorganChase to identify the operational risks associated with these types of changes, or to implement adequate controls to mitigate those risks, has resulted and could in the future result in:

•hindering JPMorganChase’s ability to operate its businesses

•potential liability to clients, counterparties and customers

•impairment of JPMorganChase’s liquidity

•weaker competitive standing

•higher compliance, operational or integration costs

•regulatory intervention

•losses from fraudulent transactions

•higher litigation costs and penalties, or

•reputational harm.

Any of the foregoing consequences could materially and adversely affect JPMorganChase’s businesses and results of operations.

JPMorganChase’s business and operations rely on appropriate staffing and on the competence, trustworthiness, health and safety of employees.

JPMorganChase’s ability to operate its businesses efficiently and profitably, to offer products and services that meet the expectations of its clients and customers,


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Part I

and to maintain an effective risk management framework is highly dependent on its ability to staff its operations appropriately and on the competence, trustworthiness, health and safety of its employees. JPMorganChase’s businesses and operations similarly rely on the workforces of third parties, including employees of vendors, custodians and financial markets infrastructures, and of businesses that it may seek to acquire.

JPMorganChase’s businesses could be materially and adversely affected by:

•staffing shortages, particularly in tight labor markets

•any failure by employees to adhere to controls designed to mitigate operational risks

•the possibility that significant portions of JPMorganChase’s workforce are unable to work effectively, including due to health emergencies or other extraordinary events beyond JPMorganChase’s control

•theft, fraud or other unlawful conduct by employees, or

•other negative outcomes caused by human error or misconduct

JPMorganChase’s operations could also be impaired if the measures that it takes to protect the health and safety of employees, or actions taken by governmental authorities or other external parties on which it relies are ineffective.

JPMorganChase faces substantial legal and operational risks related to the processing and safeguarding of personal information.

Complying with these applicable laws could:

•hinder development, curtail offerings or affect pricing and delivery methods of products and services

•restrict JPMorganChase from transferring information across national borders or sharing information among affiliates or with third parties such as vendors, thereby increasing compliance costs and operational risk

•present situations where the applicable law of one country conflicts with that of another, and

•require JPMorganChase to structure its businesses, operations and systems in less efficient or more costly ways, including with respect to the local storage and processing of data.

JPMorganChase could face legal proceedings, including governmental investigations or enforcement actions, if personal information is mishandled, including if unauthorized parties receive, intercept, or compromise it, if JPMorganChase fails or is perceived

to have failed to comply with applicable law, or if JPMorganChase or its third-party vendors fail to protect personal information appropriately. These actions could require JPMorganChase to modify or cease operations or could result in other penalties. Any of these factors could cause reputational harm and otherwise adversely affect JPMorganChase’s businesses.

The growing sophistication of technology poses a heightened risk of identity fraud, as malicious actors may exploit technology to create convincing false identities or manipulate verification processes. Failure to manage these risks or to implement effective countermeasures could lead to unauthorized transactions, financial losses, increased regulatory scrutiny and reputational harm. In addition, greater government scrutiny of practices related to the handling of personal information has in some cases resulted in, and could in the future lead to, the adoption of applicable law in the U.S. and elsewhere that is stricter and could result in JPMorganChase incurring higher compliance costs or constraining its ability to offer certain products and services to customers.

JPMorganChase’s operations, results and reputation could be harmed by occurrences of extraordinary events beyond its control.

JPMorganChase’s business and operations could be seriously disrupted, and its reputation could be harmed, by events or contributing factors that are wholly or partially beyond its control, including material instances of:

•cyber attacks

•security breaches of its physical premises, including threats to health and safety

•utility or telecommunications failures, internet outages or shutdowns of mass transit

•failure of, or loss of access to, technology or operational systems, including any resulting loss of critical data

•interruption of service from third-party service providers, including financial market infrastructures

•damage to or loss of property or assets of JPMorganChase or third parties, and any consequent injuries, including in connection with any construction projects undertaken by JPMorganChase

•failure or perceived failure by clients, customers or counterparties of JPMorganChase, or by other parties, including newly-acquired businesses, companies in which JPMorganChase has made principal investments, parties to joint ventures with JPMorganChase and vendors with which


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JPMorganChase does business, to comply with applicable law

•natural disasters, severe weather conditions or the effects of climate change

•accidents such as explosions or structural failures

•health emergencies, or

•events arising from any outbreak or escalation of civil unrest, hostilities, terrorist acts or other violence or criminal activity.

