Lazard (LAZ) Risk Analysis

The financial services industry is intensely competitive, and we expect it to remain so. We compete on the basis of a number of factors, including the quality of our advice, our employees and transaction execution, the range and price of our products and services, our innovation and our reputation. We have experienced intense fee competition in some of our businesses in recent years, and we believe that we may experience pricing pressures in these and other areas in the future as some of our competitors seek to obtain increased market share by reducing fees. A number of factors increase the competitive risks of our Financial Advisory and Asset Management businesses: - there are relatively few barriers to entry impeding the launch of new asset management and financial advisory firms, including a relatively low cost of entering these businesses, and the successful efforts of new entrants, including major banks and other financial institutions, into our lines of business have resulted in increased competition;- our Financial Advisory business competes against bulge-bracket institutions, who have a large range of product and services to offer clients;- other industry participants will from time to time seek to recruit our employees away from us in order to compete in our lines of business; and - certain of our practices and products are newly established and relatively small. In addition, many of our competitors have the ability to offer a wide range of products, from loans, deposit-taking and insurance to brokerage, asset management and investment banking services, including products and services which we do not currently offer, which may enhance their competitive position. They may also have the ability to support investment banking, including financial advisory services, with commercial banking, insurance and other financial services in an effort to gain market share, which could result in pricing pressure in our businesses. Competitive pressure could adversely affect our ability to attract new or retain existing clients, make successful investments, retain our people or maintain AUM, any of which would adversely affect our results of operations and financial condition.

Our ability to market our Asset Management services relies in part on receiving mandates from the client base of national and regional securities firms, banks, insurance companies, defined contribution plan administrators, investment consultants and other intermediaries. To an increasing extent, our Asset Management business uses referrals from accountants, lawyers, financial planners and other professional advisors. The inability to have this access could materially adversely affect our Asset Management business. In addition, many of these intermediaries and consultants review and evaluate our products and our organization. Poor reviews or evaluations of either the particular product or of us may result in client withdrawals or an inability to attract new clients through such intermediaries or consultants.

Maintaining our reputation is critical to our attracting and maintaining clients, investors and employees. If we fail to deal with, or appear to fail to deal with, various issues that may give rise to reputational risk, we could significantly harm our business prospects. These issues include, but are not limited to, any of the risks discussed in this Item 1A, appropriately dealing with potential conflicts of interest, legal and regulatory requirements, ethical issues, money-laundering, cybersecurity and privacy, record keeping, and the proper identification of the legal, reputational, credit, liquidity and market risks inherent in our products. Further, negative publicity regarding us, whether or not true, may also result in harm to our prospects. There is no assurance that we will be able to successfully reverse the negative impact of allegations and rumors in the future and our potential failure to do so could have a material adverse effect on our business, financial position and results of operations.

In 2025, we earned a significant portion of our revenues from our international operations. We intend to grow our non-U.S. business, and this growth is important to our overall success. Our international operations carry special financial and business risks, which could include the following: - greater difficulties in managing and staffing foreign operations;- language and cultural differences;- fluctuations in foreign currency exchange rates that could adversely affect our results;- unexpected changes in trading policies, regulatory requirements, tariffs and other barriers;- longer transaction cycles;- higher operating costs;- adverse consequences or restrictions on the repatriation of earnings and/or capital;- potentially adverse tax consequences, such as trapped foreign losses;- less stable political and economic environments; and - civil disturbances or other catastrophic events that reduce business activity. If our international business increases relative to our total business, these factors could have a more pronounced effect on our operating results.

Pandemics have affected, and may continue to affect, the global community and our business, financial condition and results of operations, by affecting the economies and markets in which we operate. For example, disruptions to, and volatility in, the global financial markets as a result of a pandemic may result in a decrease in the volume and value of M&A transactions, thereby reducing the demand for our Financial Advisory services and increasing price competition among financial services companies seeking such engagements. Those same market disruptions may result in a decrease in our AUM resulting in lower asset management fees for our Asset Management business, may affect our ability to effect transactions for our Asset Management clients and may negatively impact the liquidity of the assets held in our client portfolios. Furthermore, any such disruptions may affect our ability to incur debt or issue equity on acceptable terms, or at all, to fund our working capital requirements, refinance existing indebtedness or make acquisitions and other investments. Our efforts to mitigate the impact of pandemics may require significant investments of time and resources across our businesses. Furthermore, as many employees continue to perform all or a portion of their job functions remotely on a regular basis, there can be no assurance that our measures implemented to protect the confidentiality of our and our clients' confidential information will be adequate. Any unauthorized disclosure of such information could result in legal action, regulatory sanctions and reputational or financial harm.

