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CORPORATE PLAN SUMMARY
CORPORATE PLAN SUMMARY 20
20132017 CORPORATE PLAN
EXECUTIVE SUMMARY 4
CHAPTER 1: THE PLANNING ENVIRONMENT 7
1.1 THE GLOBAL OUTLOOK 8
1.2 CANADA’S TRADE AND INVESTMENT PERFORMANCE 9
1.3 OPPORTUNITIES FOR CANADIAN COMPANIES 10
CHAPTER 2: THE BUSINESS STRATEGY 13
2.1 OVERVIEW 13
2.2 CREATING BENEFITS FOR CANADA 15
2.3 OUR OVERARCHING PRINCIPLES 15
A PartnershipPreferred Philosophy 16
A Commitment to Corporate Social Responsibility 17
2.4 INVESTING IN OUR STRENGTHS 18
A Focus on People 18
Leveraging Technology for Success 19
Managing our Capital Base 20
2.5 THE FOUR CORE DIMENSIONS OF EDC’S BUSINESS 20
The Business Development Dimension 21
The Operations Dimension 29
The Risk Management Dimension 34
The Financial Sustainability Dimension 36
2.6 MEASURING SUCCESS 37
Creating Benefits for Canada 37
EDC’s Scorecard for 2013 37
CHAPTER 3: EDC’S FINANCIAL PLAN 41
3.1 KEY BUSINESS ASSUMPTIONS 42
Business Facilitated 42
Risk Profile of Business Facilitated 43
Foreign Exchange 45
Interest Rates and Yields 45
3.2 ADMINISTRATIVE EXPENSES PRODUCTIVITY RATIO 45
Productivity Ratio 46
20132017 CORPORATE PLAN 1
3.3 PLANNED CAPITAL EXPENDITURES 47
3.4 FINANCIAL RESULTS 48
Statement of Comprehensive Income 48
Statement of Financial Position 50
Statement of Changes in Equity 52
Statement of Cash Flows 53
Accounting Policies and Future Accounting Changes 54
Evolving Standards 54
3.5 CAPITAL MANAGEMENT 54
Capital Adequacy Policy (CAP) 54
Eligible Dividends 55
3.6 STATUTORY LIMITS 56
3.7 ASSET/LIABILITY MANAGEMENT AND BORROWING
Asset Liability and Market Risk Management 57
Borrowing Strategies 58
Sources of Financing 60
Drivers of Capital Markets Borrowing Requirements 61
3.8 PROGRESSION OF EDC PLANS FOR 2011 AND 2012 65
3.9 OPERATION OF SUBSIDIARY 66
ANNEX I: EXPORT DEVELOPMENT CANADA CORPORATE
Mandate and Operating Principles 70
Legislative Powers and Obligations 72
Managerial and Organizational Structure 74
Board and Committee Structure 75
EDC’s Financing and Insurance Solutions 76
Online Products and Tools 79
ANNEX II: CANADIAN EXPORT FORECAST BY SECTOR AND
The 2013–2017 Corporate Plan was approved by EDC’s Board of Directors on October 17, 2012. The Plan and its underlying assumptions were developed
over the summer and fall of 2012, during a period of ongoing uncertainty in the global economy. While the Plan and its underlying assumptions were aligned
with the economic environment at the time of their development, continued volatility in the global economy may alter the economic landscape and, in some
cases, impact the assumptions upon which the Plan is based.
2 EXPORT DEVELOPMENT CANADA
Since 1944, Export Development Canada (EDC) has played an important role in building
Canada‟s trade capacity. Every transaction that EDC undertakes is designed to create
benefits for Canada– benefits that will generate growth, prosperity and jobs for
Through its international trade expertise and suite of financing and insurance solutions,
EDC facilitates trade by helping Canadian companies be more competitive, helping them
to take advantage of global international business opportunities. Working together with
our partners in government, EDC is also helping to create trade where it would not
otherwise take place by helping Canadian businesses expand into new markets and
identifying opportunities that play to Canada‟s strengths.
EDC‟s expertise in international trade and risk management, our strong network of
public and privatesector partners and our ongoing commitment to deliver value to our
customers are what drives the corporation‟s vision of being the most knowledgeable,
most connected, most committed partner in trade for Canada. The initiatives profiled in
the 20132017 Corporate Plan highlight how we are working towards this vision over the
next five years and beyond.