Further, should extraordinary events or the factors that cause or contribute to those events become more chronic, the disruptive effects of those events on JPMorganChase’s business and operations, and on its clients, customers, counterparties and employees, could become more significant and persistent.

Any significant failure or disruption of JPMorganChase’s business and operations, or the occurrence of extraordinary events that are beyond its control, could:

•hinder JPMorganChase’s ability to provide services to its clients and customers or to transact with its counterparties

•require it to expend significant resources to correct the failure or disruption or to address the event

•cause it to incur losses or liabilities, including from loss of revenue, property damage, or injuries

•disrupt market infrastructure systems on which JPMorganChase’s businesses rely

•expose it to litigation or penalties, and

•cause reputational harm.

Any failure to maintain adequate data management processes could adversely affect JPMorganChase’s ability to effectively manage its businesses, comply with applicable law or make informed business decisions.

JPMorganChase relies on accurate, timely and complete data to effectively operate its systems and processes, including:

•assessing risk exposures and limits

•monitoring and detecting fraudulent transactions and cyber threats

•developing or maintaining models and other analytical and judgment-based estimations

•implementing and maintaining compliance programs, and

•preparing financial statements, disclosures and regulatory reports, as well as internal reporting

Any deficiencies in JPMorganChase’s data management processes, including with respect to the accuracy or completeness of data, the timeliness of data collection, the analysis or validation of data, or the safeguarding of data could undermine the reliability and effectiveness of JPMorganChase’s operations, such as:

•risk management practices, including inaccurate or untimely risk reporting

•completion of regulatory reporting or internal or external financial reporting

•compliance practices, such as those relating to transaction monitoring, customer screening, recordkeeping or reporting

•business activities, including managing JPMorganChase’s market-making positions and liquidity and capital levels

•providing services to clients and customers, including transaction processing, lending services, account management and customer support, and

•fraud detection and prevention processes.

In addition, if a third-party, whether authorized or unauthorized, obtains and misappropriates data from JPMorganChase’s systems, JPMorganChase and its clients and customers could experience negative outcomes, including a heightened risk of fraudulent transactions using JPMorganChase’s systems, losses from fraudulent transactions and reputational harm from perceived system insecurity.


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Part I

Enhanced regulatory and other standards for the oversight of JPMorganChase’s vendors and other service providers could result in higher costs and other potential exposures.

JPMorganChase’s failure to appropriately assess and manage these relationships, especially those involving significant banking functions, shared services or other critical activities, could materially and adversely affect JPMorganChase. Specifically, any such failure could result in:

•potential harm to clients and customers, and any liability associated with that harm

•lower revenues, and the opportunity cost from lost revenues

•increased operational costs

•the imposition of penalties, or

•reputational harm.

JPMorganChase could incur losses arising from any significant inadequacy or lapse in its risk management framework and control environment.

JPMorganChase’s financial condition or results of operations could be materially and adversely affected by any significant inadequacy or lapse in its risk management framework, governance structure, practices, models, reporting systems or controls. Any such inadequacy or lapse could:

•lead to inaccurate or delayed identification of risks

•hinder the timely escalation of material risk issues to JPMorganChase’s senior management and Board of Directors

•lead to business decisions that have negative outcomes

•harm customers or clients, and cause JPMorganChase to incur associated liabilities

•require significant resources and time to remediate

•lead to non-compliance with applicable law, or attract heightened regulatory scrutiny

•expose JPMorganChase to litigation, investigations by governmental authorities or penalties, or

•cause reputational harm.