The financial services industry is subject to extensive regulation. We are subject to regulation by governmental and self-regulatory organizations in the jurisdictions in which we operate around the world. Many of these regulators, including U.S. and non-U.S. government agencies and self-regulatory organizations, as well as state securities commissions in the U.S., are empowered to conduct administrative proceedings that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a regulated entity from registration or membership. The requirements imposed by our regulators are generally designed to ensure the integrity of the financial markets and to protect customers and other third parties who deal with us and not to protect our stockholders. Consequently, these regulations often serve to limit our activities, including through net capital, customer protection and market conduct requirements. We face the risk of significant intervention by regulatory and governmental authorities, including extended investigation and surveillance activity, adoption of costly or restrictive new regulations and judicial or administrative proceedings that may result in substantial penalties. Among other things, we could be fined or be prohibited from engaging in some of our business activities. In addition, the regulatory environment in which we operate is subject to modification and further regulation. Such changes may increase the expenses that we incur without necessarily leading to commensurate increases in revenue and income. Certain laws and regulations within the U.S. and externally include extraterritorial application that may lead to overlapping or conflicting legal and regulatory burdens with additional risks and implementation expenses. New laws or regulations or changes in the enforcement of existing laws or regulations applicable to us and our clients also may adversely affect our business, and our ability to function in this environment will depend on our ability to continually monitor and react to these changes. The U.S. and other governments and institutions have taken actions, and may in the future take further actions, in response to geopolitical events and disruption and volatility in the global financial markets. Such further actions could include expanding current or enacting new standards, requirements and rules that may be applicable to us and our subsidiaries. The effect, complexity and scope of any such expanded or new standards, requirements and rules is uncertain and could increase costs of compliance, monitoring and reporting and result in increased potential for litigation, sanctions and other liabilities, all of which could have adverse consequences to our business, financial condition and results of operations. While we continue to examine the requirements of new regulations that may become applicable to us in the U.S. and in the European Union (see "Business-Regulation" above), and previously announced actual or potential regulations that may be modified, we are not able to predict the ultimate effect on us. In addition, we face increasingly diverging expectations and demands from our stakeholders and our regulators on certain topics, including sustainability and other matters, and jurisdictions in which we operate have adopted or proposed differing or conflicting laws, regulations or policies on these topics. If we are not able to adequately recognize and respond to such developments and such diverging expectations, we may become subject to additional legal or regulatory risk, face increased social, investor or other scrutiny, incur unexpected costs or experience damage to our reputation, in each case that could have a material adverse effect on our business. The regulatory environment in which our clients operate may also impact our business. For example, changes in antitrust laws or the enforcement of antitrust laws could affect the level of M&A activity, and changes in state laws may limit investment activities of state pension plans. In addition, many tax laws and regulations have been modified, or are otherwise under review, in the U.S. and in many other jurisdictions in which we and our clients operate. Actual and proposed changes to these laws and regulations may affect the level of M&A activity, including cross-border M&A activity. For the asset management businesses in general, there have been a number of highly publicized cases involving fraud or other misconduct by employees of asset management firms, as well as industry-wide regulatory inquiries. These cases and inquiries have resulted in increased scrutiny from regulators, governments and investors and may result in new rules and regulations for mutual funds, hedge funds, private equity funds and their investment managers. This regulatory scrutiny and these rulemaking initiatives may result in an increase in operational and compliance costs or the risk of assessment of significant fines or penalties against our Asset Management business and may otherwise limit our ability to engage in certain activities. Specific regulatory changes also may have a direct impact on the revenue of our Asset Management business. In addition to regulatory scrutiny and potential fines and sanctions, regulators continue to examine different aspects of the asset management industry. For example, the use of "soft dollars," where a portion of commissions paid to broker-dealers in connection with the execution of client trades also pays for research and other eligible services that are used by investment advisors, has in the last several years been reexamined by different regulatory bodies and industry participants. Although a substantial portion of the research relied on by our Asset Management business in its investment decision-making processes is generated internally by our investment personnel, external research, including external research and other eligible services traditionally paid for with soft dollars, is also important to the process. This external research includes materials provided by broker-dealers and research firms, as well as eligible data and analytics services from various sources. In connection with the implementation of the EU Markets in Financial Instruments Directive II ("MiFID II") in 2018, our Asset Management affiliates in France, Germany and the U.K. decided to pay for broker research services from their own resources. This has reduced our ability to utilize commissions to pay for research services and other soft dollar services in certain European jurisdictions. Similar pressures may come from future changes within the asset management industry itself, which may further increase our costs related to external research services. For the year ended December 31, 2025, our Asset Management business obtained research and other eligible services through third-party soft dollar arrangements, the total value of which we estimate to be approximately $25 million. In addition, new regulations affecting the asset management business, including those regarding the management of U.S. mutual funds, hedge funds, Undertakings for the Collective Investment in Transferable Securities ("UCITS") funds and the use of certain investment products may impact our Asset Management business and result in increased costs. For example, the European Union has adopted updated directives on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities ("UCITS V") with respect to various subjects. Among other things, UCITS V establishes remunerations policies that impact the structure of compensation for certain portfolio managers and other personnel within the Company. UCITS V also establishes certain regulations governing oversight and independence of depository functions. While these rules have already been implemented, they could further impact our personnel or result in changes to our operations, resulting in increased costs to the business. In addition, many regulators around the world, including those in the U.S., continue to adopt disclosure requirements impacting the asset management business, as well as changes to the laws, rules and regulations relating to recordkeeping and reporting obligations. Legislators and regulators around the world continue to explore changes to, and additional oversight of, the financial industry generally. The impact of the potential changes on us are uncertain and may result in an increase in costs or a reduction of revenue associated with our businesses. See "Business-Regulation" above for a further discussion of the regulatory environment in which we conduct our businesses.

