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IBM Institute for Business Value CFO Summit – 2011 April 26th, 2011 Ludek Rainet – IBM RCIS CFO © 2010 IBM Corporation IBM 2010 CFO Study 2 © 2010 IBM Corporation Introduction The 2010 IBM CFO Study is the fourth edition since 2003 and builds upon our primary research from 2005 and 2008 CFO Studies 2003 3 2005 2008 2010 © 2010 IBM Corporation Introduction The study examines how the CFO can make the enterprise smarter in an era of increased uncertainty CFO Study 2010 Provocative Topics ! The impact of the New Economic Environment on the CFO’s role ? What Finance model achieves the optimal mix of capabilities needed to outperform? ? What can CFOs do to enable timely and informed decision-making? ? How can the CFO help the enterprise anticipate and shape its environment? Source: IBM Institute for Business Value, The Global CFO Study 2010 4 © 2010 IBM Corporation Introduction Finance needs to improve its effectiveness in order to deliver on the enterprise agenda Importance Effectiveness CFO Agenda: Importance vs. Effectiveness Rank Gap Developing your people in the Finance organization Executing continuous Finance process improvements Core Finance 59% Driving integration of information across the enterprise 3 Driving enterprise cost reduction 51% 20% 40% 34% 77% 62% 0% 9% 80% 52% Supporting / managing / mitigating enterprise risk Measuring / monitoring business performance 28% 16% 75% 73% 39% Providing inputs into enterprise strategy 2 35% 52% 61% Driving Finance function cost reduction Enterprise Focused 83% 55% Strengthening compliance programs and internal controls 1 84% 49% 28% 26% 85% 59% 80% 60% 80% 23% 21% 100% N = 1,834 Note: Executives asked: How important to your Finance organization are each of following areas of responsibility? and How effectively do you think your Finance organization is performing in each of those areas? And Please rank your top 3. Importance defined as enterprises selecting [5] Critical and [4] on a 5-point scale where [5] Critical and [1] Unimportant. Effectiveness defined as enterprises selecting [5] Very Effective and [4] on a 5-point scale where [5] Very Effective and [1] Ineffective Source: IBM Institute for Business Value, The Global CFO Study 2010 5 © 2010 IBM Corporation Introduction Enterprise focused activities have accelerated in importance for CFOs over the past five years – some dramatically Importance of Enterprise Focused Activities Over Time 84% 85% 80% 109% increase increase 80% 77% 73% 71% 69% 93% 73% 66% 62% 61% 56% 40% 35% Measuring / monitoring business performance Providing inputs Driving enterprise into enterprise cost reduction2 strategy1 2005 2008 Supporting / managing / mitigating enterprise risk Driving integration of information across the enterprise 2010 2005: N = 844, 2008: N = 1,195, 2010: N = 1,904 Note: 2005 uses “High” importance, 2008 uses [5] Critical and [4] Important and 2010 uses [5] Critical and [4] which indicates moderately critical Note: Defined as enterprises selecting [5] Critical and [4] Increase on a 5-point scale where [5] Critical and [1] Unimportant 1 2005 defined as “Partnering with your organization to identify and execute growth strategies” and 2008 defined as “Inputs into identifying and executing growth strategies” 2 2005 defined as “Driving cost reduction” and 2008 defined as “Driving cost reduction” Source: IBM Institute for Business Value, The Global CFO Study 2005, 2008, 2010 6 © 2010 IBM Corporation Introduction Analysis of CFO responses and objective enterprise financial measures identified enablers to deliver efficiency and insight Finance Efficiency and Business Insight Enablers Business Insight Finance Efficiency Enabler Low High Corporate philosophy on information standards Do not see any value in enterprise-wide standards Enterprise-wide standards mandated for all business units and enforced Common Finance data definitions and data governance Not adopted Enterprise-wide > 75% Standard Financial chart of accounts Not adopted Enterprise-wide > 75% Standard / common Finance processes Not adopted Enterprise-wide > 75% Analytical capability (operational planning and forecasting)1 Not deployed Satisfactory analytical capability People / talent (effectiveness of developing people in Finance) Ineffective Effective people / talent Technology (deployment of a common planning platform) Not deployed Deployed to a large extent 1 Also analyzed Scenario Planning, Predictive Analytics Source: IBM Institute for Business Value, The Global CFO Study 2010 7 © 2010 IBM Corporation Introduction Four Finance profiles become apparent when participants are segmented by efficiency and business insight Finance Profiles High Finance Efficiency 32% 23% 33% 12% Low Low High Business Insight Source: IBM Institute for Business Value, The Global CFO Study 2010 8 © 2010 IBM Corporation Introduction Value Integrators