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Part II
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
49
The company’s global operations are exposed to financial market risks relating to fluctuations in foreign currency exchange rates,
commodity prices, and interest rates. The company has established a variety of programs including use of derivative instruments
and other financial instruments to manage the exposure to financial market risks as to minimize volatility of financial results. In
the ordinary course of business, the company enters into derivative instruments to hedge its exposure to foreign currency, interest
rate and commodity price risks under established procedures and controls. For additional information on these derivatives and
related exposures, see Note 20 to the Consolidated Financial Statements. Decisions regarding whether or not to hedge a given
commitment are made on a case-by-case basis, taking into consideration the amount and duration of the exposure, market volatility
and economic trends. Foreign currency exchange contracts are also used, from time to time, to manage near-term foreign currency
cash requirements.
Foreign Currency Exchange Rate Risks
The company has significant international operations resulting in a large number of currency transactions that result from
international sales, purchases, investments and borrowings. The primary currencies for which the company has an exchange rate
exposure are the European Euro (EUR), Brazilian Real, Chinese Yuan, and Japanese Yen. The company uses forward exchange
contracts to offset its net exposures, by currency, related to the foreign currency denominated monetary assets and liabilities of its
operations. In addition to the contracts disclosed in Note 20 to the Consolidated Financial Statements, from time to time, the
company will enter into foreign currency exchange contracts to establish with certainty the USD amount of future firm commitments
denominated in a foreign currency.
Certain foreign entities of the company held USD denominated marketable securities, mainly US government securities, at
December 31, 2015. The USD/EUR is the primary foreign exchange exposure for these nonfunctional currency denominated
marketable securities. These marketable securities are classified as “available-for-sale” and as such, fluctuations in foreign exchange
are recorded in accumulated other comprehensive loss (AOCI) within the Consolidated Statements of Equity. These fluctuations
are subsequently reclassified from AOCI to earnings in the period in which the marketable securities are sold.
The following table illustrates the fair values of outstanding foreign currency contracts and nonfunctional currency denominated
marketable securities at December 31, 2015 and 2014, and the effect on fair values of a hypothetical adverse change in the foreign
exchange rates that existed at December 31, 2015 and 2014. The sensitivities for foreign currency contracts and nonfunctional
currency denominated marketable securities are based on a 10 percent adverse change in foreign exchange rates.
Fair Value
Asset/(Liability) Fair Value
Sensitivity
(Dollars in millions) 2015 2014 2015 2014
Foreign currency contracts $ (6) $ 192 $ (738) $ (870)
Marketable securities 788 — (110) —
Since the company's risk management programs are highly effective, the potential loss in value for each risk management portfolio
described above would be largely offset by changes in the value of the underlying exposure.
Concentration of Credit Risk
The company maintains cash and cash equivalents, marketable securities, derivatives and certain other financial instruments with
various financial institutions. These financial institutions are generally highly rated and geographically dispersed and the company
has a policy to limit the dollar amount of credit exposure with any one institution.
As part of the company's financial risk management processes, it continuously evaluates the relative credit standing of all of the
financial institutions that service DuPont and monitors actual exposures versus established limits. The company has not sustained
credit losses from instruments held at financial institutions.
The company's sales are not materially dependent on any single customer. As of December 31, 2015, no one individual customer
balance represented more than five percent of the company's total outstanding receivables balance. Credit risk associated with its
receivables balance is representative of the geographic, industry and customer diversity associated with the company's global
businesses.
The company also maintains strong credit controls in evaluating and granting customer credit. As a result, it may require that
customers provide some type of financial guarantee in certain circumstances. Length of terms for customer credit varies by industry
and region.