Our operations rely on electronic information systems that we use for the collection, processing, maintenance, use, sharing, dissemination or disposition of our and our clients' information, which we refer to as "information systems", including our computer systems, hardware, software and networks and those of our third-party vendors and service providers. Such information systems, which frequently include "cloud"-based networks and services, have in the past and may in the future be subject to unauthorized or fraudulent access, computer viruses or other malicious code or other threats, including "phishing" and social engineering attempts, that are constantly evolving and that could have a material security impact on us. There can be no assurance that we will not suffer material losses relating to cybersecurity incidents or threats, including cyber attacks that exploit vulnerabilities, or other security breaches involving our information and payment systems, or the information systems of third parties with which we do business, despite taking protective measures to prevent such breaches. The increased use of mobile technologies and remote working technologies can heighten these and other operational risks, as can the advancing sophistication and increased frequency and severity of cybersecurity incidents and threats globally. In addition, attacks against us, our customers and our third-party vendors have in the past and may in the future increase during periods of heightened diplomatic or armed conflict. A successful cyber attack or other cybersecurity incident or threat against us, our customers or other third parties with which we do business, our confidential or proprietary information, or the confidential or proprietary information of our clients or their counterparties, that is stored in, or transmitted through, such information systems could result in compromise or misappropriation of such information. Any such cyber attack or other cybersecurity incident or threat, or any disruption of or failure in the physical or logical infrastructure or operating systems that support such information systems or our businesses, could significantly impact our ability to operate our businesses and could result in reputational damage, legal liability, the loss of clients or business opportunities and financial losses that are either not insured against or not fully covered through any insurance maintained by us. Additionally, as geopolitical tensions rise, cyber retaliation between nation states can impact the business of those countries, which could adversely affect our business. As threats continue to multiply, become more sophisticated, frequent and severe and threaten additional aspects of our businesses, we may also be required to expend additional resources on information security and compliance costs in order to continue to modify or enhance our protective measures or to investigate and remediate any cybersecurity vulnerabilities or other exposures. Additionally, certain of our third-party vendors or service providers, which may process or otherwise have access to confidential or sensitive data, may have instituted policies allowing their respective employees who are capable of performing their functions remotely to do so and implementing or expanding back-up procedures and capabilities, and may be experiencing a growing demand for their services. As such, such vendors and service providers may be more susceptible to interruptions or confidentiality or security breaches than in prior periods. Any failure of or interruption to their systems or any back-up procedures and capabilities as a result of such actions or such growth in demand could materially adversely affect our business, financial condition and results of operations. See "Other operational risks may disrupt our businesses, result in regulatory action against us or limit our growth." Similarly, due to the significant number of employees frequently deploying the remote working capabilities of our information systems, including on home networks or through increased use of mobile technologies, we face a heightened risk of operational interruptions and security breaches involving such systems. Additionally, such home and mobile technology resources could be more susceptible to interruptions and security breaches than our dedicated business resources. There can be no assurance that protective measures and policies we have instituted in an effort to reduce the likelihood and severity of such interruptions and breaches, including as a result of cybersecurity incidents or threats, will be adequate.