excel in both efficiency and business insight, contributing to financial outperformance Efficiency + Business Insight Contributes to Outperformance > 20x more 14.0% 49% 30% more more Value Integrators All other enterprises 12.1% 11.3% 9.4% 9.3% 0.5% EBITDA Revenue ROIC 5-year CAGR, 2004-2008 5-year CAGR, 2004-2008 5-year average, 2004-2008 Value Integrators also have an almost 20% better operating efficiency ratio than all other companies examined. Revenue Growth: N = 580; EBITDA: N = 531; ROIC: N = 501; Source: IBM Institute for Business Value, The Global CFO Study 2010 9 © 2010 IBM Corporation Efficiency through standards Enterprises that have adopted standards and increased Finance efficiency are performing better Effectiveness Benefits of Finance Efficiency Effectiveness Against Core Finance Activities Strengthening compliance programs and internal controls Finance Efficiency Helps the Enterprise React to External Forces 65% 62% Driving Finance function cost reduction 25% better 52% 56% 11% Enterprises with high Finance efficiency 74% better 20% better Executing continuous Finance process improvement Developing your people in the Finance organization 61% 27% better 48% 56% 46% Enterprises with high Finance efficiency 62% 22% better All other enterprises N = 1,867 to 1,880 Note: Defined as those enterprises selecting [5] Very Effective or [4] on a 5-point scale where [5] Very Effective and [1] Ineffective Source: IBM Institute for Business Value, The Global CFO Study 2010 10 All other enteprises N = 1,883 Note: Defined as those enterprises selecting [5] Very Well or [4] on a 5-point scale where [5] Very Well and [1] Very Poorly © 2010 IBM Corporation Efficiency through standards Enterprises that establish process ownership are far more likely to achieve the standards that enable Finance efficiency Accelerator: Process Ownership Adoption of Process Ownership Impact on Standards Percent adopted enterprise-wide > 75% 52% Common processes 145% Common data definitions 80% 26% 208% better 73% 30% 68% 39% 143% better 33% Globally mandated standards 73% better 81% more All other enterprises 90% Standard chart of accounts Enterprises with high Finance efficiency 74% better Enterprises that have implemented processs ownership enterprise-wide All other organizations N = 1,869 Note: Defined as those enterprises selecting >50% adoption rate Source: IBM Institute for Business Value, The Global CFO Study 2010 11 N = 1,863 to 1,889 © 2010 IBM Corporation Efficiency through standards A common technology platform drives a greater adoption of standards Accelerator: Common Ledger and Accounting Transaction Applications Implementation of a Common Ledger and Accounting Transaction Applications Percent adopted Enterprise-wide > 75% 75% Standard chart of accounts Enterprises with high Finance efficiency 29% 91% Common processes 47% more All other enterprises Impact on Standards Common data definitions better 52% 13% 300% better 50% 22% 53% 32% 127% better 62% Globally mandated standards 159% 66% better Enterprises that have implemented a common ledger and accounting transaction applications All other organizations N = 1,875 Note: Defined as those enterprises selecting [5] To a very large extent or [4] on a 5-point scale where [5] To a very large extent and [1] Not at all Source: IBM Institute for Business Value, The Global CFO Study 2010 12 N = 1,852 to 1,880 Note: Defined as those enterprises selecting [5] To a very large extent or [4] on a 5-point scale where [5] To a very large extent and [1] Not at all © 2010 IBM Corporation Efficiency through standards Alternative delivery models enforce the adoption of standards Accelerator: Alternative Delivery Models for Transactional Activities Enterprise-wide Shared Services / Centers of Excellence or Outsourcing Adoption Impact on Standards Percent adopted enterprise-wide > 75% 56% 49% Common processes 69% more All other enterprises 77% Standard chart of accounts Enterprises with high Finance efficiency Common data definitions 60% 33% better 82% better 52% 39% 57% 42% 33% better 29% Globally mandated standards 38% 36% better Enterprises that have adopted shared services / COEs or outsourcing enterprisewide for transactional activities All other organizations N = 1,892 Note: Defined as those enterprises selecting Enterprise-wide where choices included Enterprise-wide, Line of business consolidation, Country / regional-based, Not adopted Source: IBM Institute for Business Value, The Global CFO Study 2010 13 N = 1,863 to 1,887 © 2010 IBM Corporation Business insight Objective financial data validates that decision making supported by business insight contributes to enterprise outperformance Business Insight Contributes to Financial Outperformance Revenue Growth EBITDA Return on Invested Capital 5-year CAGR, 2004-2008 5-year CAGR, 2004-2008 5-year average, 2004-2008 12.5% 33% > 12x more more 32% more 