Freddie Mac 2009 Annual Report Download - page 53

accounting, data processing or other operating systems and facilities may fail to operate properly or become disabled,
adversely affecting our ability to process these transactions. The inability of our systems to accommodate an increasing
volume of transactions or new types of transactions or products could constrain our ability to pursue new business initiatives.
We also face the risk of operational failure or termination of any of the clearing agents, exchanges, clearinghouses or
other financial intermediaries we use to facilitate our securities and derivatives transactions. Any such failure or termination
could adversely affect our ability to effect transactions, service our customers and manage our exposure to risk.
Most of our key business activities are conducted in our principal offices located in McLean, Virginia. Despite the
contingency plans and facilities we have in place, our ability to conduct business may be adversely impacted by a disruption
in the infrastructure that supports our business and the communities in which we are located. Potential disruptions may
include those involving electrical, communications, transportation or other services we use or that are provided to us. If a
disruption occurs and our employees are unable to occupy our offices or communicate with or travel to other locations, our
ability to service and interact with our customers or counterparties may suffer and we may not be able to successfully
implement contingency plans that depend on communication or travel.
We are exposed to the risk that a catastrophic event, such as a terrorist event or natural disaster, could result in a
significant business disruption and an inability to process transactions through normal business processes. Any measures we
take to mitigate this risk may not be sufficient to respond to the full range of catastrophic events that may occur.
Our operations rely on the secure processing, storage and transmission of confidential and other information in our
computer systems and networks. Our computer systems, software and networks may be vulnerable to unauthorized access,
computer viruses or other malicious code and other events that could have a security impact. If one or more of such events
occur, this potentially could jeopardize confidential and other information, including nonpublic personal information and
sensitive business data, processed and stored in, and transmitted through, our computer systems and networks, or otherwise
cause interruptions or malfunctions in our operations or the operations of our customers or counterparties, which could result
in significant losses or reputational damage. We may be required to expend significant additional resources to modify our
protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation
and financial losses that are not fully insured.
We rely on third parties for certain important functions, including some that are critical to financial reporting, our
mortgage-related investment activity and mortgage loan underwriting. Any failures by those vendors could disrupt our
business operations.
We outsource certain key functions to external parties, including but not limited to: (a) processing functions for trade
capture, market risk management analytics, and financial instrument valuation; (b) custody and recordkeeping for our
mortgage-related investments; (c) processing functions for mortgage loan underwriting; and (d) certain services we provide to
Treasury in our role as program compliance agent under HAMP. We may enter into other key outsourcing relationships in
the future. If one or more of these key external parties were not able to perform their functions for a period of time, at an
acceptable service level, or for increased volumes, our business operations could be constrained, disrupted or otherwise
negatively impacted. Our use of vendors also exposes us to the risk of a loss of intellectual property or of confidential
information or other harm. Financial or operational difficulties of an outside vendor could also hurt our operations if those
difficulties interfere with the vendor’s ability to provide services to us.
Our risk management and loss mitigation efforts may not effectively mitigate the risks we seek to manage.
We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify,
manage, monitor and mitigate operational risks, interest rate and other market risks and credit risks related to our business.
Our risk management policies, procedures and techniques may not be sufficient to mitigate the risks we have identified or to
appropriately identify additional risks to which we are subject. See “QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK” and “MD&A — RISK MANAGEMENT” for a discussion of our approach to
managing the risks we face.
Legal and Regulatory Risks
The future status and role of Freddie Mac could be materially adversely affected by legislative and regulatory action that
alters the ownership, structure and mission of the company.
Future legislation will likely materially affect the role of the company, our business model, our structure and future
results of operations. Some or all of our functions could be transferred to other institutions, and we could cease to exist as a
stockholder-owned company or at all. If any of these events were to occur, our shares could further diminish in value, or
cease to have any value, and there can be no assurance that our stockholders would receive any compensation for such loss
in value.
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