Honeywell 2003 Annual Report Download - page 392

financial position. We minimize our risks from interest and foreign currency
exchange rate and commodity price fluctuations through our normal operating
and financing activities and, when deemed appropriate, through the use of
derivative financial instruments.
Credit and Market Risk
Financial instruments, including derivatives, expose us to counterparty credit
risk for nonperformance and to market risk related to changes in interest or
currency exchange rates. We manage our exposure to counterparty credit risk
through specific minimum credit standards, diversification of counter parties,
and procedures to monitor concentrations of credit risk. Our counterparties are
substantial investment and commercial banks with significant experience using
such derivative instruments. We monitor the impact of market risk on the fair
value and cash flows of our derivative and other financial instruments
considering reasonably possible changes in interest and currency exchange rates
and restrict the use of derivative financial instruments to hedging activities.
We do not use derivative financial instruments for trading or other speculative
purposes and do not use leveraged derivative financial instruments.
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