The Walt Disney Company
Risk Finance and Risk Management Strategy
Tim East
Director, Risk Management
Organization of The Walt Disney Company
The Walt Disney Company
Corporate
Media
Networks
Distribution
of
Content
Theme Parks
and
Resorts
11 Theme
Parks and
Resorts
Consumer
Products
Licencing
and
Retail
Studio
Entertainment
Interactive
Media
Creation of
Content
Interactive
Media and
Internet
Media Networks
3
Parks & Resorts
4
Consumer Products
5
Studio Entertainment
6
Interactive Media
7
Organization of The Walt Disney Company
The Walt Disney Company
Corporate
Media
Networks
Theme Parks
and
Resorts
Consumer
Products
2010
Revenue:
$17.2B USD
2010
Revenue:
$10.7 B USD
2010
Revenue:
$2.7 B USD
Studio
Entertainment
Interactive
Media
2010
Revenue:
$6.7 B USD
2010
Revenue:
$.76 B USD
Growth in Revenue by Year
Revenue in U.S.$ Millions
$39,000
$38,063
$37,843
$38,000
$37,000
$36,149
$36,000
$35,510
$35,000
$34,000
Revenue
$33,747
$33,000
$32,000
$31,000
2006
2007
2008
2009
2010
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