11.9% 9.4% 9.0% 7.3% 0.6% Finance organizations with strong business insight All other enterprises Revenue Growth: N = 580; EBITDA: N = 435; ROIC: N = 606 Source: IBM Institute for Business Value, The Global CFO Study 2010 14 © 2010 IBM Corporation Business insight Finance organizations with strong business insight are performing better Effectiveness Benefits of Business Insight Effectiveness Against Enterprise Focused Activities 79% Measuring / monitoring business performance 54% 53% 71% 39% better better 40% 63% 45% All other enterprises 51% better 63% 49% 30% Finance organizations with strong business insight better All other enterprises N = 1,458 to 1,469 Note: Defined as those enterprises selecting [5] Very Effective or [4] on a 5-point scale where [5] Very Effective and [1] Ineffective Source: IBM Institute for Business Value, The Global CFO Study 2010 15 34% 39% 46% Supporting / managing / mitigating enterprise risk Finance organizations with strong business insight better 64% Providing inputs into enterprise strategy 46% better 71% Driving enterprise cost reduction Driving integration of information across the enterprise Business Insight Helps the Enterprise Anticipate External Forces N = 1,471 Note: Defined as those enterprises selecting [5] Very Well or [4] on a 5-point scale where [5] Very Well and [1] Very Poorly © 2010 IBM Corporation Business insight Finance organizations with strong business insight have automated production, are more efficient, and facilitate speed of insight Accelerator: Timely Metrics High Automation Financial Metrics Finance organizations with strong business insight Enterprises that automate the production of financial metrics 73% All other enterprises 29% more better All other enterprises Enterprises that automate the production of operational metrics 61% Metrics 38% 53% 42% 39% more better 43% Financial: N = 1,463; Operational: N = 1,435 Note: Defined as those enterprises selecting [5] Largely automated or [4] on a 5-point scale where [5] Largely automated and [1] Largely manual Source: IBM Institute for Business Value, The Global CFO Study 2010 16 49% 28% 57% Finance organizations with strong business Operational insight All other enterprises Impact on Analytics Satisfaction All other enterprises 38% Financial: N = 1,454; Operational: N = 1,428 © 2010 IBM Corporation Business insight Finance organizations with strong business insight establish operational data standards, providing common “truth”-based insight Accelerator: Establishment of Non-Financial Data Standards High Adoption Finance organizations with strong business insight All other enterprises Impact on Analytics Satisfaction Enterprises that establish nonfinancial data standards 53% 51% 42% more better 35% N = 1,449 Note: Defined as those enterprises selecting [5] To a very large extent or [4] on a 5-point scale where [5] To a very large extent and [1] Not at all Source: IBM Institute for Business Value, The Global CFO Study 2010 17 54% All other enterprises 38% N = 1,442 © 2010 IBM Corporation Efficiency + Business insight Those that excel in both efficiency and business insight contribute to even better financial outperformance Efficiency + Business Insight Contributes to Outperformance Revenue Growth EBITDA Return on Invested Capital 5-year CAGR, 2004-2008 5-year CAGR, 2004-2008 5-year average, 2004-2008 Finance Efficiency 14.0% 9.8% 9.0% 11.3% 3.9% 9.3% -2.1% 12.1% 10.2% -0.1% Business Insight 7.8% 11.6% Business Insight Value Integrators also have an almost 20% better operating efficiency ratio than all other companies examined. Revenue Growth: N = 580; EBITDA: N = 531; ROIC: N = 501 Source: IBM Institute for Business Value, The Global CFO Study 2010 18 © 2010 IBM Corporation Efficiency + Business insight Value Integrators drive broader improvements in data and analytics, process, technology and people What do Value Integrators do differently? Data and Analytics • Improve information delivery • Drive data integrity • Use different approaches to help the enterprise make decisions Process • Focus on next tier process improvements Technology • Rationalize and standardize analytical technologies People • Drive risk management through CFO direct reports of Controls and Risk Management Source: IBM Institute for Business Value, The Global CFO Study 2010 19 © 2010 IBM Corporation Efficiency + Business insight Value Integrators drive broader improvements in data and analytics, process, technology and people What do Value Integrators do differently? % more 32% Streamlined information delivery Electronic data capture at the source 35% Systematic data cleansing and auditing 31% Business Risks in Performance Reporting 22% Employed Functional Best Practices 31% Utilized automated workflow tools 25% Measurement & monitoring of processes 41% Common reporting platform 31% Common planning platform 22% 0% 20% 40% 60% 80% 100% Percent