20132017 CORPORATE PLAN 3
EDC is a Crown corporation which provides trade finance and risk management services
to Canadian companies to help them take advantage of global trade and investment
opportunities. The corporation‟s mandate is to support and develop, directly or indirectly,
Canada‟s export trade and Canadian capacity to engage in that trade, as well as respond
to international business opportunities. Since March 2009, and until March 2013, EDC is
also responding to the domestic needs of Canadian companies within the traderelated
space. At the core of EDC‟s mission is its unique ability to take on and manage
significant levels of financial risk in order to facilitate the success of Canadian companies
in international markets.
The Planning Environment
Three major forces continue to shape the planning horizon. First, major parts of the
global economy are still struggling in the aftermath of the 2008 financial crisis. Although
the economy was expected to recover and settle into a steadier growth path more quickly,
volatility will continue to temper growth in the short term. Second, while liquidity is
returning to the market in many areas, the new international financial regulatory
framework is impacting banks and insurance companies‟ ability to engage in trade
finance activities. Third, emerging markets continue to grow, spurring the development
of major infrastructure projects and driving strong demand for natural resources. The
impact of this demand on commodity prices has contributed to a strong Canadian dollar,
despite slower economic growth in Canada.
The result is an evolving economic landscape which, although not significantly different
from last year‟s, remains twosided. On the one hand slower growth for Canada‟s long
established trade partners is contributing to diminished opportunities for many Canadian
companies which rely on these markets, particularly small business. On the other hand,
emerging markets are experiencing sustained expansion, driving increased trade flows
between them. Opportunities abound for Canadian companies willing to venture beyond
the traditional markets and establish a presence abroad to take advantage of these shifting
patterns of trade. At home, renewed emphasis on the development of resources within
Canada and the growth of Canada‟s ocean cluster reflect the increased global demand for
energy and natural resources.
The outlook for the planning period calls for a disparity in 2013 between a growing
resource sector and other sectors still experiencing challenging conditions. Beyond 2013
however, all sectors should benefit from the increased pace of export growth.
4 EXPORT DEVELOPMENT CANADA
The Business Strategy
Last year, EDC launched a new corporate strategy focused on creating benefits for
Canadian companies in an uncertain environment. Thanks to this strategy, EDC remains
very well positioned to deliver value to Canadian businesses in the current economic
environment. The 20132017 Business Strategy constitutes a next step in the direction set
last year. It highlights the progress we have made in the initiatives launched in the 2012
2016 Plan. It introduces new areas of opportunity to explore, but maintains a stable scope
of activities as we continue to invest in delivering value to our clients through our core
business and through the priorities identified in 2012.
The 20132017 Business Strategy is built around two fundamental strategic objectives:
Trade Facilitation Trade facilitation continues to be EDC‟s core business. EDC will
continue to adapt and improve its suite of financing and insurance solutions in
response to the evolving needs of Canadian companies.
Trade Creation EDC has a critical role to play in introducing Canadian companies
to opportunities they would not otherwise have been aware of or able to access. The
activities related to this strategic objective are made possible by achieving
productivity gains which free up resources within the organization.
In order to achieve these objectives, EDC will continue to invest in its three core
strengths: our people and their unique talents, our technological platform, and our
financial capital. Firstly, we will strive to anticipate the people risks that could prevent
the corporation from achieving its business priorities and ensure we have the right
resources to deliver on our mandate. Secondly, EDC will make significant new
investments over the planning period to modernize its key business systems to support
continuous improvement of our service offering and to accommodate growing demand
with existing human resources. The strengthening of our service delivery to small
Canadian businesses will be a particular focus of this effort. Finally, the corporation will
ensure it leverages its capital to the fullest extent in the execution of its mandate, while
ensuring it has adequate capital to meet the demands of its current and future business,
including in the event of significant unforeseen challenges.
EDC remains committed to Corporate Social Responsibility (CSR) and to a Partnership
Preferred Philosophy, our two overarching principles. EDC‟s PartnershipPreferred
Philosophy means that whenever possible, we will use our financial capacity in a manner
that is complementary to the products and services of privatesector financial institutions.
