Morgan Stanley 2014 Annual Report Download - page 149

Industry Exposure—OTC Derivative Products. The Company also monitors its credit exposure to individual
industries for current exposure arising from the Company’s OTC derivative contracts.
The following table shows the Company’s OTC derivative products at fair value by industry:
Industry At December 31, 2014 At December 31, 2013
(dollars in millions)
Utilities .................................................. $ 3,797 $ 3,142
Banks and securities firms ................................... 3,297 2,358
Funds, exchanges and other financial services(1) .................. 2,321 2,433
Industrials ................................................ 2,278 914
Regional governments ....................................... 1,603 1,597
Healthcare ................................................ 1,365 1,089
Special purpose vehicles ..................................... 1,089 1,908
Not-for-profit organizations .................................. 905 672
Sovereign governments ...................................... 889 816
Real Estate ................................................ 761 503
Consumer staples .......................................... 650 487
Other .................................................... 3,272 1,695
Total(2) .............................................. $22,227 $17,614
(1) Amounts include mutual funds, pension funds, private equity and real estate funds, exchanges and clearinghouses and diversified
financial services.
(2) For further information on derivative instruments and hedging activities, see Note 12 to the Company’s consolidated financial statements
in Item 8.
Other.
In addition to the activities noted above, there are other credit risks managed by the Company’s Credit Risk
Management Department and various business areas within the Company’s Institutional Securities business
segment. The Company participates in securitization activities whereby it extends short-term or long-term
funding to clients through loans and lending commitments that are secured by the assets of the borrower and
generally provide for over-collateralization, including commercial real estate loans, loans secured by loan pools,
commercial company loans, and secured lines of revolving credit. Credit risk with respect to these loans and
lending commitments arises from the failure of a borrower to perform according to the terms of the loan
agreement or a decline in the underlying collateral value. See Note 7 to the Company’s consolidated financial
statements in Item 8 for information about the Company’s securitization activities. In addition, a collateral
management group monitors collateral levels against requirements and oversees the administration of the
collateral function. See Note 6 to the Company’s consolidated financial statements in Item 8 for additional
information about the Company’s collateralized transactions.
Country Risk Exposure.
Country risk exposure is the risk that uncertainties arising from the economic, social, security and political
conditions within a foreign country (any country other than the U.S.) will adversely affect the ability of the
sovereign government and/or obligors within the country to honor their obligations to the Company. Country risk
exposure is measured in accordance with the Company’s internal risk management standards and includes
obligations from sovereign governments, corporations, clearinghouses and financial institutions. The Company
actively manages country risk exposure through a comprehensive risk management framework that combines
credit and market fundamentals and allows the Company to effectively identify, monitor and limit country risk.
Country risk exposure before and after hedges is monitored and managed.
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