Adopted Disciplined Operators Constrained Advisors N = 1,454 to 1,469 Note: Defined as those enterprises selecting [5] To a very large extent or [4] on a 5-point scale where [5] To a very large extent and [1] Not at all Source: IBM Institute for Business Value, The Global CFO Study 2008, 2010 20 Value Integrators © 2010 IBM Corporation Country Scorecard – Integrated Risk management 21 © 2010 IBM Corporation Smart risk management is about collecting better information, using it more quickly and more effectively, and minimizing the need for human interaction in routine events. Country Financial Risk Scorecard Smarter Near Real-time Integrated Risk Management INSTRUMENTED INTERCONNECTED INTELLIGENT The smart scorecard is instrumented, enabling IBM to measure and control risk data at the country level and allows CFOs to sense and respond quickly to financial risks. The smart scorecard is built on interconnected data that enables business insight and collaboration and provides a single source for information. The smart scorecard enables the rapid, intelligent analysis of a vast mix of structured and unstructured data to improve insight and enable informed judgment. 22 22 © 2010 IBM Corporation Optimizing finance’s contribution to a globally integrated enterprise Tomorrow Today Vast amounts of data I& E B/S Sources Finance GMV FIW-LR SBU Other data I& E B/S External data 16 data sources Various flows KPIs Manual aggregation and analysis External data 16 data sources Automated information integration and financial risk monitoring DB2 SPSS Matlab Income & Expense ($ in M) Revenue 466 (5)% 252 7% 70 (12)% 79 3% 13 % 87 92 Growth/(Decrease) 111 (8)% 57 136 12 % 70 180 51 % 99 519 11 % 265 132 43 % 61 Cash (30)% 22 (13)% 24 7% 30 53 % 32 5% 108 55 % 30 USD LC Denominated 25 % 2% 41 % 94 % 37 % 35 % 15 17 46 78 14 Total Intercompany Payables (101)% 8.4% (34)% 7.8% (25)% 6.4% 71 % 6.0% (15)% 7.1% 9.6% 11.6% 10.8% 8.5% 7.2% 7.0% 8.4% 2.0 pts 3.7 % 0 (1.1)pts (2.3)pts (1.3)pts (0.2)pts (3.2)pts (0.7)% (2.7)% (2.2)% (1.4)% (1.8)% 0 0 0 0 0 Currency Spot Rate Shipped but Uninstalled 7.1 8.3 (4)% (17)% 10.0 8.5 7.8 7.5 (21)% 15 % 8% 4% 8.4 (2)% Controllable FCF Net Exposed Position 5,882 % Percent Change 5.7% Current Ratio 7.0% Return on Equity (ROE) Annualized (1.4)pts GMU ROE Annualized (3.0)% Major Market ROE Annualized 0 Total Dividends 7.5 Translation Losses FY2006 FY2007 FY2008 1Q2009 2Q2009 3Q2009 0.0 0.0 0.0 Macroeconomic Indicators Country IBM GRMG 2007 2008 Sovereign Risk BBB BBB 0.0 0.0 1.4 1.7 0.0 0.0 0.0 0.0 1Q2009 2Q2009 3Q2009 4Q2009 BB BB BB BB 1.7 0.0 2009 3 BB 0.8 Days Sales Outstanding BBB Country Currency Risk BBB BB BB BB BB BBB BBB BBB Growth Market Unit BBB BBB BBB BBB BBB BBB BBB BBB Major Market Macroeconomic Risk 9 3 5 36 4 36 7 15 7 90 26 53 0.0 68.4 0.0 52.6 0.0 41.2 0.0 80.4 0.0 80.4 0.0 60.0 69 68.4 53 41 80 80 50 54 51 19 33 48 48 37 (5)% (62)% 69 % 46 % 0% (22)% 9% 7% 2.1 x 1.8 x 1.9 x 1.5 x 1.4 x 1.6 x 1.6 x 1.5 x 72 % 32 % 14 % 0 83 % 44 % 20 % 0 (1)% 26 % 14 % 0 28 % 33 % 16 % 0 40 % 32 % 16 % 0 66 % 39 % 18 % 0 66 % 39 % 18 % 0 34 % 19 % 14 % 0 (7) 61.8 1 2 8 0 53.3 45.0 59.4 67.6 53.9 58.8 58.8 57.7 Hardware 2 Software (14) Services (1) Other 6 Total % Business Partner Revenue 30 45 45 60 60 60 60 60 Gross Profit Margin 15% 27% 26% 17% 45% 44% 12% 22% 55% Hardware Software Services 14% 13% 10% Other 100% Total 32 36 36 36 36 36 36 36 Country 36.3% 99.3% 13.2% 69.8% 46.6% 21 25 25 29 29 29 29 29 GMU 34.4% 96.4% 25.6% 56.0% 44.0% 45 Major Market 35.2% 96.6% 27.0% 63.8% 47.4% Computer Services Comm Dist 43 45 46.8 250.9 364.3 215.8 142.8 142.4 216.3 135.5 (16)% 436 % 75 % 13 % (32)% (64)% (14)% (63)% (61.2) 41 (68.5) 43 (14.4) (5.1) (4.4) (6.5) (30.4) (6.5) 9.2% 11.0% 11.3% 11.9% 45 12.6% 45 11.5% 45 11.0% 14.2% Fiscal Debt/GDP 14% 26% 28% 28% 28% 25% 25% 32% Deficit/GDP 0.5 % 0.8 % (0.3)% (0.3)% (0.3)% (0.3)% (1.1)% (2.4)% 5.1 5.6 4.7 4.7 4.7 4.7 4.7 4.7 Corruption Perception Index KRIs = Key Risk Indicators; KPIs = Key Performance Indicators Industry Concentration IBM Risk Score 5 - Overall Score 31% 100% 31% 100% Foreign Trade/Payments Risk Foreign Reserves/GDP 60 2.1 x 94 % 21 % 16 % 0 Financial Risk CDS Pricing change 1Q2010 6 111 0.0 69.2 119 0.0 1Q 2010 Businss Model First Quarter 2010 3 Revenue Mix Banking Sector Risk Balance of Payments FY2009 17 100 0.0 119.2 78 46 Other Metrics 0.0 Revenue Reversals Risk Briefing Rating 4Q2009 8 49 0.0 78.1 24 % Other Metrics CDS Pricing bps 23 92 (11)% 40 0.6 pts 5.5 % 0 Strengthen/(Devaluation) 5% 11.5% 1Q2009 2Q2009 3Q2009 4Q2009 FY2009 1Q 2010 Balance Sheet ($ in M) (0.23996) Interest Rates Real GDP Growth/(Decline) Exchange Gain/Losses 5% 7.1% Cognos Growth/(Decrease) Inflation/Deflation Integrated business insights needed! FY2008 491 10 % 286 Pre Tax Income Gross Profit Growth/(Decrease) KRIs – Business insights into risk exposures FY2007 SG&A Expense