J P Morgan Chase SWOT and PESTLE Analysis

Strength

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Weakness

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Opportunity

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Threat

1. Data privacy and cyber security risks: Due to the importance of data privacy nowadays, there is increasing regulatory pressure on companies to implement strong data protection steps. Data leaks can damage the brand image and put companies in trouble with regulatory authorities. The increasing use of technology in BFSI sector brings with it a high risk of hacking and data theft. JP Morgan regularly informs customers about privacy issues and has put in place data protection measures. The company, in partnership with Intuit, has introduced a data protection system for the bank, customers and third parties. This system allows customers to decide what data they want to share. Cyber security risks are quite high in BFSI sector. As per Infosecurity Magazine, financial services firms are hit by cybersecurity incidents 300 times more frequently than firms of other sectors. JP Morgan, along with other financial firms Bank of America, Citibank and Wells Fargo are spending a collective $1.5 billion to tackle cyber-attacks.

2. Fallout of Brexit: BFSI companies are facing lot of uncertainty after the Brexit declaration. The UK-EU trading arrangements like regulatory alignment and supervisory cooperation would have a significant impact on the business model and structure of the companies. Client reactions to the change would also impact the operating models of BFSI companies. The companies would need to brace themselves for spending time, money and effort on significant change across all businesses. JP Morgan is preparing itself to tide over the Brexit fallout by planning to move 300-400 jobs around Europe and modifying some legal entities for doing post-Brexit business.

3. Increasing competition in finance business segment from technology giants: In the age of financial technology, many big technology firms like Amazon, Alibaba and Apple are leveraging their expertise in machine learning and artificial intelligence that they have already developed over a period of time and using it to encroach onto the territory of traditional financial services firms that have only recently started using latest technology. Ant Financial, a Chinese financial services firm that was initially started by Chinese billionaire Jack Ma as an online payments system for his company Alibaba’s e-commerce platforms, has now grown to become a $150 billion behemoth that is even bigger than Goldman Sachs and Morgan Stanley. The expansion of payments and wealth management businesses of these tech firms poses a major threat to firms like JP Morgan that are traditional strongholds of these businesses.

Political

1. Corporate influence over public policy in USA: In USA it is common for companies to influence public policy through lobbying and political contributions in order to make the government pass laws favourable to their businesses. Political Action Committees (PAC) of companies are active financial contributors to political campaigns. JP Morgan also actively engages with policy makers to protect its own interests. The company regularly expresses its views on policies to the officials and provide facts to inform their decisions. To enable this reach to the government officials, the company is a member of many trade associations like American Bankers Association, Business Roundtable, Electronic Payments Coalition etc. The company PAC has also made many contributions to both Republican and Democrat candidates and committees as per the latest contribution report of 2017. Some of its contributions that year were: $3000 to Democrat politician Edwin Perlmutter, $1500 for the Democratic Senate Campaign Fund and $3000 to Republican politician Scott Tipton.

2. Impact of Brexit on operations: Brexit is expected to have significant impact on most industries including BFSI. Companies are facing lot of uncertainty regarding the likely situation after the Brexit happens. The UK-EU trading arrangements like regulatory alignment and supervisory cooperation would have a significant impact on the business model and structure of the companies. Client reactions to the change would also impact the operating models of BFSI companies. The companies would need to brace themselves for spending time, money and effort on significant change across all businesses. Despite Brexit happening in 2019, there would be a 21-month transitional period till December 2020 during which it remains to be seen what rules and regulations would apply to businesses. JP Morgan is preparing itself to tide over the Brexit fallout by planning to move 300-400 jobs around Europe and modifying some legal entities for doing post-Brexit business.

3. Growing geopolitical tensions and uncertainty around American global leadership: Geopolitical tensions are growing since the last few years. Russian aggression, Middle East conflicts, Venezuela, North Korea, Iran, Turkey, Brexit and European politics generally have increased the geopolitical uncertainty. This has been further heightened due to the uncertainty around the global leadership attempts of USA. The trade issues between US and China is likely to impact global economy, especially the financial services sector and also have a direct impact on JP Morgan’s business.

Economic

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Social

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Technological

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Legal

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Environmental

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