The Walt Disney Company Risk Finance and Risk Management Strategy Tim East Director, Risk Management.

The Walt Disney CompanyRisk Finance and Risk Management Strategy

Tim EastDirector, Risk Management

Organization of The Walt Disney Company

The Walt Disney Company

MediaNetworks

Distributionof

Content

Theme Parks and

Resorts

11 ThemeParks and

Resorts

ConsumerProducts

Licencingand

Retail

InteractiveMedia

Interactive Media and

Internet

Corporate

StudioEntertainment

Creation of Content

Media NetworksMedia Networks

3

Parks & ResortsParks & Resorts

4

Consumer ProductsConsumer Products

5

Studio EntertainmentStudio Entertainment

6

Interactive MediaInteractive Media

7

Organization of The Walt Disney Company

The Walt Disney Company

MediaNetworks

2010Revenue:

$17.2B USD

Theme Parks and

Resorts

2010Revenue:

$10.7 B USD

ConsumerProducts

2010 Revenue:

$2.7 B USD

InteractiveMedia

2010 Revenue:

$.76 B USD

Corporate

StudioEntertainment

2010 Revenue:

$6.7 B USD

Growth in Revenue by Year

$33,747

$35,510

$37,843

$36,149

$38,063

$31,000

$32,000

$33,000

$34,000

$35,000

$36,000

$37,000

$38,000

$39,000

2006 2007 2008 2009 2010

Revenue in U.S.$ Millions

Revenue

Highlights

• Revenue up 5%• Net income attributable to Disney up 20%• Toy Story 3 – No. 1 animated movie of all time• Acquisition of Marvel Entertainment• Investing significantly in expanding and enhancing

the theme parks• Began Shanghai project

How Disney Manages Risk

• Risks are identified, defined and quantified• Risk management strategies are developed and

implemented– Leadership with the business units– Partnership with external resources and providers

• Corporate Risk Management reports through Corporate Treasury– Corporate Risk Management is focused on pure risks – Financial/operational risks managed by Treasury, Finance and the

Business Units

• Business Unit risk management specialists report to the leaders of the business unit

Risk Identification and Quantification

• Risk identification in our business is a constant process and repetitive loop

• Various techniques and methods are used depending on the exposure– Risk mapping– Dynamic analysis and simulation– Risk modeling

• Whether a risk is insurable is a second-question• Three key risk areas

Risk Identification and Quantification• Property and Business Interruption

Risk Identification and Quantification• Work Injury or Illness

Risk Identification and Quantification• Motion Picture and Television

Production

Risk Tolerance and Appetite

• Risk tolerance considers reputational, financial and operational impacts

• Processes used depend on the nature of the risk• Strong balance sheet and cash flow increases our

financial tolerance• Managing and mitigating a risk is the first strategy• If a pure risk can be economically transferred we

use commercial insurance

Risk Financing• Risk retention and self-insurance• Captive insurance

– Alameda Insurance Company– Buena Vista Insurance Company

• Captives are used strategically– Internally: To help business units understand risk– Externally: To improve placement and reduce the cost-of-risk

• Alternative Risk Transfer – CAT bonds– Various weather derivatives and methods

Selling Risk

• We develop long-term partnerships with insurers• Partners must know and understand our

business• What sells our risk:– Our people– Our processes– Our infrastructure

The Future of Risk Management

• Technology• Global risk takers• Continued need for:– Long-term Vision– Trusting Relationships– Creative Problem-solving– Communicating Effectively