Growth/(Decrease) Growth/(Decrease) Risk–based predictive analytics: •By country •Trends Other data GMV FIW-LR SBU Financial Industrial Services 15% Country GP Normalized -41.3% (2.7)pts 41.1% (6.3)pts Public General Bus. 0% 20% 0% 29% 5% 18% 28% 100% FY2007 FY2008 1Q2009 2Q2009 3Q2009 4Q2009 FY2009 1Q 2010 56% 43% 42% 45% 32% 26% 54% 68% Risk Multiples GMU Major Country Risk/Unit Risk Relative Profit Con 1.2 x 0.6 x B/(W) (0.6)x (1.7)x Profit Con Normalized GMU Major Country Margin 5% Compare Margin 9% 2.0 x 0.3 x 5% 16% Delta (4.0)Pts (11.3)Pts Short-Term Signings 1Q2010 % Change from 1Q2009 15.35 -22.1% Long-Term Signings 1Q2010 % Change from 1Q2009 22.748 28.1% Country Financial Risk Scorecard Finance/GMs © 2010 IBM Corporation IBM Country Financial Risk Scorecard Smarter use of integrated information to enhance IBM’s ability to identify and manage financial risks and seize opportunities across the enterprise. IBM Country Risk Score Historical Trends & Forward Prediction Economic Indicators Income &Expense ($ in M) FY2006 FY2007 FY2008 1Q2009 2Q2009 3Q2009 4Q2009 FY2009 1Q2010 2Q2010 Balance Sheet ($ in M) Revenue 9,505 (11)% 5,814 9,515 0% 5,575 10,333 9% 5,718 2,624 (0)% 1,487 2,384 (4)% 1,357 2,499 2% 1,374 2,676 (3)% 1,451 10,183 (1)% 5,670 2,627 0% 1,450 2,487 Cash 4% Controllable FCF 1,400 Net Exposed Position 204 1,322 167 1,544 220 2,072 366 188 242 537 3,691 (3)% 3,940 7% 4,615 17 % 1,136 (4)% 1,027 (4)% 1,125 4% 1,225 (5)% 4,513 (2)% 1,177 4% 1,087 USD 6% LCDenominated 0.0 (867.5) 0.0 (777.7) 4.0 (402.0) 5.0 100.1 4.0 (566.3) 330 2Q2009 2% 2,384 474 (4)% 2% 1,357 -0.1% 328 3Q2009 (4)% Growth/(Decrease) Cost Gross Profit Growth/(Decrease) SG&AExpense Income & ExpenseGrowth/(Decrease) ($ in M) FY2006 Revenue Pre Tax Income 9,505 Growth/(Decrease) Growth/(Decrease) (11)% SG&A Expense Inflation/Deflation 5,814 3,691 Interest Rates (3)% Global Market Value 1,136 Growth/(Decrease) Growth/(Decrease) Cost Gross Profit 1,136 1,186 1,285 FY2007 FY20084 % 1Q2009 8% 9,5151,26910,333 1,434 2,624 1,696 0 % (1)% 9 %13% (0)% 18 % 5,5750.3% 5,7180.1% 1,487 1.4% 3,940 4,615 1,136 1,027 1.7% 1.7% 1.5% 1.3% 7% 17 % (4)% (4)% 91,773 330 105,576 34,725 1,18691,6651,285 328 15 % 5% 4% 8 %12% 2 % (4)% 2.0 % 2.4 % (1.2)% (8.9)% Real GDPGrowth/(Decline) Pre Tax Income 1,269 1,434 (0) 1,696 0 474(0) 391 0 Exchange Gain/Losses Growth/(Decrease) (1)% 13 % 18 % 2% 11 % I and Eexchange rate 116 118 103 94 0.3% 0.1% 1.4% -0.1% -1.0% Inflation/Deflation Strengthen/(Devaluation) (1)% 12 % 9% 1.7% 1.7% 1.5% 1.3% 1.4% Interest Rates Other Metrics 91,665 91,773 105,576 34,725 22,367 Global Market Value Shipped but Uninstalled 0.0 0.0 0.0 0.0 Growth/(Decrease) 15 % 5% 2% 12% Revenue Reversals2.0 % 0.0 0.0 2.4 %0.0 (1.2)%0.0 (8.9)% (5.7)% Real GDP Growth/(Decline) (0) 0 2006 (0) 2007 02008 1Q2009 0 Exchange Gain/Losses Macroeconomic Indicators Growth/(Decrease) FY2006 335 367 1,360 343 339 Total -867 4Q2009 FY2009 6% 1Q 2010 4 %2Q20103%Balance Sheet ($Payables in M) FY2006 Intercompany 5% 22% 763 2,499 2,676 493 10,183 1,798 2,627 618 2,487 381CashIntercompany Aging 204 391 440 TBD Controllable FCF 2% (1)% 6%0 % 30% 4 % (3)% 1,322 Percent Change 11% 13(3)% % 1% 1,374 -2.2% 1,451 -2.0% 5,670 -1.3% 1,450 -1.2%1,400-1.1% Net Exposed Position -1.0% Current Ratio 0.8 x 1,125 1,225 4,513 1,177 1,087 USDReturn on Equity (ROE) 0.0 1.4% 1.3% 1.3% 1.4% 1.3% 1.2% 49 % Annualized 4% (5)% (2)% 4% 6 % LC Denominated (867.5) 22,367 21 % 335 27,224 367 25,045 1,360 109,360 343 33,10233923,096 TotalGMUROEAnnualized -867 2 %5 % 5% 16 % Major Market ROEAnnualized 763 Payables 22 % 2 % 6 % 4%4 % (5)% 3 % 3%Intercompany (5.7)% (5.2)% (1.1)% (5.2)% 4.6 % 4.6 % Intercompany Aging 493 TBD 0440 (0) 01,798 (0) 618 0 381 (0) Dividends Payable 0 13 % 1% 6% 30 % (3)% Percent Change 97 94 90 94 91 92 B/STranslation Losses (32) -2.2% -2.0% -1.3% -1.2% -1.1% Current Ratio 0.8 x (4)% 4% 4% 9% 3% 5%Return on Equity (ROE) 1.3% 1.3% 1.4% 1.3% 1.2% 49 % Annualized Other Metrics 27,224 25,045 109,360 33,102 23,096 GMU ROE Annualized 2144.8 % 0.0 0.0 0.0 0.0 0.0 0.0 Days Sales Outstanding 5% 2% 4% (5)% 3 % Major Market ROE Annualized 16 % 0.0 (5.2)% 0.0 (1.1)% 0.0 (5.2)% 0.04.6 % 0.0 4.6 % 0.0 (0) 3Q2009 0 4Q2009 (0) 2009 0 1Q2010(0)2Q2010 Dividends Payable 2Q2009 Businss Model First Quarter 20100 1 91 1 92 1B/S Translation Revenue MixLosses 94 90 94 (32) Country IBMGRMG116 I and E exchange rate 118 94 97 Strengthen/(Devaluation) Sovereign Risk (1)% A 12 % A 9 %A A (4)% BBB 4% BBB 4% Other Metrics Currency Risk Shipped but Uninstalled Banking Sector Risk0.0 A A 0.0 AA 0.0 A A 0.0 A A 0.0 A A A0.0 A A0.0 A A0.0 A 0.0 80 2Q2009 18 800.0 3Q2009 18 0.0 75 4Q2009 18 750.0 182009 1 21 26BBB 75 0.0 75 0.0 75 Gross Profit Margin 1Q 2010 182Q2010 18Businss Model First Quarter 2010 18 Country 1 1 Revenue Mix 21 21 21 GMU 26BBB 26 BBB 26Country Major Market A A Growth Market Unit 70 88 111 A A Major Market 