Western Union 2010 Annual Report Download - page 14

Intellectual Property
The Western Union brand, consisting of trademark registrations in many countries, is material to our Company.
The international expansion of our agent network over the past decade has taken the Western Union brand nearly
everywhere consumers send and receive money. The loss of the Western Union trademark or a diminution in the
perceived quality associated with the name would harm our growth. We offer money transfer services under the
Western Union, Orlandi Valuta
SM
or Vigo»brands in 200 countries and territories, and various global business
payment services under several brands like Speedpay, Equity Accelerator, Just in Time EFT, Paymap», Western
Union Payments, Quick Collect, Convenience Pay, Quick Pay, Quick Cash, Pago Fácil (registered in Argentina),
Western Union Business Solutions and other trademarks and service marks, such as MoneyWise
TM
, that are also
important to our Company.
Our operating results over the past several years have allowed us to invest significantly each year to support our
brands. In 2010, we invested approximately $210 million to market, advertise and promote our brands and services.
Many of our agents have also contributed significant financial resources to assist with marketing our services.
We own patents and patent applications covering various aspects of our processes and services. We have been,
are and in the future may be, subject to claims and suits alleging that our technology or business methods infringe
patents owned by others, both in and out of the United States. Unfavorable resolution of these claims could require
us to change how we deliver services, result in significant financial consequences, or both, which could adversely
affect our business, financial position and results of operations.
Risk Management
Our Company has a credit risk management department that evaluates and monitors our agent-related credit and
fraud risks. We are exposed to credit risk related to receivable balances from agents in the money transfer, walk-in
bill payment and money order settlement process. We also are exposed to credit risk directly from consumer
transactions particularly through our online services and electronic global business payment channels, where
transactions are originated through means other than cash, and may therefore be subject to “chargebacks,”
insufficient funds or other collection impediments, such as fraud. Our credit risk management team performs a
credit review before each agent signing and conducts periodic analyses. As a result, our losses associated with bad
debts have been less than 1% of our annual revenue in each of the last three fiscal years. However, the challenging
global economic environment may increase our losses associated with bad debts.
Our Business Solutions business exposes us to credit risk relating to derivative financial instruments written by
us to our customers. The duration of these derivative contracts is generally nine months or less. The credit risk
associated with our derivative contracts increases when foreign currency exchange rates move against our
customers, possibly impacting their ability to honor their obligations to deliver currency to us or to maintain
appropriate collateral with us. To mitigate this risk, we perform periodic credit reviews of customers on an ongoing
basis. In addition, we may require certain customers to post collateral based on the fair value of the customer’s
contract and their risk profile. As we require the receipt of funds from our customers, in most cases, before releasing
the associated cross-currency payment, the credit risk arising from our spot foreign currency exchange contracts is
largely mitigated.
To manage our exposures to credit risk with respect to investment securities, money market fund investments and
other credit risk exposures resulting from our relationships with banks and financial institutions, we regularly
review investment concentrations, trading levels, credit spreads and credit ratings, and we attempt to diversify our
investments among global financial institutions.
A key component of the Western Union business model is our ability to manage financial risk associated with
conducting transactions worldwide. We settle accounts with the majority of our agents in United States dollars or
euros. We utilize foreign currency exchange contracts, primarily forward contracts, to mitigate the risks associated
with currency fluctuations and to provide predictability of future cash flows. Limited foreign currency risk arises
with respect to the agent settlement process. The foreign currency exchange risk is limited because the majority of
money transfer transactions are paid within 24 hours after they are initiated and agent settlements occur within a few
days in most instances.
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