Western Union 2013 Annual Report Download - page 196

2013 FORM 10-K
86
Credit Risk
As of December 31, 2013, the majority of our investment securities had credit ratings of "AA-" or better from a major credit
rating agency.
To manage our exposures to credit risk with respect to investment securities, money market fund investments, derivatives
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. We also limit our investment level in any individual money market fund to no more than $100 million.
We are also exposed to credit risk related to receivable balances from agents in the money transfer, walk-in bill payment and
money order settlement process. In addition, we are exposed to credit risk directly from consumer transactions particularly through
our online services and electronic channels, where transactions are originated through means other than cash, and therefore are
subject to "chargebacks," insufficient funds or other collection impediments, such as fraud. We perform a credit review before
each agent signing and conduct periodic analyses.
We are exposed to credit risk in our Business Solutions business relating to: (a) derivatives written by us to our customers
and (b) receivables from certain customers for which beneficiaries are paid prior to receiving cleared funds from the customer,
where we have offered "trade credit." For the derivatives, the duration of these contracts at inception is generally less than one
year. 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. For those receivables where we have offered trade credit, collection ordinarily occurs within a few days. To mitigate the
risk associated with potential customer defaults, we perform credit reviews of the customer on an ongoing basis, and, for our
derivatives, we may require certain customers to post or increase collateral.
Our losses associated with bad debts have been less than 1% of our consolidated revenues in all periods presented.