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A Practical Approach to Risk Management at Microsoft

An Interview with Patrick Boyer, Group Manager, Treasury Controllers Group, Microsoft Treasury

In this interview, we discuss with Patrick Boyer, Group Manager, Treasury Controllers Group how Microsoft has addressed some of the challenges of hedge accounting by implementing Reval®.

Introduction to Microsoft

Since Microsoft was first founded in 1975, it has become one of the world’s most respected companies and recognised brands. The company is centred around five business segments across client and server solutions, internet tools, business services and entertainment, with nearly 96,000 employees across 107 countries. In 2008, Microsoft achieved revenues of $60.42bn, an increase of 18% on the previous year, and net income of $17.68bn, representing growth of 26% on 2007. With complex cash and risk management requirements, and a diverse, fast changing business, Microsoft Treasury has a strong commitment to effective, practical risk management to protect the needs of the business and its shareholders.

How would you describe Microsoft’s approach to risk management?

Microsoft has an experienced treasury team with substantial experience in cash and risk management. Due to the large volumes of cash which the company often holds, treasury’s investment policy and risk management strategy is quite conservative, with liquidity and security being the most important drivers.

Cash needs to be available when required by the business for activities such as acquisitions, and in particular, returning cash to shareholders, such as the special dividend and share buyback announced in 2004. Once we have ensured that a sufficient proportion of the cash portfolio is available to support our business needs, we may seek a higher return on the remainder, but this is not a primary objective and security of capital remains a priority.