Experian 2014 Annual Report Download - page 30

26 Strategic report • Protecting our business
Protecting our business continued
EXPOSURE TO THE UNPREDICTABILITY OF FINANCIAL MARKETS (FOREIGN EXCHANGE, INTEREST RATE AND
OTHER FINANCIAL RISKS)
Our operations expose us to the unpredictability of international financial markets.
Performance indicator
Profit before tax
Strategic alignment
• Geographic expansion
Further information
• Financial review
section and financial
statements notes
Description of risk
• We are exposed to foreign exchange risk from future commercial
transactions, recognised assets and liabilities, and investments in,
and loans between, undertakings with different functional currencies.
• We face interest rate risks arising from our borrowings.
• Credit and liquidity risks arise from our derivative financial
instruments and borrowing facilities.
Potential impact
• Changes in financial market conditions could adversely
affect our business, operations and profitability.
How we manage this risk
• We operate conservative currency hedging strategies, to
minimise the impact of currency volatility.
• We use fixed and floating rate borrowings, of varying durations.
• We have long-term committed bank borrowing facilities.
• Our treasury and insurance activities are only with institutions with
strong credit ratings, within limits we set for each organisation.
Change from 2013
Increasing risk
2014 update
Tapering of the US quantitative
easing (‘QE’) policy could
contribute to ongoing currency
volatility. Changes in the value of
sterling, the euro, the Brazilian
real or other Group operating
currencies, relative to the US
dollar, could affect our EBIT.
Reduction in QE could also result
in higher global interest rates,
making our debt more expensive
to service in the future.
ADVERSE MARKET CONDITIONS COULD AFFECT OPERATIONAL RESULTS
Our operations are exposed to adverse market conditions resulting from concerns about the large sovereign debts and/or fiscal deficits
of a number of European countries and the US or an economic slowdown in high-growth markets such as Brazil and China.
Performance indicator
EBIT and percentage of
revenue from customer
segments other than
financial services
Strategic alignment
• Geographic expansion
Further information
• Regional reviews
Description of risk
• The default, or a significant decline in the credit rating, of one
or more sovereigns or financial institutions could cause severe
stress in the financial system.
• An economic slowdown could hit our high-growth markets.
Potential impact
• We could see sluggish demand for our products and services,
affecting our operations and profitability.
• Financial instability of our customers, suppliers, counterparties
or creditors could affect our profitability.
How we manage this risk
• Our business is diversified by region and clients.
• We continue to develop counter-cyclical products and services.
• We monitor our counterparty relationships.
Change from 2013
Stable
2014 update
Concerns over the state of sovereign
debt have moderated, along with
governments taking measures to
promote economic growth. We
continue to benefit from a diversified
portfolio of clients, in many
countries. For 2014, businesses in
North America accounted for 50%
of global revenue, Latin America
19%, the UK and Ireland 20% and
the remaining countries, comprising
the EMEA/Asia Pacific regions, 11%.
EXPOSURE TO COUNTRY AND REGIONAL POLITICAL, FINANCIAL, ECONOMIC OR SOCIAL RISKS, PARTICULARLY
IN THE US, BRAZIL AND THE UK
Our global footprint subjects our businesses to risks associated with international sales and operations.
Performance indicator
EBIT
Strategic alignment
• Geographic expansion
Further information
• Our corporate
responsibilities –
working in partnership
with communities
• Exposure to legislation or
regulatory reforms risks
and uncertainties
Description of risk
• Changes in a country’s or region’s political, economic or social
risks or geopolitical turmoil could result in loss of services
and prevent us meeting agreed service levels or fulfilling other
obligations. These risks are generally outside our control.
• We could face increased effective tax rates due to changes in
some countries’ tax laws.
How we manage this risk
• We have a diverse portfolio by geography, product, sector
and client.
• We help communities to realise their social and economic
potential, by using our business skills, products and services
to promote financial education, financial inclusion and support
small business entrepreneurs.
• We retain internal and external tax professionals, who monitor
the likelihood of future tax changes.
Change from 2013
Stable
2014 update
We have seen isolated instances of
social and political unrest in Brazil,
Turkey and Thailand, which have
had minimal effect on us. Cyclical
economic weakness in Brazil
has contributed to a slowdown
in organic growth during 2014.
Latin America accounted for 19%
of global revenue.
P47
P120
P34
P57
P24