Discover 2009 Annual Report Download - page 23

power of Visa and MasterCard. The former exclusionary rules of Visa and MasterCard limited our ability to attract
merchants and credit and debit card issuers, contributing to Discover not being as widely accepted in the U.S. as Visa
and MasterCard. Merchant acceptance of the Discover card, however, has increased recently and we are making
investments to further grow acceptance both domestically and internationally.
In our payment services business, we compete with other networks for volume and to attract third-party issuers to issue
credit, debit and prepaid cards on the Discover, PULSE and Diners Club networks. We generally compete on the basis of
customer service and pricing, including the incentives and rebates we offer to our third-party issuers. Diners Club’s and
Discover Network’s primary competitors are Visa, MasterCard and American Express, and PULSE Network’s competitors
include Visa’s Interlink, STAR, and MasterCard’s Maestro. American Express is a particularly strong competitor to Diners
Club as both cards significantly target international business travelers.
In our deposits business, we compete with other deposit-taking organizations such as banks and credit unions that
source deposits through electronic and internet delivery channels or through branch locations. We compete in the deposit
markets on the basis of pricing, reputation and convenience. We seek to obtain the deposits of new customers as well as
existing Discover credit card customers by offering attractive rates and marketing our name brand.
For discussion of the risks we face with respect to competition, see “Risk Factors.”
Intellectual Property
We use a variety of methods, such as trademarks, patents, copyrights and trade secrets, to protect our intellectual
property. We also place appropriate restrictions on our proprietary information to control access and prevent
unauthorized disclosures. Our Discover, PULSE and Diners Club brands are important assets, and we take steps to protect
the value of these assets and our reputation.
Employees
As of January 15, 2010, we employed approximately 10,500 individuals.
Risk Management
The understanding, identification and management of risk are important elements to our success. Accordingly, we
maintain a comprehensive risk management program to identify, measure, monitor, evaluate, manage, and report on the
principal risks we assume in conducting our activities. These risks include credit, market, liquidity, operational,
compliance and legal and strategic risks.
Enterprise Risk Management Principles
Our enterprise risk management philosophy is to ensure that all relevant risks inherent in our business activities are
appropriately identified, measured, monitored, evaluated, managed and reported. Our enterprise risk management
philosophy is expressed through five key principles that guide our approach to risk management: comprehensiveness,
independence, accountability, defined risk appetite and transparency.
Comprehensiveness. We seek to maintain a comprehensive framework for managing risk enterprise-wide, including
policies, risk management processes, monitoring, and reporting. The framework is designed to be comprehensive with
respect to our reporting segments and its control and support functions, and it extends across all risk types.
Accountability. We structure accountability along the principles of risk management execution, oversight and
independent validation. Our business units hold primary accountability for management of the risks to which their
businesses are exposed. The principles apply across all businesses and risk types.
Independence. We maintain independent risk and control functions including Corporate Risk Management, Law and
Compliance, and Internal Audit. Our Corporate Risk Officer, who leads our Corporate Risk Management function, is
appointed by our board of directors and is accountable for providing an independent perspective on the risks to which
we are exposed; how well management is identifying, assessing and managing risk; and the capabilities we have in
place to manage risk across the enterprise.
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