JPMorganChase could recognize unexpected losses, its capital levels could be reduced and it could face greater regulatory scrutiny if its models, estimations or judgments, including those used in its financial statements, are inadequate or incorrect.

JPMorganChase uses various models and other analytical and judgment-based estimations to measure, monitor and implement controls related to its

market, credit, capital, liquidity, operational and other risks, as well as to prepare its financial statements under U.S. generally accepted accounting principles (“U.S. GAAP”). The models and estimations that JPMorganChase uses may not be effective in all cases to identify, observe and mitigate risk because of factors such as:

•their reliance on historical trends that may not persist, including assumptions underlying the models and estimations such as correlations among certain market indicators or asset prices

•inherent limitations associated with forecasting uncertain economic and financial outcomes

•historical trend information may be incomplete, or may not be indicative of severely negative market conditions such as extreme volatility, dislocation or lack of liquidity

•sudden illiquidity in markets or declines in prices of certain loans and securities could make it more difficult to value certain financial instruments

•technology that is introduced to run models or estimations may not perform as expected, or may not be well understood by the personnel using the technology

•models and estimations may contain erroneous data, valuations, formulas or algorithms

•review processes may fail to detect flaws in models and estimations, and

•models may inadvertently incorporate biases present in data used in the models.

For example, where quoted market prices are not available for certain financial instruments that require a determination of their fair value, JPMorganChase may make fair value determinations based on internally developed models or other means which ultimately rely to some degree on management estimates and judgment. In addition, the reliability of JPMorganChase’s models and estimations could become more uncertain if assets differ from those used to develop those models and estimations, which could also result in unexpected losses.

These types of estimates and judgments may be inaccurate due to a variety of factors, including if the current and forecasted environments are significantly different


26

from the historical environments upon which the models were developed.

Some models and estimations used by JPMorganChase for managing risks require regulatory review and approval before JPMorganChase may use the models and estimations for calculating market risk RWA, credit risk RWA and operational risk RWA under Basel III.

A significant inadequacy in disclosure or financial reporting controls could negatively affect JPMorganChase’s business, operations and reputation.

JPMorganChase is subject to complex global financial reporting obligations that require continuous enhancements to disclosures in its financial statements and regulatory reports. JPMorganChase’s disclosure and financial reporting controls may not always be effective, and a material weakness or significant deficiency in internal control over financial reporting could occur. Any such significant lapse, weakness or deficiency could result in inaccurate financial reporting which, in turn, could:

•materially and adversely affect JPMorganChase’s business and results of operations or financial condition

•restrict its ability to access the capital markets

•require it to expend significant resources to correct the lapse, weakness or deficiency

•expose it to litigation and penalties, and

•cause reputational harm.

Strategic

JPMorganChase’s results or competitive standing could suffer if its management fails to develop and execute effective business strategies and to anticipate changes affecting those strategies.

These strategies relate to:

•the products and services that JPMorganChase offers

•the geographies in which it operates

•the types of clients and customers that it serves

•the businesses that it acquires or in which it invests

•the counterparties with which it does business

•the technologies that it adopts or in which it invests, and

•the methods, distribution channels and third-party service providers by or through which it offers products and services.

JPMorganChase’s growth prospects also depend on management’s ability to develop and execute effective business plans to address these strategic priorities, both over near term and longer time horizons. Each of these objectives could be adversely affected by any failure by management to:

•devise effective business plans and strategies

•offer products and services that meet expectations of clients and customers

•allocate capital in a manner that promotes long-term stability to enable JPMorganChase to build and invest in market-leading businesses

•appropriately assess and monitor principal investments

•conduct appropriate due diligence on prospective business acquisitions or investments, or effectively integrate newly-acquired businesses

•appropriately address concerns of clients, customers, investors, employees, regulators and other stakeholders

•maintain an effective risk management framework

•react quickly to changes in market conditions or structures

•appropriately balance workforce planning and training as new technologies, such as AI, are adopted and integrated, or

•develop the operational, technology, risk, financial and managerial capabilities necessary to grow and manage JPMorganChase’s businesses.


