Experian 2012 Annual Report Download - page 29

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Governance Financial statementsBusiness reviewBusiness overview
Risk and impact Mitigation Change
From 2011
Commentary
Exposure to country and regional risk (political, financial, economic, social) particularly in the United States and the United Kingdom
Our global footprint subjects our businesses to
economic, political and other risks associated with
international sales and operations. A variety of factors,
including changes in a specific country’s or region’s
political, economic, or regulatory requirements, as
well as the potential for geopolitical turmoil, including
terrorism and war, could result in loss of services,
prevent our ability to respond to agreed service levels
or fulfil other obligations. These risks are generally
outside our control.
Our portfolio is diversified by geography, by
product, by sector and by client in order to protect
itself against many of these fluctuations, especially
those that are restricted to individual territories and
market sectors. We have offices in 44 countries
and derive 35% of revenue from outside the United
States and the United Kingdom. Only 5% of global
revenue is derived from the euro zone.
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The outlook for the world’s major western economies
continues to be weak. Social unrest could drive
political agendas around the use of credit data.
Related global strategy:
•Drive profitable growth
Further information:
•Corporate responsibility section – Playing
an active part in communities
•Exposure to legislation or regulatory
reforms risks and uncertainties
Strategic investments including acquisitions and other organic initiatives may not meet expectations
We continue to expand our global reach and
extend our capabilities through a combination of
acquisitions, strategic alliances/joint venture and
organic strategic investments. The contributions
of these businesses and initiatives to Experian may
result in financial outcomes that are different than
expected.
We assess all acquisitions rigorously, using both
in-house experts and professional advisers. In
addition, we conduct extensive post-acquisition and
organic investment reviews to ensure performance
remains consistent with the business plan.
_While we made investments in 10 companies that
continue to diversify our product offerings and
expand our presence in existing and new markets,
such as Colombia, our risk profile remained
unchanged due to the application of sound
integration practices.
Related global strategy:
•Drive profitable growth
Further information:
•Business review section - discussion of how
we extend our global lead through geographic
expansion
•Financial statement note 41 for a detailed
description of the financial impact of these
acquisitions to the Group
Exposure to the unpredictability of financial markets (foreign exchange, interest rate and other financial risks)
As Experian operates on an international basis, it
is exposed to the risk of currency fluctuations and
the unpredictability of financial markets in which it
operates.
The large sovereign debts and/or fiscal deficits of a
number of European countries and the United States
have raised concerns regarding the financial condition
of financial institutions, insurers and other entities that
are directly or indirectly exposed to these countries.
The default, or a significant decline in the credit rating,
of one or more sovereigns or financial institutions could
cause severe stress in the financial system generally
and could adversely affect our counterparties,
customers, suppliers, vendors, or creditors, directly
or indirectly, in ways which are difficult to predict.
The impact of these conditions may be detrimental
to Experian and may adversely affect its business,
operations and profitability.
Our financial risk management focuses on the
unpredictability of financial markets and seeks to
minimise potential adverse effects on Experian’s
financial performance. We apply conservative
currency hedging strategies to minimise the impact
of currency volatility. Treasury and insurance
activities are conducted only with financial and
insurance institutions with strong credit ratings,
within limits set for each organisation. Refer to the
financial review section of this report for a detailed
description of our mitigation strategies.
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Concerns about credit risk (including that of
sovereigns) and the euro zone crisis have recently
intensified contributing to currency volatility and
downgrades of some financial institutions. We
continue to monitor counterparty positions regularly.
Related global strategy:
•Optimise capital efficiency
•Drive profitable growth
Further information:
•Financial review section and financial
statements note 8
Exposure to increasing competition
We operate in a number of geographic, product and
service markets that are highly competitive. The
competitor environment continues to be dynamic
with new entrants that may have scale, integration
capability and partner networks. Competitors may
develop products and services that are superior to ours
or that achieve greater market acceptance than our
products and services which could result in the loss of
clients or reduction in revenue.
We are committed to continued research and
investment in new data sources, people, technology
and products to support our strategic plan.
_Related global strategy:
•Drive profitable growth
Further information:
•Business review section
Loss or infringement of intellectual property rights
Our success depends, in part, upon proprietary
products and/or services and related intellectual
property rights. The extent to which intellectual
property rights can be protected varies in different
jurisdictions. Third parties may claim that Experian
is infringing their intellectual property rights or our
intellectual property rights could be infringed by third
parties. If we do not enforce our intellectual property
rights successfully, our competitive position may suffer,
which could harm our operating results.
Experian, where appropriate and feasible,
relies upon a combination of patent, copyright,
trademark and trade secret laws, as well as various
contractual restrictions, to protect our proprietary
products and services and continues to monitor
this situation. We also vigorously defend all third
party infringement claims.
_2011 US legislative patent reform should not have
a material impact on existing or future intellectual
property rights as our existing patent programme
applies a ‘first to file’ strategy which is consistent with
the revised legislation.
Related global strategy:
•Focus on data and analytics
•Drive profitable growth
Further information:
•Business review section for a general
description of the types of developed tools
and software
•Financial statement note 21 for a
description of other acquired intangibles
including trademarks and licences, trade
names and completed technology