Western Union 2015 Annual Report Download - page 189

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Credit Risk
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 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. We perform a credit review before each agent signing and conduct periodic analyses of agents
and certain other parties we transact with directly. In addition, we are exposed to credit risk directly from consumer transactions
particularly through our 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, which are anticipated to increase as
electronic channels become a greater proportion of our money transfer business.
We are exposed to credit risk in our Business Solutions business relating to: (a) derivatives written by us to our customers
and (b) the extension of trade credit when transactions are paid to recipients prior to our receiving cleared funds from the sending
customers. 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 approximately 1% of our consolidated revenues in all periods presented.
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