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Part I

Competition in the financial services industry could lead to negative effects on JPMorganChase’s results of operations.

JPMorganChase expects that competition in the financial services industry will remain intense, with new competitors in the financial services industry continuing to emerge. For example, technological advances and the growth of e-commerce have made it possible for non-depository institutions to offer products and services that traditionally were banking products. These advances have also allowed financial institutions and other companies to provide electronic and internet-based financial solutions, including:

•lending and other extensions of credit to consumers

•payments processing

•cryptocurrency, including stablecoins

•tokenized securities, and

•online automated algorithmic-based investment advice.

Furthermore, both financial institutions and their non-banking competitors face the risk of disruption to payments processing and other products and services from the use of new technologies that may not require intermediation, such as tokenized securities or other products that leverage distributed ledger technology. If JPMorganChase does not keep pace with rapidly changing technological advances, including the adoption of generative AI, it risks losing clients and market share to competitors, which could negatively impact revenues, operating costs and its competitive position. Competition could be intensified as the feasibility, capability and scalability of new technologies improves. In addition, new technologies (including generative AI) could be used by customers or bad actors in unexpected or disruptive ways, or could be breached or infiltrated by third parties, which could increase JPMorganChase’s compliance expenses and reduce its income related to the offering of products and services through those technologies.

Actions by competitors could put pressure on the pricing for JPMorganChase’s products and services or could cause it to lose market share, particularly with respect to investment products and traditional banking products. In addition, advocacy by non-banking competitors for exemptions from regulatory requirements could significantly disadvantage traditional financial institutions.

The failure of any of JPMorganChase’s businesses to meet the expectations of clients and customers, whether due to general market conditions, under-performance, a decision not to offer a particular product or service, changes in client and customer expectations or other factors, could affect JPMorganChase’s ability to attract or retain clients and customers. Furthermore, regulatory uncertainty regarding new technologies, including inconsistent regulatory approaches within and across jurisdictions, could require JPMorganChase to modify or restrict its product and service offerings, incur higher operational or compliance costs or forgo business opportunities.

JPMorganChase’s operations, results, and competitive standing could be adversely affected by the development of advanced technologies such as AI.

The rapid development and deployment of advanced technologies, including generative and agentic AI systems, present a range of risks to JPMorganChase’s businesses and operations, including:

•AI system failures, inappropriate use of AI systems, lack of transparency in AI systems, or inaccurate or biased output from AI systems resulting from rapid deployment, insufficient testing, erroneous data, ineffective model design or insufficient controls, which could disrupt operations, cause erroneous transactions, compromise data privacy, infringe on intellectual property, harm clients and customers, or impair JPMorganChase’s ability to make sound business decisions

•increased exposure to cyber attacks, system manipulation, or data loss if AI systems, particularly agentic systems, are not designed and implemented with appropriate safeguards to prevent systems from accessing sensitive data sources or system resources and taking actions

•intensified AI-enabled cyber threats, which may allow malicious actors to exploit vulnerabilities, reverse-engineer security patches, and conduct sophisticated social engineering attacks, potentially resulting in unauthorized access to sensitive information and data breaches, especially if JPMorganChase fails to adequately maintain, secure and upgrade its technological infrastructure in response to rapidly evolving technological advances

•regulatory and compliance challenges arising from rapidly evolving applicable law, including differences, inconsistencies and conflicts in international standards, which could increase costs, lead to fines and sanctions, and restrict JPMorganChase’s use of AI technologies


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•competitive disadvantage if competitors are able to deploy AI more quickly or effectively, potentially gaining advantages in cost efficiency, client and customer experience, or product innovation, which could result in a loss of market share to competitors, or

•replacement or disintermediation of direct customer relationships if AI agents autonomously manage or intermediate financial decisions and product selection or other services for customers.