In particularly challenging markets or sectors, EDC will use its capital strength without
other financial players but will, where relevant, look to create conditions that will favour
the participation of the private sector. EDC‟s commitment to CSR is founded on our goal
to meet the expectations of Canadians to act as good corporate citizens, upholding
Canada‟s values both at home and abroad, while ensuring that Canadian businesses
benefit from international business opportunities.
20132017 CORPORATE PLAN 5
The 20132017 Business Strategy highlights key initiatives that correspond to the four
dimensions of our strategic framework:
Business Development: At EDC, business development means going beyond our
financial solutions and proactively developing trade opportunities that Canadian
companies would otherwise not be able to access. This is done through a variety of trade
creation tools, as well as through three strategic initiatives launched in 2012: Aerospace,
Clean technologies and Indian infrastructure. The Business Development section of the
Plan profiles how our activities in Canada and our international representations are
helping Canadian exporters and investors succeed.
Operations: EDC operates on commercial terms, while fully leveraging its capital to
meet its mandate, adding financial capacity to the market where it is needed and
delivering value to our customers through the continuous improvement of our financial
solutions. Over the planning period, EDC will focus on how it can broaden access to its
services through online tools to reach a larger proportion of small business exporters,
while focusing its customized services on highgrowth companies that need its expertise.
Risk Management: EDC‟s ability to adequately manage the significant risks we take to
help Canadian companies be successful is a key competency of the organization. It is
supported by a strong risk management culture and effective policies and processes. The
new Enterprise Risk Management group will elevate the critical importance of
understanding, planning and preparing for the multitude of risks to which the corporation
is exposed, while enabling us to provide the best possible service to Canadian exporters.
Financial Sustainability: Financial sustainability and a continual focus on efficiency
enables the corporation to effectively respond to the demands of its customers today,
without compromising its ability to serve Canadian global businesses in the long term.
Over the planning period, EDC has committed to spend no more than approximately 25
cents of every dollar earned on overhead costs. To do so, EDC must continually achieve
productivity gains to ensure it fulfills its mandate to the fullest.
The Financial Plan
EDC‟s ability to deploy its lending and insurance solutions to Canadian global businesses
is dependent on the corporation‟s commitment to sound financial management. The
20132017 Financial Plan outlines how EDC is managing its administrative and operating
expenses. It provides a detailed analysis of how the changes to EDC‟s Capital Adequacy
Policy will ensure the corporation adequately manages its supply of capital while
continuing to take on significant risks to ensure Canadian companies are best positioned
in international markets, despite an uncertain environment. Key business assumptions
which underlay EDC‟s projected financial performance, including projected consolidated
statements of income and comprehensive income, statements of financial position,
statements of changes in equity, and statements of cash flow, as well as planned capital
expenditures for 20132017, are also highlighted.
6 EXPORT DEVELOPMENT CANADA
CHAPTER 1: THE PLANNING ENVIRONMENT
Over the next five years, the global economic environment will be shaped by the
significant volatility expected to continue in the shorter term. While Canadian exporters
have reason to be optimistic in the later years of the planning horizon, as the economy is
expected to recover and settle into a steadier growth path, the economic trends of the past
12 months will continue to temper growth in the near future.
Three major forces continue to shape the planning horizon. First, major parts of the
global economy continue to operate in an economic crater caused by the crisis in the U.S.
financial sector in 2008. Second, the introduction of a new, international financial
regulatory framework aimed at preventing a future credit crisis is impacting many
international banks and insurance companies‟ ability to lend and provide coverage. Third,
emerging markets continue to grow, spurring the development of major infrastructure
projects and driving strong demand for natural resources. The impact of this demand on
commodity prices has contributed to a strong Canadian dollar, despite slower economic
growth in Canada.
This twotrack economy presents both challenges and opportunities for Canadian
exporters. Slower growth for Canada‟s longestablished trade partners is contributing to
diminished opportunities for many Canadian companies, particularly small businesses,
which have traditionally focused on these markets. This trend, combined with a high
Canadian dollar and the relative strength of the domestic economy, has resulted in many
companies choosing to leave the export market altogether.