103 Revenue Reversals Macroeconomic Risk0.0 0.0 50 0.0 45 0.0 45 Macroeconomic Indicators 2006 Risk 2007 14 2008 18 1Q2009 Foreign Trade/Payments 18 Country IBM GRMG Financial Risk 25 17 21 A A 26 A 25 A 25 Sovereign Risk Risk Briefing Rating A A A A Currency Risk 6 12 31 CDSPricing bps AA A A A Banking Sector Risk 21 BBB 28 A 88 A 21 29BBB A 61 A 21 BBB 26 A 52 A 78 A A Metrics AOtherGrowth Market Unit SalesMarket Outstanding A 0.0 ADaysMajor 45 56.97 4570.58 8052.64 18 18 18 2.0% 2.1% 1.7% 17 21 21 80 8.50 18 1.2% 21 11.2375 18 1.0% 21 75 14.77 18 0.8% 21 ProfitConcentration Margin 12.6775 47.17 75 18.33 75 13.20Gross Industry 18 18 18 Country 0.7% 0.9% 0.5% 0.5% 21 21 21 GMU Risk Briefing RatingFiscal Debt/GDP 26 25 163% 25162% 28168% 183% 29 179%26 183% 26 191% 26 181%26 190% 26 187% Risk Score MajorIBM Market 0.9 % 88 7.3 0.2 % 61 7.7 0.2 % 52 7.7 0.2 % 78 7.7 0.2 % 70 7.7 0.9 % 0.2 % 0.2 % 88 111 7.7 7.7 7.7 8.50 11.23 Surplus(Deficit)/GDP 6 Corruption Perception Index Current Account Foreign Reserves/GDP 56.97 2.0% 12 0.6 % 31 0.5 % 7.6 70.58 2.1% 7.5 52.64 1.7% 1.2% 1.0% 14.77 0.8% 12.67 0.7% 47.17 0.9% 18.33 0.5% 13.20 2 - Shareholder Value Industry Concentration 0.5% Fiscal Debt/GDP 163% 162% 168% 183% 179% 183% 191% 181% 190% 187% IBM Risk Score Surplus(Deficit)/GDP 0.6 % 0.5 % 0.9 % 0.2 % 0.2 % 0.2 % 0.2 % 0.9 % 0.2 % 0.2 % 7.6 7.5 7.3 7.7 7.7 7.7 7.7 7.7 7.7 7.7 Corruption Perception Index 2 - Shareholder Value FY2007 FY2008 1Q2009 -778 FY2007 863 167 TBD 1,544 13 -398 FY2008 701 220 TBD 2,072 -19 105.1 1Q2009 573 0.8 x 0.9 x 4.0 155 % (402.0) 44% -398 20% 701 1.0 x 5.0 463% 100.1 26 % 105.1 14 %573 0.0 72 % (777.7) 32 % -778 14863 % 0TBD 0TBD 13 -19 168 369 0.8 x 0.9 x (18.08)% 31.36 % 72 % 155 % #DIV/0! #DIV/0! 32 % 44 % 41.5 41.9 14 % 20 % -10% -48% 0 0 Hardware 168 Software 369 TBD366 -18188 2Q2009 3Q2009 4Q2009 44.8 #DIV/0! 28% 41.5 14% #DIV/0! 19% 41.9 22% 28% 369 395 249 568 (61.0) (174.9) (89.2) (517.5) Income & Expense -562 -408 -506 -506 -236 -607 5552Q2009 6103Q2009626 4Q2009626 FY2009 463 1Q2010 590 215 TBD 215TBD 369TBD TBD 242 TBD 316 TBD (3)%537 10 % 515 3 % 244 0% 1,483 (26)% 395 27 % 0.8 x 0.9 x 0.9 x 0.9x 0.9 x 4.0 4.0 11.0 11.0 280% 164 % (516.5) 99% (566.3)213%(411.7)164 % (516.5) 33%-562 32 % -408 39% -50639% -506 19% 16% 555 16 % 610 18% 62618% 62614% Services (15) 41%25% 54%38.3 Other 13 Total 57 40% 96.7% 5% 20% Comm 1% 5% FY2007 FY2008 40% 2Q2010 249 568 0.8x (61.0) 71 % (174.9) 26 % -236 15 % 463 TBD TBD 0 TBD 0 TBD 0 TBD 0 0 0 -18 (3)% 10 % 3% 0% (15) 13 57 (59) (3) (5) 1.0 x 0.8 x 0.9 x 0.9 x 0.9 x 66.62 % (33.82)% 30.56 % (32.20)% (2.39)% 72.07 % 463 % -20%280 % 0% 213 %174% 164 %174% 164-657% % 25% 38.326 % 36.933 % 39.1 32 % 36.3 39 %36.3 39 % 39.1 14 % 16 % 16 % 18 % 18 % -125% -666% -27% 25% 28% -66% 0 0 0 0 0 (89.2) (517.5) -607 590 TBD TBD 0 (26)% 27 % 102 0.9 x 0.8 x 2.62 % 9946% % 71 % 1939.5 % 26 % 14 % 15 % 196% 0 0 %(59) Business Partner (3) Revenue (5) 12%-20% 100% 0% 10% 36.9 100% 39.1 14% (32.20)% (2.39)% 174%33% 36.316% 174% -657% 36.3 39.1 -27% GPNormalized 25% Country 28% Risk Multiples 102 72.07 % Country 2.62 Risk/Unit % Risk 46% GPMargin Relative 39.5 B/(W) 196% Ratio GPNormalized -66% 20% GMU Major 0.7 x 1.1 x 1.1x 1.0x 0.4 x GMU (0.1)x Major Country Margin 50.3% Risk Multiples Compare Margin 46.94% 50.0% GMU 48.6% Major 0.7 x DeltaCountry Risk/Unit 3.4 pts Risk 1.5pts Relative GP Margin %Change 1.1 x Short-TermSignings 2Q2010 from2Q2009 B/(W) 0.4 x GP Normalized GMU 792.0Ratio -13.7% (0.1)x Major Country Margin %Change 50.3% Long-TermSignings 2Q2010 Compare Margin from2Q2009 46.94% 48.6% 1.1 x 1.0 x Macro Indicators 54% 10% 100% 16% Services Financial OtherIndustrialTotalPublic CountryGeneral GP Normalized Dist Services Bus. 32.9% 62.9% 43.7% -26.9% 9% pts 49%57.5% 19% 46.9% 5% 50.3%11% 3.4 100% FY2007 3Q2009 48.6% 4Q2009 50.0% FY2009 1.5 1Qpts 2010 39.3% FY2008 96.5% 1Q200928.3% 2Q200964.2% Computer Services 2Q2010 215 1,483 11.0 (516.5) 90.1% 32.9% 62.9% 43.7% -Software Services Other Total % Business Partner Revenue 96.7% 26.9% 57.5% 46.9% 50.3% 3.4 pts 12% 69% 64.2%10% 48.6%100%50.0% 96.5% 28.3% 1.5 pts 14% 19% 41% 12% 100% 33% 14% 22% Computer Hardware Comm Software Services 43.0% 90.1% 37.4% 1% 1Q2010 215 244 11.0 (516.5) -10% Software -48% Services-125%Other -666% Hardware Total 43.0% Hardware 37.4% 9% 39.3% FY2009 316 515 4.0 (411.7) 9% 100% 30.56 % (18.08)% 12% 31.36 % 69%66.62 %10%(33.82)% A A 0.0 14 Foreign Trade/Payments Risk Foreign Reserves/GDP 25 CDS Pricing bps 50 BBB 9 % BBB3 % BBB 5 % BBB Country Financial Risk Macroeconomic RiskCurrent Account 24 Shareholder Value 60% Dist 40% 40% 60% Financial Industrial Services 60% Public 40% 2Q2010 Delta 390.6 40% Short-Term Signings General Bus. Long-Term Signings 9% 49% 19% 5% 11% 100% 1Q2009 2Q2009 3Q2009 4Q2009 FY2009 1Q 2010 2Q 2010 40% 40% 60% 60% 40% 40% 60% 50.0% 3.4 pts -24.1% 1.5 pts 2Q2010 % Change from 2Q2009 792.0 -13.7% 2Q2010 % Change from 2Q2009 390.6 -24.1% Liquidity Factors Risk Reward Income & Expense ($ in M) FY2006 FY2007 FY2008 1Q2009 2Q2009 3Q2009 4Q2009 FY2009 1Q 2010 2Q2010 Balance Sheet ($ in M) Revenue 9,505 (11)% 5,814 9,515 0% 5,575 10,333 9% 5,718 2,624 (0)% 1,487 2,384 (4)% 1,357 2,499 2% 1,374 2,676 (3)% 1,451 10,183 (1)% 5,670 2,627 0% 1,450 2,487 Cash 4 % Controllable FCF 1,400 Net Exposed Position 204 1,322 167 1,544 220 2,072 366 188 242 537 316 515 215 244 215 1,483 369 395 249 568 3,691 (3)% 3,940 7% 4,615 17 % 1,136 (4)% 1,027 (4)% 1,125 4% 1,225 (5)% 4,513 (2)% 1,177 4% 1,087 USD 6 % LC Denominated 0.0 (867.5) 0.0 (777.7) 4.0 (402.0) 5.0 100.1 4.0 (566.3) 4.0 (411.7) 11.0 (516.5) 11.0 (516.5) (61.0) (174.9) (89.2) (517.5) Growth/(Decrease) Balance Sheet Cost Gross Profit Growth/(Decrease) FY2006 FY2007 FY2008 1Q2009 2Q2009 3Q2009 4Q2009 FY2009 1Q2010 2Q2010 SG&A Expense Income & Expense ($ in M) 1,136 1,186 1,285 330 328 335 367 1,360 343 339 Total -867 -778 -398 105.1 -562 -408 -506 -506 -236 -607 FY2006 FY2007 FY2008 1Q2009 2Q2009 3Q2009 4Q2009 FY2009 1Q 2010 2Q2010 Balance Sheet ($ in M) FY2006 FY2007 FY2008 1Q2009 2Q2009 3Q2009 4Q2009 FY2009 1Q2010 2Q2010 Growth/(Decrease) 4% 8% 2% (4)% 5% 22 % 6% 4% 3 % Intercompany Payables 763 863 701 573 555 610 626 626 463 590 Revenue 9,505 9,515 10,333 2,624 2,384 2,499 2,676 10,183 2,627 2,487 Cash 204 167 220 366 242 316 215 215 369 249 Pre Tax Income 1,269 1,434 1,696 474 391 440 493 1,798 618 381 Intercompany Aging TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD Growth/(Decrease) (11)% 0% 9% (0)% (4)% 2% (3)% (1)% 0% 4 % Controllable FCF 1,322 1,544 2,072 188 537 515 244 1,483 395 568 Growth/(Decrease) Percent Change 13 -19 -18 (3)% 10 % 3% 0% (26)% 27 % 5,814 (1)% 5,57513 %5,71818 %1,487 2 % 1,35711 % 1,37413 % 1,451 1 % 5,670 6 % 1,45030 % 1,400 (3)%Net Exposed Position Cost 0.3% 0.1% 1.4% -0.1% -1.0% -2.2% -2.0% -1.3% -1.2% -1.1% Current Ratio Inflation/Deflation 0.8 x 0.8 x 0.9 x 1.0 x 0.8 x 0.9 x 0.9 x 0.9 x 0.9 x 0.8 x Gross Profit 3,691 3,940 4,615 1,136 1,027 1,125 1,225 4,513 1,177 1,087 USD 0.0 0.0 4.0 5.0 4.0 4.0 11.0 11.0 (61.0) (89.2) Return on Equity (ROE) 1.7% 1.7% 1.5% 1.3% 1.4% 1.3% 1.3% 1.4% 1.3% 1.2% Interest Rates Growth/(Decrease) (3)% 7% 17 % (4)% (4)% 4% (5)% (2)% 4% 6 % LC Denominated (867.5)49 % (777.7)72 % (402.0)155 % 100.1463 % (566.3)280 % (411.7)213 % (516.5)164 % (516.5)164 % (174.9)99 % (517.5)71 % Annualized SG&AGlobal Expense 1,13691,6651,18691,7731,285 TotalGMU ROE Annualized -867 21 % -778 32 % -398 44 % 105.126 % -562 33 % -408 32 % -506 39 % -506 39 % -236 19 % -607 26 % 105,57633034,725 32822,367 33527,224 36725,0451,360 109,360 34333,102 33923,096 Market Value Growth/(Decrease) Payables Growth/(Decrease) 4 % 12% 8 % 15 % 2 % 5 % (4)% 2 % 5 % 5 % 22 % 2 % 6 % 4 % 4 % (5)% 3 % 3 %Intercompany Major Market ROE Annualized763 16 % 863 14 % 701 20 % 573 14 % 555 16 % 610 16 % 626 18 % 626 18 % 463 14 % 590 15 % RealIncome GDP Growth/(Decline) 1,2692.0 % 1,4342.4 %1,696(1.2)% 474 (8.9)% 391 (5.7)% 440 (5.2)% 493 (1.1)%1,798(5.2)% 618 4.6 % 381 4.6 % Pre Tax Intercompany Aging TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD (0) 0 (0) 0 0 (0) 0 (0) 0 (0) Dividends Payable 0 0 0 0 0 0 0 0 0 0 Exchange Gain/Losses Growth/(Decrease) (1)% 13 % 18 % 2% 11 % 13 % 1% 6% 30 % (3)% Percent Change 13 -19 -18 (3)% 10 % 3% 0% (26)% 27 % I and E exchange rate B/SRatio Translation Losses 0.8 x (32) 0.8 x 168 0.9 x 369 1.0 x (15) 0.8 x 13 0.9 x 57 0.9 x (59) 0.9 x (3) 0.9 x (5) 0.8 x 102 0.3% 116 0.1% 118 1.4% 103 -0.1% 94 -1.0% 97 -2.2% 94 -2.0% 90 -1.3% 94 -1.2% 91 -1.1% 92Current Inflation/Deflation Return on Equity (ROE) Strengthen/(Devaluation) (18.08)% 31.36 % 66.62 % (33.82)% 30.56 % (32.20)% (2.39)% 72.07 % 2.62 % 1.7% 1.7% (1)% 1.5%12 % 1.3% 9 % 1.4% (4)% 1.3% 4 % 1.3% 4 % 1.4% 9 % 1.3% 3 % 1.2% 5 % Interest Rates 49 % 72 % 155 % 463 % 280 % 213 % 164 % 164 % 99 % 71 % Annualized Other Metrics Other Metrics #DIV/0! #DIV/0! 25% -20% 0% 174% 174% -657% 46% 91,665 91,773 105,576 34,725 22,367 27,224 25,045 109,360 33,102 23,096 GMU ROE Annualized Global Market Value 21 % 32 % 44 % 26 % 33 % 32 % 39 % 39 % 19 % 26 % Shipped but Uninstalled 0.0 12% 0.0 15 % 0.0 5 % 0.0 2 % 0.0 Sales Growth/(Decrease) 5 % 0.0 2 % 0.0 4 % 0.0 (5)% 0.0 3 % 0.0MajorDays Market ROEOutstanding Annualized 16 % 44.8 14 % 41.5 20 % 41.9 14 % 38.3 16 % 36.9 16 % 39.1 18 % 36.3 18 % 36.3 14 % 39.1 15 % 39.5 Real Revenue GDP Growth/(Decline) Reversals Exchange Gain/LossesIndicators Macroeconomic I andCountry E exchange IBM rate GRMG Strengthen/(Devaluation) Sovereign Risk Other Metrics Currency Risk Shipped but Uninstalled Banking Sector Risk Revenue Reversals Macroeconomic Risk Macroeconomic Indicators Foreign Trade/Payments Risk Country IBM GRMG Financial Risk Sovereign Risk Risk Briefing Rating Currency Risk CDSSector PricingRisk