MasterCard 2010 Annual Report Download - page 30

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Enterprise Risk Management
MasterCard faces a number of risks in operating its business (for a description of material risks, see “Risk
Factors” in Part I, Item 1A). Managing risk is an integral component of our business activities and the degree to
which we manage risk is vital to our financial condition and profitability. We have an Enterprise Risk
Management (“ERM”) program which is integrated with the business and designed to ensure appropriate and
comprehensive oversight and management of risk. The ERM program leverages our business processes to,
among other things, ensure: allocation of resources to appropriately address risk; establishment of clear
accountability for risk management; and provision of transparency of risks to senior management, the Board of
Directors and appropriate Board committees. Our ERM program seeks to accomplish these goals by: identifying,
prioritizing and monitoring key risks; providing an independent view of our risk profile; and strengthening
business operations by integrating ERM principles and continuing to create a risk aware culture within
MasterCard. MasterCard’s integrated risk management structure balances risk and return by having business
units and central functions (such as finance and law) identify, own and manage risks, our executive officers set
policy and accountability and the Board and committees provide oversight of the process.
Intellectual Property
We own a number of valuable trademarks that are essential to our business, including MasterCard®,
Maestro®and Cirrus®, through one or more affiliates. We also own numerous other trademarks covering various
brands, programs and services offered by MasterCard to support our payment programs. Trademark and service
mark registrations are generally valid indefinitely as long as they are used and/or properly maintained. Through
license agreements with our customers, we authorize the use of our trademarks in connection with our customers’
card issuing and merchant acquiring businesses. In addition, we own a number of patents and patent applications
relating to payments solutions, transaction processing, smart cards, contactless, mobile, electronic commerce,
security systems and other matters, some of which may be important to our business operations. Patents are of
varying duration dcpending on the jurisdiction and filing date, and will typically expire at the end of their natural
term.
Competition
General. MasterCard programs compete against all forms of payment, including paper-based transactions
(principally cash and checks); card-based payment systems, including credit, charge, debit, prepaid, private-label
and other types of general purpose and limited use cards; and electronic transactions such as wire transfers and
Automated Clearing House payments. As a result of a global trend, electronic forms of payment such as payment
cards are increasingly displacing paper forms of payment, and card brands such as MasterCard, Visa, American
Express and Discover are benefiting from this displacement. However, cash and checks still capture the largest
overall percentage of worldwide payment volume.
Payment Card, Processing and Alternative Competitors.
•General Purpose Payment Card Industry. Within the general purpose payment card industry, we face
substantial and increasingly intense competition worldwide from systems such as Visa (including Plus®,
Electron and Interlink), American Express and Discover, among others. Within the global general
purpose card industry, Visa has significantly greater volume than we do. Outside of the United States,
some of our competitors such as JCB in Japan and China Union Pay®have leading positions in their
domestic markets. Regulation can also play a role in determining competitive market advantages for
competitors. For example, China Union Pay is the sole domestic processor designated by the Chinese
government and operates the sole national cross-bank bankcard information switch network in China
due to local regulation. Some governments, such as India and Russia, are promoting local networks for
domestic processing and there are similar developments in other countries. See “Risk Factors—Legal
and Regulatory Risks—Government actions may prevent us from competing effectively against
providers of domestic payments services in certain countries, which could adversely affect our ability to
maintain or increase our revenues ” in Part I, Item 1A.
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