Humbly and Vigilantly Continuing to Build Jefferies Together

As we contemplate the challenges facing some in our industry, it brings to mind the proverb, “There but for the grace of God go I.” We say this to remind all of us that humility and the vigilant awareness of risk have been and will remain critical factors in Jefferies’ continued evolution and growth. Our mantra will never change: We must remain humble. We have all worked hard, maintained a keen sense of urgency and prioritized long-term results and success. Our individually selected collection of human talent has consistently built our client-driven business, while never forgetting our concurrent commitment to protect our stakeholders’ significant financial capital. What has allowed our firm to consistently navigate this complicated world (despite occasional bruises) is that we all realize guarding against risk is not the responsibility of one, two, a dozen or fifty+ Jefferies people. Jefferies continues to prosper and we will succeed in continuing to build our firm because all 3,984 of us will never forget that it is every one of our jobs to vigilantly protect the fragility that defines all businesses, brands, reputations, trust, and lives in general. The best way to protect our company and each other is to be self-aware and always act with humility while serving our clients and interacting with each other.

With these thoughts in mind, we ask that each of us never forget to think of all possibilities and pitfalls when we act on behalf of our clients or on behalf of our firm. Risk management starts with knowing our clients and all the other parties with whom we interact. Each of us should be driven with deep intellectual curiosity to assure we know with whom we are doing business, why we are in business with them and what is the extreme range of possible outcomes. We face market risk all the time, but we also face risks in our work and our operations, risks to our reputation, credit risks, concentration risks, and myriad other potential risks. We need each and every person at Jefferies to be cognizant that risk comes in endless numbers of forms and can lurk behind any nook and corner within our expansive organization. The history books are littered with financial organizations that missed early warning signs and allowed problems to compound rapidly to the point of serious damage or worse yet, the point of no return.

Metacognition is a term in psychology that involves one knowing when one knows, knowing when one doesn’t know and knowing what to do when one doesn’t know. This is an apt way to think about risk. There are risks we see and know and there are risks we can’t see or know. Clearly the former are less likely to harm us, assuming we do what we are capable of, particularly as a firm. Known risks need to be analyzed, understood and managed appropriately. We must at the same time constantly be on the lookout for and be thinking about the risks we don’t know and don’t see. It is easy for one to think one is doing a great job because one is expertly analyzing all the known risks and quantifying and living within proper limits. If every one of us goes to the next level and takes true ownership and responsibility by thinking about the potential unknown risks that may surface, then we truly have a culture that will allow us to survive whatever volatility and challenges will surely come our way.

Key to managing the unseen and unknown risks around us are the concepts of partnership and elevation. Partnership means that we have all appropriate and relevant people involved in each of our decisions to drive the best outcome. As a corollary, elevation means that we bring more senior people into a discussion to benefit from their greater experience and broader mandates, both of which are relevant to risk analysis. No one at Jefferies will ever be criticized for elevating a question or a fact to a higher level. Quite the contrary, folks always will be applauded for proper and prompt elevation. False alarms are greatly appreciated and we would rather quickly bring out all the fire trucks unnecessarily than be one moment late or one person short to arrive at a five alarm inferno.

We have written this note after seeing yet again several avoidable major crises in our industry, despite a highly favorable environment. One can lose one’s opportunity even on what seems like a sunny day. We are no smarter or better than people at other financial institutions and if we don’t remain humble and vigilant, we could easily make a mistake. The fact that we know this and embrace it is what makes Jefferies different. Regardless of the environment, our destiny remains in our control and dependent in large measure on what we do inside our firm, rather than on actions outside Jefferies. We believe this is more true today than ever. As a result, regardless of the environment, we cannot afford any major missteps and must act with humility and an awareness that there is always more to know when we make decisions. We ask all of you for your partnership in assuring that all risks, no matter how remote or difficult to perceive, are identified and managed appropriately.

Ever humble and always vigilantly on guard with each of you,

Rich and Brian