bps Banking 2.0 % 0.0 2.4 % 0.0 (1.2)%0.0 (8.9)%0.0 (5.7)%0.0 (5.2)%0.0 (1.1)%0.0 (5.2)%0.0 4.6 % 0.0 4.6 % 0.0 (0) 0 (0) 0 0 (0) 0 (0) 0 (0) Dividends Payable 0 2006 2007 2008 1Q2009 2Q2009 3Q2009 4Q2009 2009 1Q 2010 2Q2010 Businss Model First Quarter 2010 116 118 103 94 97 94 90 94 1 91 1 92 1 B/S Translation Losses (32) Revenue Mix A (1)% A 12 % A 9 % A 0.0 0.0 2006 A A AA 50 14 25 26 A AA 6 0.0 0.0 2007 A A A A 45 18 17 25 0.0 0.0 2008 A A A A 45 18 21 25 0.0 0.0 1Q2009 A A A A 80 18 21 28 (4)% BBB 0.0 0.0 2Q2009 BBB A A A 80 18 21 29 4 % BBB 4 % BBB 9 % BBB 3 % BBB 5 % BBB Country Other Metrics A A A A A Growth Market Unit 0.0 0.0 0.0 0.0 0.0 Days Sales Outstanding 44.8 A A A A A Major Market 0.0 0.0 0.0 0.0 0.0 75 75 75 75 75 Gross Profit Margin 3Q2009 4Q2009 2009 1Q 2010 2Q2010 Businss Model First Quarter 2010 18 18 18 18 18 Country 1 1 1 Revenue Mix 21 21 21 21 21 GMU BBB BBB BBB BBB BBB Country 26 26 26 26 26 Major Market A A A A A Growth Market Unit A 52 A 78 A 70 A 88 A 111Major Market Business Model A 12 A 31 A 88 A 61 Macroeconomic Risk Current Account Foreign Trade/Payments Risk Foreign Financial RiskReserves/GDP 50 56.97 45 70.58 45 52.64 80 8.50 14 18 18 18 25 2.0% 17 2.1% 21 1.7% 21 1.2% 80 11.23 21 1.0% 75 14.77 75 12.67 75 47.17 75 18.33 75 13.20GrossIndustry Profit Margin Concentration 18 18 18 18 18 Country 21 0.8% 21 0.7% 21 0.9% 21 0.5% 21 0.5%GMU Risk Briefing Rating Fiscal Debt/GDP 26 163% 25 162% 25 168% 28 183% 29 179% 26 183% 26 191% 26 181% 26 190% 26 187% MajorIBM Market Risk Score 18 2 - Shareholder Value 0.6 % 0.5 % 0.9 % 0.2 % 0.2 % 0.2 % 0.2 % 0.9 % 0.2 % 0.2 % Surplus(Deficit)/GDP 6 12 31 88 61 52 78 70 88 111 CDS Pricing bps 7.6 7.5 7.3 7.7 7.7 7.7 7.7 7.7 7.7 7.7 Corruption Perception Index 56.97 70.58 52.64 8.50 11.23 14.77 12.67 47.17 18.33 13.20 Industry Concentration Current Account Foreign Reserves/GDP 2.0% 2.1% 1.7% 1.2% 1.0% 0.8% 0.7% 0.9% 0.5% 0.5% Fiscal Debt/GDP 163% 162% 168% 183% 179% 183% 191% 181% 190% 187% IBM Risk Score Surplus(Deficit)/GDP 0.6 % 0.5 % 0.9 % 0.2 % 0.2 % 0.2 % 0.2 % 0.9 % 0.2 % 0.2 % 7.6 7.5 7.3 7.7 7.7 7.7 7.7 7.7 7.7 7.7 Corruption Perception Index 2 - Shareholder Value -10% 0 -48% 0 0 -125% 0 -666% -27% 0 25% 0 168Hardware 369Software (15)Services 13 Other 57 Total (59) 28% 0 -66% 0 43.0% 90.1% 32.9% 62.9% 43.7% Hardware Software Services Other Total 37.4% 96.7% 26.9% 57.5% 46.9% 9% 12% 69% 10% 100% 39.3% 96.5% 28.3% 64.2% 48.6% 28% 19% 41% 12% 100% 14% 22% 54% 10% 100% 57.5%49% 46.9%19% 50.3% 5% 3.4 pts11% 64.2% pts 2Q2009 48.6% 3Q2009 50.0% 4Q2009 1.5FY2009 60% 40% 40% 196% 60% 100% 1Q 2010 60% 2Q 2010 40% Comm Dist Public General Bus. 1% 5% 9% 49% 19% 5% 11% 100% FY2007 FY2008 1Q2009 2Q2009 3Q2009 4Q2009 FY2009 1Q 2010 2Q 2010 40% 40% 60% 60% 40% 40% 20% 60% GMU Major Country Risk/Unit Risk Relative GP Margin 0.7 x 1.1 x 1.1 x 1.0 x B/(W) GP Normalized Ratio 0.4 x GMU (0.1)x Major Risk Country MultiplesMargin GMU50.3% Major50.0% Compare Margin 46.94% 48.6% Country Risk/Unit Risk 0.7 x 1.1 x Delta 3.4 pts 1.5 pts Relative GP Margin 1.1 x 1.0 x % Change Short-Term Signings 2Q2010 from 2Q2009 B/(W) 0.4 x (0.1)x GP Normalized Ratio GMU 792.0 Major-13.7% Country Margin 50.3% 50.0% % Change Long-Term Signings46.94% 2Q2010 48.6% Compare Margin from 2Q2009 Computer Services 40% Financial Industrial Services 39.5 16% Financial Total Country GP Normalized General Other Industrial Public Services Bus. 62.9% 43.7% -- 37.4% 1% 96.7% 5% 26.9% 9% 39.3% FY2007 96.5% FY2008 28.3% 1Q2009 20% Risk Multiples 2.62 % 46% -- Partner Revenue % Business 50.3% 3.4 pts 14% 50.0% 1.5 pts 33% ComputerSoftware Services Hardware Comm Dist Services 43.0% 90.1% 32.9% 40% 196% 0 (5) Revenue 102 %(3) Business Partner (18.08)% % 66.6269% % (33.82)% % (32.20)% (2.39)% 9% 31.3612% 10% 30.56100% 14% 72.07 % #DIV/0! #DIV/0! 25% -20% 0% 174% 174% -657% 28% 19% 41% 12% 100% 33% 41.5 41.9 38.3 36.9 39.1 36.3 36.3 39.1 14% 22% 54% 10% 100% 16% -10% -48% -125% -666% -27% 25% 28% -66% Hardware Software Services Other Total Country GP Normalized Delta 3.4 pts 1.5 pts 390.6 -24.1% % Change from 2Q2009 40% Short-Term Signings 2Q2010 792.0 -13.7% Long-Term Signings 2Q2010 % Change from 2Q2009 390.6 -24.1% © 2010 IBM Corporation IBM country risk score structure Tier 1 Data updated monthly; scores calculated automatically; analytics flag level of risk Tier 2 IBM Country Risk Score Avg. of Tier 2 risk scores Economic Indicator Shareholder Value Liquidity factors Risk-reward Derived from avg. of Tier 3 Sub-scores Predictive Score (next 3 months) Tier 3 Key risk metrics (e.g. Foreign Reserves, GDP, Raw data translated into sub-scores inflation, Cash balance, GP margin) 25 © 2010 IBM Corporation Macro Economic Report - Scorecard quadrant example External indicators provide trends on the business environment. 26 © 2010 IBM Corporation Thank you Ludek Rainet [email protected] 27 © 2010 IBM Corporation