However, the strong, sustained growth of emerging markets presents a wealth of
opportunities for Canadian companies willing to venture beyond the traditional markets
and establish a presence abroad. The growth and size of these markets has led to a strong
increase in trade flows between emerging markets, known as SouthSouth trade,
presenting opportunities for Canadian exporters to integrate into growing supply chains
that service this SouthSouth trade. At home, emphasis on the development of resources
within Canada is responding to the increased global demand for energy and natural
resources and creating opportunities to participate in this development.
This chapter will provide EDC‟s economic outlook for the planning period, including the
impacts of the new international credit and regulatory environments. We will examine the
challenges affecting small businesses, as well as opportunities for growth in emerging
markets, as observed by EDC‟s economic experts and customerfacing employees.
20132017 CORPORATE PLAN 7
1.1 THE GLOBAL OUTLOOK
Challenges in the Global Financial System
As noted earlier, the future of the Euro is likely to be tested over the planning period,
making Europe a critical planning variable, as a default by one or more member countries
or a breakup of the Euro would have cascading effects throughout the world‟s financial
system. These, and other heightened risks have been key drivers in EDC‟s review of its
Enterprise Risk Management.
Other factors shaping the credit environment for financial institutions include the impact
of Basel III (a comprehensive set of reform measures designed to improve the regulation,
supervision and risk management within the banking sector) and Solvency II (an updated
set of regulatory requirements for insurance firms that operate in the European Union).
Over the planning period, the corporation will also explore ways in which it can refine its
financing service offering in order to better serve Canadian exporters in the context of the
Basel III framework and its impact on the financial industry.
The Rise of New Trade Flows
While traditional Western economies cope with credit constraints and economic
uncertainty, emerging markets continue to show promise. This growth is particularly
apparent with respect to trade between emerging markets. Commonly referred to as
SouthSouth trade, integrated intraregional supply chains, particularly within Asia, as
well as significant regional and subregional trading associations in Africa and Latin
America are consistently showing annual growth of more than 20.
Canada‟s foreign affiliate sales (FAS) show that Canada is already present in the South
South space. Canadianowned foreign affiliates, whose sales are about the same
magnitude as direct exports from Canada, have become increasingly important, both as a
source of lowercost inputs for Canadian operations, as well as a vehicle to sell directly to
foreign customers. Although the U.S. has been Canada‟s prime FAS location, its share of
total FAS has plunged from 65 to just under 50, while the share of Canadian FAS in
emerging markets has risen from 12 to 28.
Similarly, Canadian direct investment abroad (CDIA) in emerging markets is also on the
rise. In 2000, half of CDIA was in the U.S., while 22 of CDIA was in emerging
markets. Since then, the U.S. share has slipped to 40, while emerging markets have
gained ground, rising to almost 28 of total CDIA.
Canadian foreign direct investment is an important channel for companies to effectively
capitalize on the opportunities arising from SouthSouth trade. The Business Strategy
chapter will highlight how EDC enables Canadian exporters to invest abroad and how the
corporation is helping to identify supply chains which offer the best southbound trade
8 EXPORT DEVELOPMENT CANADA
1.2 CANADA’S TRADE AND INVESTMENT PERFORMANCE
At first glance, Canada‟s trade and investment performance appears to tell a positive
story, despite slower growth in GDP and the economic volatility coming out of Europe.
EDC‟s export forecast for Canada shows strong growth in the near future, with exports
predicted to rise between 6 and 8 in 2012 and 2013. However, closer examination
reveals that Canada‟s trade performance is uneven, and reflective of the current twotrack
Exports in the extractive and resource sectors are on the rise, responding to strong
demand from emerging markets. This demand is offsetting a softening of commodity
prices, which continue to be volatile. However, many exporters in other sectors,
particularly those reliant on the U.S. market, continue to face significant challenges. This
is particularly true of the information technology, light manufacturing and transportation
sectors, which have yet to see their annual export sales return to prerecession (2007)
The importance of a vibrant, tradeengaged, small business sector cannot be
underestimated. Over the last decade, 47 of all jobs in Canada that were created during
this time were created by small businesses. Moreover, small business exporters employ
twice as many people, spend six times more on research and development and have
revenues of more than twice their domestic equivalents.
Small business exporters face a number of challenges in the international marketplace.
Often these companies lack the connections necessary to identify export opportunities as
they arise, as well as the resources and knowledge to look for and find needed
information, resulting in missed opportunities for growth. Access to financing is another
challenge for many small businesses, particularly for those which have grown beyond the
venture capital stage but do not yet qualify for traditional financing solutions.
