Discover 2015 Annual Report Download - page 28

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networks' primary competitors are Visa, MasterCard and American Express, and PULSE's network competitors include
Visa's Interlink, MasterCard's Maestro and First Data's STAR. American Express is a particularly strong competitor to
Diners Club as both cards target international business travelers. As the payments industry continues to evolve, we are
also facing increasing competition from new entrants to the market, such as online networks, telecom providers and
other alternative payment providers, which leverage new technologies and a customer's existing deposit and credit
card accounts and bank relationships to create payment or other fee-based solutions.
In our direct-to-consumer deposits business, we have acquisition and servicing capabilities similar to other direct
competitors, including USAA, Ally Bank, American Express, Capital One (360), Sallie Mae and Barclays. We also
compete with traditional banks and credit unions that source deposits through branch locations. We seek to differentiate
our deposit product offerings on the basis of brand reputation, convenience, customer service and value.
For more information regarding the nature of and the risks we face in connection with the competitive
environment for our products and services, see "Risk Factors — Strategic Business Risk."
Intellectual Property
We use a variety of methods, such as trademarks, patents, copyrights and trade secrets, to protect our intellectual
property. We also place appropriate restrictions on our proprietary information to control access and prevent
unauthorized disclosures. Our Discover, PULSE and Diners Club brands are important assets, and we take steps to
protect the value of these assets and our reputation.
Employees
As of January 31, 2016, we employed approximately 15,036 individuals.
Risk Management
Our business exposes us to strategic (including reputational), credit, market, liquidity, operational, compliance
and legal risks. We use an enterprise-wide risk management framework to identify, measure, monitor, manage and
report risks that affect or could affect the achievement of our strategic, financial and other objectives.
Enterprise Risk Management Principles
Our enterprise risk management philosophy is expressed through five key principles that guide our approach to
risk management: Comprehensiveness, Accountability, Independence, Defined Risk Appetite and Transparency.
Comprehensiveness
We seek to maintain a comprehensive risk management framework for managing risk enterprise-wide, including
policies, risk management processes, monitoring and testing, and reporting. Our framework is designed to be
comprehensive with respect to our reporting segments and their control and support functions, and across all risk types.
Accountability
We structure accountability across three lines of defense along the principles of risk management execution,
oversight and independent validation. As the first line of defense, our business units seek to manage the risks to which
they are exposed as a result of their activities, including those risks arising from activities that have been outsourced to
third parties. The principles apply across all businesses and risk types and guide the definition of specific roles and
responsibilities.
Independence
Our second and third lines of defense, which are comprised of risk and control functions, operate independent of
the business units. The second line of defense includes our corporate risk management ("CRM") department, which is
led by our Chief Risk Officer (“CRO”), who is appointed by our Board of Directors. The CRM department sets risk
management standards and policies that are consistent with the size and complexity of our business, industry practices
and applicable legal and regulatory requirements. The CRO is accountable for providing our Board of Directors and
executive management with an independent perspective on: the risks to which we are exposed; how well management
is identifying, assessing and managing risk; and the capabilities we have in place to manage risks across the
enterprise. Our internal audit department, as the third line of defense, performs periodic, independent reviews and tests