Western Union 2015 Annual Report Download - page 129

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Risks associated with operations outside the United States and foreign currencies could adversely affect our business, financial
condition, results of operations, and cash flows.
A substantial 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 and net monetary assets denominated in foreign currencies. For
example, a considerable portion of our revenue is generated in the euro. If we are unable to or elect not to hedge our foreign
exchange exposure to the euro against a significant devaluation, the value of our euro-denominated revenue, operating profit
and net monetary assets and liabilities would be correspondingly reduced when translated into United States dollars for inclusion
in our financial statements. Moreover, if we engage in foreign currency hedging activities related to our revenues, such transactions
may help to mitigate the adverse financial effects of an appreciation in the United States dollar relative to other currencies. In
an environment of a declining United States dollar relative to other currencies, such hedging transactions could have the effect
of limiting the translation benefits on our reported financial results. In addition, our Business Solutions business provides currency
conversion and, in certain countries, foreign exchange hedging services to its customers, further exposing us to foreign currency
exchange risk. In order to help mitigate these risks, we enter into derivative contracts. However, these contracts do not eliminate
all of the risks related to fluctuating foreign currency rates.
We operate in almost all developing markets throughout the world. In many of these markets, our foreign currency exposure
is limited because most transactions are receive transactions and we currently reimburse most of our agents in either United
States dollars or euros for the payment of these transactions. However, in certain of these developing markets we generate
revenue from send transactions. Our exposure to foreign currency fluctuations in those markets is increased as these fluctuations
impact our revenues and operating profits. Typically, in these markets the cost of hedging activities is prohibitive.
We have additional foreign exchange risk and associated foreign exchange risk management requirements due to the nature
of our Business Solutions business. The majority of this business' revenue is from exchanges of currency at spot rates, which
enable customers to make cross-currency payments. In certain countries, this business also writes foreign currency forward and
option contracts for our customers. The duration of these derivative 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.
Business Solutions 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 established financial
institution counterparties. If we are unable to obtain offsetting positions, our business, financial condition, results of operations,
and cash flows could be adversely affected.
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