We are integrating AI tools into our business and may expand the number and use of these tools over time, including to support research, analysis, drafting, summarization and workflow automation. As AI use expands and evolves toward more automated workflows, we may face increased operational, compliance and quality-control risks, particularly to the extent we shift toward more autonomous AI agents and expand data connectivity across our AI tools. Our use of AI may also result in reliance on third-party vendors, including AI tool providers and data licensors, and we may have limited ability to negotiate contractual protections or other safeguards that fully address the risks. In addition, our competitors may adopt AI more effectively, which could reduce our competitiveness, increase pricing pressure or adversely affect our ability to attract and retain clients and talent. Our clients or other third parties may use AI to perform some functions that historically drove demand for our services, which could have a negative impact on our business. AI systems are complex and may produce inaccurate, incomplete, biased or otherwise flawed output that may be difficult to validate or supervise. If AI-assisted work product contains errors, or if human oversight is insufficient, we could provide incorrect advice or fail to meet applicable legal, regulatory, contractual and professional obligations or standards, exposing us to liability and reputational harm. The legal and regulatory environment relating to AI is rapidly evolving, and regulators are increasingly applying existing laws to AI use, including with respect to data privacy, cybersecurity, employment, anti-discrimination, intellectual property, record keeping, and financial regulatory and supervision. Moreover, AI-specific laws and regulations are being adopted both globally in jurisdictions where we operate and in the U.S. by states, regulatory agencies, and in Congress, where a number of proposed federal bills are pending. If our disclosures or communications regarding AI are inaccurate or inconsistent with our actual practices, we could face regulatory scrutiny, enforcement actions, litigation and reputational harm. Use of AI tools may also complicate supervision, testing, recordkeeping and auditability requirements applicable to our businesses, including where prompts, outputs or AI-assisted communications constitute records that must be retained, monitored or produced to regulators. AI tools may generate outputs that are alleged to infringe, misappropriate or otherwise violate third-party intellectual property or other rights, or that raise questions regarding ownership, protectability or permissible use of AI-assisted work product. Additionally, our use of AI may heighten risks relating to confidentiality, data privacy, information security and compliance with contractual and licensing restrictions. AI tools may require inputting or processing sensitive information, including proprietary Lazard information, as well as confidential client and third party data. We face the risk of unauthorized disclosure of such information due to cybersecurity incidents, system vulnerabilities, human error, or use of data in a manner that contravenes contractual restrictions such as non-disclosure agreements. Any improper disclosure or compromise of sensitive information could harm clients, lead to litigation, trigger regulatory inquiries and cause reputational damage. Our use of AI may also depend on access to, and permissible use of, third-party data, research and content under commercial licenses, and AI-enabled ingestion, summarization or reuse of such materials could result in contractual disputes, termination of access, or liability. As we connect AI tools to internal systems and data sources and deploy more automated workflows, errors, misuse, compromise or misconfigurations could have amplified impacts, including unauthorized access to data, unintended actions, or the rapid propagation of inaccurate information. AI may also increase cybersecurity and fraud risks. Threat actors may use AI to automate attacks or create more convincing phishing or impersonation attempts. Although we have adopted a global AI governance framework and other controls designed to promote responsible AI use, these may not be fully effective, may not be consistently applied across the firm, or may not evolve quickly enough to keep pace with technological, regulatory or competitive developments. If any of the foregoing risks materialize, our business, financial condition, results of operations and reputation could be materially and adversely affected.