As credit quality plunged in the second half of 2008, Microsoft realized that it had people attentively tracking credit risk and aggressively managing it from separate silos. One group watched the investment portfolio. Another watched accounts receivable. A third watched counterparties in derivatives transactions. Yet another kept a close eye on depository banks. What the company needed and swiftly invented was a “360-degree view,” something that pulled together all its credit risks into one holistic view, explains Jared Bean, quantitative manager.
If a large bank, for example, held significant Microsoft deposits; was a counterparty for derivative transactions; owed accounts receivable balances to Microsoft for software it had licensed; and had issued securities that were held in Microsoft’s $15 billion investment portfolio, the risk to Microsoft if that bank went under could only be accurately assessed if all these risks were cumulated, Bean says. So Microsoft, with its considerable information technology resources, integrated the silos and created the 360-Degree Exposure Report. It did the project within established budgets, hiring no additional staff and demanding no additional ongoing resources from internal groups. Since this is Microsoft, the report has a nifty graphic spin. Bubbles of different sizes and colors are placed within X and Y axes representing the type and magnitude of exposure.
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