It is also possible that JPMorganChase could miscalibrate its workforce planning and employee training efforts either because of over-reliance on AI or the failure to appropriately adopt AI. Over-reliance on AI could cause JPMorganChase to experience shortages in qualified staff due to reduced hiring or retention of employees, or could hinder the development or enhancement of important skills among its employees, including critical thinking, problem-solving, judgment, creativity and adaptability. On the other hand, any efficiencies or competitive advantages that AI may offer could be squandered if JPMorganChase fails to adopt AI in a timely and judicious manner and to make related adjustments to its workforce.

The effects of climate change could adversely affect JPMorganChase’s business and operations, both directly and as a result of impacts on its clients and customers.

Both physical risks and transition risks associated with climate change could negatively impact JPMorganChase and its clients and customers. Physical risks include the increased frequency or severity of acute weather events and shifting climate patterns, which may lead to lower asset values, increased insurance costs, and business and supply chain disruptions. Transition risks, including evolving regulatory requirements, carbon taxes and the adoption of new technologies to support lower-carbon operations, may increase compliance and operational costs, contribute to commodity price volatility and impact the profitability of clients and customers that are adapting to a low-carbon economy. Any of these impacts could have a negative effect on the financial condition of JPMorganChase, the financial condition or creditworthiness of JPMorganChase’s clients and customers, JPMorganChase’s exposure to affected companies and markets, or the effectiveness of JPMorganChase’s existing business strategy.

Conduct

Conduct failure by JPMorganChase employees could trigger litigation and regulatory actions and harm JPMorganChase’s reputation.

JPMorganChase expects its employees to conduct themselves ethically and in compliance with JPMorganChase’s Code of Conduct, as well as with internal policies and applicable laws and regulations. Notwithstanding these expectations, employees of JPMorganChase have in the past engaged and could in the future engage in improper or illegal conduct. In addition, employee misconduct could lead to higher operational and compliance costs, harm JPMorganChase’s reputation and result in collateral consequences for its business and operations. The foregoing risks could be heightened with respect to newly-acquired businesses if JPMorganChase fails to successfully integrate employees of those businesses or any of those employees engage in misconduct.

Reputation

Damage to JPMorganChase’s reputation could negatively affect its business, results and prospects.

Maintaining the trust, affinity and goodwill of clients, customers, employees and investors is critical to JPMorganChase’s ability to operate its business successfully. JPMorganChase’s reputation could be harmed by its decisions to engage or not engage with a client or in a business activity that lead to negative commercial impacts, and could also be compromised by:

•inaccurate or misleading information about JPMorganChase or its clients, including results generated by AI, that is rapidly and broadly disseminated through any form of media, including social networking sites, and

•concerns that JPMorganChase has treated certain clients or customers unfairly

Events or circumstances that damage JPMorganChase’s reputation could also negatively affect its business, results of operations and prospects, and could result in:

•greater scrutiny from governmental authorities or criticism from politicians, including in the form of investigations by governmental authorities or litigation

•unfavorable media coverage or commentary, including through social media campaigns


						29

Part I

•certain clients and customers ceasing to do business with JPMorganChase, and encouraging others to do so

•impairment of JPMorganChase’s ability to attract new clients and customers, to expand its relationships with existing clients and customers, or to hire or retain employees, or

•certain investors opting to divest from investments in securities of JPMorganChase.

JPMorganChase could face litigation, enforcement actions and heightened regulatory scrutiny, and its reputation could be damaged, by the failure or perceived failure to:

•adequately address or appropriately disclose actual or potential conflicts of interest, including those that may arise in connection with providing multiple products and services in, or having investments related to, the same transaction

•identify and address any conflict of interest that a third-party with which it is does business may have with respect to a transaction involving JPMorganChase

•deliver appropriate standards of service and quality, and to treat clients and customers fairly and with the appropriate standard of care

•provide fiduciary products or services in accordance with applicable law, or

•handle or use confidential information of customers or clients appropriately and in compliance with applicable law.

