Western Union 2009 Annual Report Download - page 35

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to fulfill its lending commitment to us, our short-term liquidity and ability to support borrowings
under our commercial paper program could be adversely affected.
• We may be unable to refinance our existing indebtedness as it becomes due or we may have to
refinance on unfavorable terms, which could require us to dedicate a substantial portion of our cash
flow from operations to payments on our debt, thereby reducing funds available for working capital,
capital expenditures, acquisitions, share repurchases and other purposes.
• The market value of the securities in our investment portfolio may substantially decline. The impact
of that decline in value may adversely affect our results of operations and financial condition.
• The derivative financial instruments that we use reduce our exposure to various market risks
including changes in interest rates and foreign exchange rates. Our counterparties to our derivative
instruments may fail to honor their obligations, which could expose us to risks we had sought to
mitigate. That failure could have an adverse effect on our financial condition and results of
operations.
• We aggregate our foreign exchange exposures in our Custom House business, including the exposure
generated by the derivative contracts we write to our customers as part of our cross-currency
payments business, and typically hedges the net exposure through offsetting contracts with
established financial institution counterparties. If our customers fail to honor their obligations or if
the counterparties to our offsetting positions fail to honor their obligations, our business, financial
position and results of operations could be adversely affected.
• Our exposure to receivables from our agents, consumers and businesses could impact us. For more
information on this risk, see risk factor, “We face credit, liquidity and fraud risks from our agents,
consumers and businesses that could adversely affect our business, financial position and results of
operations.”
• The third-party service providers on whom we depend may experience difficulties in their businesses,
which may impair their ability to provide services to us and have a potential impact on our own
business. The impact of a change or temporary stoppage of services may have an adverse effect on
our business, results of operations and financial condition.
• Banks upon which we rely to conduct our businesses could fail. This could lead to our inability to
access funds and/or credit losses for us and could adversely impact our ability to conduct our
business.
• If market disruption and volatility occurs, we could experience difficulty in accessing capital and our
business, financial condition and results of operations could be adversely impacted.
Risks associated with operations outside the United States and foreign currencies could adversely affect our
business, financial position and results of operations.
An increasing portion of our revenue is generated in currencies other than the United States dollar. As a
result, we are subject to risks associated with changes in the value of our revenues denominated in foreign
currency. We also recently acquired Canada-based Custom House which provides currency conversion and
foreign exchange hedging services to its customers. In order to mitigate these risks, we enter into derivative
contracts. However, these contracts do not eliminate all of the risks related to fluctuating foreign currency
rates.
With the acquisition of Custom House in the third quarter of 2009, our foreign exchange risk and
associated foreign exchange risk management has increased due to the nature of this business. The significant
majority of Custom House’s revenue is from exchanges of currency at the spot rate enabling customers to
make cross-currency payments. This business also writes foreign currency forward and option contracts for our
customers. The duration of these derivatives contracts is generally nine months or less. Custom House
aggregates its foreign exchange exposures arising from customer contracts, including the derivative contracts
described above, and hedges the resulting net currency risks by entering into offsetting contracts with
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