Case | HBS Case Collection | January 2011

The Risk-Reward Framework at Morgan Stanley Research

by Suraj Srinivasan and David Lane

Abstract

The case describes the Risk-Reward framework that Morgan Stanley analysts use as a systematic approach to communicate a broader range of fundamental insights about a company rather than the traditional single point estimates. The goal of the framework is to focus the analysts' work on critical uncertainties and model a limited number of scenarios relevant to key investment debates. By outlining a bear, base and a bull case, the analysts can present the risk surrounding the expected outcome over the forecast horizon. The case outlines the key elements of the methodology and the process Morgan Stanley undertook to implement the framework on a world-wide basis starting in 2007, and discusses the challenges and opportunities that managers of the research department face as the framework is increasingly identified with their firm.

Keywords: Financial Statements; Forecasting and Prediction; Equity; Framework; Management Analysis, Tools, and Techniques; Risk Management; Business Processes; Research; Valuation;

Citation:

Srinivasan, Suraj, and David Lane. "The Risk-Reward Framework at Morgan Stanley Research." Harvard Business School Case 111-011, January 2011.