vol. XVII no. 3

				Page 3 Page 1 2 3 4 5 MILLION-DOLLAR MAN Mike Eremchuk, Vice President Risk Management, First Data Corporation Every day Mike Eremchuk deals in millions. His employer, First Data Corporation, processes 424 million credit, debit and other accounts for 1,400 clients annually. Through its well-known Western Union brand, First Data handles more than 81 million consumer-to-consumer transactions and more than 134 million consumer-to-business transactions each year. In the area of government, the company handles payment and transaction processes for the federal government, 45 states, and hundreds of municipalities, annually processing more than 40 million tax payments valued at $1 trillion. Cash flow totals $2 billion a year. The company's motto is to "make commerce more secure, more efficient, and more convenient." But with that goal comes an equal load of risk. Mike Eremchuk, vice president of risk management at First Data since 1996, is in charge of assessing and scoring risks, getting that information to the right people in the company and then managing the risk. "Risk management is considered lifeblood at our company," says Eremchuk. For a company processing 70 percent of the retail transactions in the United States, the credit risks are obvious. In fact, to handle the credit risk of its worldwide Western Union business, First Data employs 200 managers who work closely with those agents. First Data also handles merchant credit processing from large retailers like Wal-Mart to mom-and-pop operations as well as charge backs for credit such as prepaid airline tickets. Because of its reliance on telecom to process charges electronically, the company has to consider the risks involved if telecom is disrupted. Because it handles hundreds of millions of credit card accounts, it faces security risks in protecting customers' confidential information. And, not least on the list, according to Eremchuk, are the strategic risks in new product development, building brand names, and mergers and acquisitions. A growing area of revenue - and likewise risk - for First Data is in the international arena. Eremchuk calculates that 35 to 40 percent of First Data revenue now comes from international operations, and the company is making a big push for Western Union in post offices in China. With expansion into global markets, First Data assumes political risks, too, in the case of nationalization Ð wherein the money held by agents becomes absorbed into governments, something Eremchuk likens to bankruptcy filing from the company's perspective. Like many businesses, First Data became immersed in an enterprise risk management approach in preparation for Y-2K, when it touched on potential risks in some 6,500 processes and 30 units throughout its organization. In response, it developed contingency plans for each risk and followed up with testing to ensure the plans worked. When Sarbanes-Oxley passed in 2003, Eremchuk's group, Risk Control and Audit, recommended to the CEO to piggyback strategic implications onto the financial ones required by the new law. Although the model is still evolving, Eremchuk believes it promises to be a permanent and effective tool for identifying, assessing and managing risk. Eremchuk turns to insurance - the roots of traditional risk management - only where it meets a need: in the catastrophic risk altitudes above $50 million. His company's direction is to work with reinsurers and capital markets to curtail risks to First Data in the case of a catastrophic event such as a large-scale cyber attack or a global terrorist event. With large databases of information, First Data can help insurance underwriters assess risks, partnering with insurance companies rather than simply being clients. Eremchuk has been in the field of risk management since 1981, long enough to see history repeating itself. "Things go up and things come down," he says. "Never take too much credit when things are going well because you'll take too much blame when they're not." Previous Page | Top | Next Page

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