Country

An outbreak or escalation of hostilities between countries or within a country or region could have a material adverse effect on the global economy and on JPMorganChase’s businesses within the affected region or globally.

Conflicts and hostilities between countries or other antagonists could expand in unpredictable ways, including:

•intensified cyber attacks

•drawing in other adversaries

•armed conflict, or

•escalation into full-scale war, which could have catastrophic consequences.

Depending on the scope of the conflict, the hostilities could result in:

•worldwide economic disruption

•heightened volatility in financial markets

•severe declines in asset values, accompanied by widespread sell-offs of investments

•sudden increases in prices in the energy and commodity markets or for certain safe haven currencies

•substantial depreciation of local currencies, potentially leading to defaults by borrowers and counterparties in the affected region

•sustained disruption to or destruction of infrastructure, including energy and power facilities and undersea cables

•disruption of global trade, including retaliatory countermeasures

•changes in economic alliances or treaties, including the potential fragmentation of trade and economic activity that may result from the formation or hardening of national or regional alliances

•diminished consumer, business and investor confidence

•refugee and humanitarian crises, and

•economic sanctions or other regulatory requirements.

Any of the above consequences could have significant negative effects on JPMorganChase’s operations and earnings, both in the countries or regions directly affected by the hostilities or globally. Further, if the U.S. were to become directly involved in such a conflict, this could lead to a curtailment of any operations that JPMorganChase may have in the affected countries or region, as well as in any nation that is aligned against the U.S. in the hostilities. JPMorganChase could also experience more numerous and aggressive cyber attacks launched by or under the sponsorship of one or more of the adversaries in such a conflict.

Some of the countries where JPMorganChase conducts business have economies or markets that are less developed and more volatile or have political, legal and regulatory regimes that are unpredictable or less established. Some of these


30

countries have in the past experienced economic disruptions, including:

•extreme currency fluctuations

•high inflation

•low or negative growth

•defaults or reduced ability to service sovereign debt, and

•increased fraud or other misrepresentation of value.

The governments in these countries have sometimes reacted to these developments by imposing restrictive policies that adversely affect the local business environment, such as:

•price, capital or exchange controls

•confiscation, expropriation, nationalization or blocking access to property, including client assets and intellectual property, and

•changes in applicable law.

In addition, emerging markets countries, as well as more developed countries, have been susceptible to unfavorable social developments arising from poor economic conditions or governmental actions, including:

•widespread demonstrations, civil unrest or general strikes

•crime and corruption

•security and personal safety issues

•outbreaks or escalations of hostilities, or other geopolitical instabilities

•overthrow of incumbent governments

•terrorist attacks, and

•other forms of internal discord.

In addition, any of these events or circumstances in one country could affect JPMorganChase’s operations and investments in another country, including in the U.S.

People

Various factors could impact JPMorganChase’s workforce.

JPMorganChase’s efforts to hire and retain talented employees could be hindered by factors such as:

•the emerging need for more-skilled workers in an evolving workplace environment, and

•targeted recruitment of JPMorganChase employees by competitors.

In addition, restrictive immigration or travel policies in the U.S. and other countries could inhibit JPMorganChase’s ability to attract and retain qualified employees, or necessitate adjustments to operating models that could reduce operational efficiency or increase costs.

Advances in technology, such as automation, AI and data science, could lead to workforce displacement. This could require JPMorganChase to invest in additional employee training, manage impacts on morale and retention, and compete for employment candidates who possess more advanced technological skills, all of which could have a negative impact on JPMorganChase’s business and operations.


						31

Parts I and II

Item 1B. Unresolved Staff Comments.

None.

Item 1C. Cybersecurity.

Refer to the Operational Risk Management section of Management’s discussion and analysis on pages 146–149 for a discussion of cybersecurity risk.

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