MasterCard 2010 Annual Report Download - page 48

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cross-border travel and our customers’ need for transactions to be converted into their base currency. Cross-
border travel may be adversely affected by world geopolitical, economic, weather and other conditions. These
include the threat of terrorism and outbreaks of flu (such as H1N1), viruses (such as SARS) and other diseases.
Any such decline in cross-border travel could adversely affect our revenues and profitability.
General economic and global political conditions may adversely affect trends in consumer spending,
which may materially and adversely impact our revenue and profitability.
The global payments industry depends heavily upon the overall level of consumer, business and government
spending. General economic conditions (such as unemployment, housing and changes in interest rates) and other
political conditions (such as devaluation of currencies and government restrictions on consumer spending) in key
countries in which we operate may adversely affect our financial performance by reducing the number or average
purchase amount of transactions involving payment cards carrying our brands. Also, as we are principally based
in the United States, a negative perception of the United States could impact the perception of our company,
which could adversely affect our business prospects and growth.
As a guarantor of certain obligations of principal members and affiliate debit licensees, we are exposed to
risk of loss or illiquidity if any of our customers default on their MasterCard, Cirrus or Maestro settlement
obligations.
We may incur liability in connection with transaction settlements if an issuer or acquirer fails to fund its
daily settlement obligations due to technical problems, liquidity shortfalls, insolvency or other reasons. If a
principal member or affiliate debit licensee of MasterCard International is unable to fulfill its settlement
obligations to other customers, we may bear the loss even if we do not process the transaction. In addition,
although we are not obligated to do so, we may elect to keep merchants whole if an acquirer defaults on its
merchant payment obligations. Our estimated MasterCard-branded gross legal settlement exposure, which is
calculated using the average daily card charges made during the quarter multiplied by the estimated number of
days to settle, was approximately $28.5 billion as of December 31, 2010. We have a revolving credit facility in
the amount of $2.75 billion which could be used for general corporate purposes, including to provide liquidity in
the event of one or more settlement failures by our customers. In the event that MasterCard International effects a
payment on behalf of a failed member, MasterCard International may seek an assignment of the underlying
receivables from its members. Subject to approval by our Board of Directors, members may be charged for the
amount of any settlement loss incurred during these ordinary course activities of MasterCard. While we believe
that we have sufficient liquidity to cover a settlement failure by any of our largest customers on their peak day,
concurrent settlement failures of more than one of our largest customers or of several of our smaller customers
may exceed our available resources and could materially and adversely affect our business and financial
condition. In addition, even if we have sufficient liquidity to cover a settlement failure, we may not be able to
recover the cost of such a payment and may therefore be exposed to significant losses, which could materially
and adversely affect our results of operations, cash flow and financial condition. Moreover, during 2010, many of
our financial institution customers continued to be directly and adversely impacted by the unprecedented events
in the financial markets which began during 2008 and the economic turmoil that has ensued around the world.
These events present increased risk that we may have to perform under our settlement guarantees. For more
information on our settlement exposure as of December 31, 2010, see Note 23 (Settlement and Other Risk
Management) to the consolidated financial statements included in Part II, Item 8.
If our transaction processing systems are disrupted or we are unable to process transactions efficiently or
at all, our revenue or profitability would be materially reduced.
Our transaction processing systems may experience service interruptions as a result of process or other
technology malfunction, fire, natural or man-made disasters, power loss, disruptions in long distance or local
telecommunications access, fraud, terrorism, accident or other catastrophic events. A disaster or other problem at
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