Experiencing comrades' deaths and being subjected to evil magics will instantly decrease Morale. The lower the Bravery, the higher the loss - someone who has Bravery 90 is twice as susceptible as someone with Bravery 100, one with Bravery 80 - thrice etc.
Losing one's nerves can occur if Morale is below 50 - the closer to zero, the higher the chance.