There are a number of players in Canada who work with small businesses to help them
address these challenges. EDC works with the private sector, helping to bring financial
capacity and knowledge to the market. EDC uses its financial solutions to help Canadian
small business exporters access working capital and other forms of financing, and as well
mitigate business risks. In addition, EDC seeks to complement the Department of Foreign
Affairs and International Trade‟s (DFAIT) Trade Commissioner Service‟s (TCS)
extensive international network and expertise in trade which helps companies navigate
foreign markets and connect into export and investment opportunities. The Business
Development Bank of Canada (BDC) is another key collaborator. In 2011, EDC and
BDC signed a Protocol to ensure that their Canadian customers have access to the
services and financial capacity that best suits their needs.
Industry Canada (small businesses defined as companies with fewer than 100 employees)
20132017 CORPORATE PLAN 9
Looking ahead, the corporation is exploring ways of enhancing both our financing and
insurance offering in the small business space. This will include leveraging our
partnership with BDC to bring value to this important segment and help those Canadian
small business exporters looking to grow, identify and realize international business
opportunities. EDC‟s renewed focus on working with small business exporters is
reflected in the introduction of a new small business measure as part of the corporation‟s
1.3 OPPORTUNITIES FOR CANADIAN COMPANIES
The twotrack economy presents significant opportunities for Canadian exporters in a
wide variety of sectors. The following section highlights some areas of focus for the
upcoming planning period.
Creating Opportunities through Trade Diversification
Continued growth in emerging markets presents a wealth of opportunities for Canadian
companies willing to diversify their customer base and integrate into SouthSouth supply
chains. EDC‟s economic intelligence shows that Canadian companies are increasingly
looking to trade diversification as a way to grow their business.
In the forestry sector, although the recovering U.S. housing market is driving demand in
the U.S., companies are also continuing to diversify into emerging markets such as
China. Similarly, Canadian agribusiness is positioning itself to meet the growing needs
of emerging economies to become more efficient in their food production. In the
automotive sector, Original Equipment Manufacturers (OEM) have a strong and growing
presence in emerging markets. Parts manufacturers, have decided to localize closer to
OEM production facilities, presenting opportunities for Canadian suppliers across the
Large infrastructure projects in emerging markets, particularly with respect to
transportation and health care, are increasingly focused on publicprivate partnerships
(P3), an area of Canadian expertise. Companies with experience in P3 projects are well
positioned to capitalize on the opportunities created by these projects. EDC has
collaborated with P3 Canada on a number of initiatives, such as a joint online panel for
foreign companies and a P3 life cycle report for customerfacing EDC and TCS
employees on how to promote trade development through P3.
The Development of Natural Resources in Canada
Canada is a worldrenowned supplier of natural resources. As emerging economies such
as China seek out new sources of natural resources to feed their growing economies,
Canada is becoming an increasingly attractive destination for investment.
10 EXPORT DEVELOPMENT CANADA
The development of Canada‟s natural resources not only impacts the export of sought
after commodities around the globe, it also creates worldclass capabilities within
Canada. Canadian and foreign investment into Canada‟s resources sector is creating
conditions for Canadian firms – particularly small and midmarket companies – to gain
expertise and credibility by serving large export projects, creating income and jobs across
the country. This in turn allows them to integrate into international supply chains to
which they may otherwise not have had access.
EDC‟s capabilities align well with these opportunities for growth, while initially rooted
in Canada, are inherently connected to global success. EDC‟s participation in this sector,
complementing the private sector, will enable Canadian companies to increase their
competitiveness and develop future export opportunities. This complementary approach
has worked well in the auto and the aerospace sectors, where EDC works with suppliers
to major exporters. This approach can be further leveraged in the resource sector,
especially if the demand for financial capital for resource development projects is
Strengthening Canada’s Ocean Industry Cluster
The development of an ocean industry cluster in Canada presents new economic
opportunities for Canadian companies of all sizes, with significant potential to translate
into international growth. The Ocean Industry Cluster is comprised of two interconnected
industries: offshore oil and gas and shipbuilding. Both industries will require advanced
technology, high levels of research, development and innovation, and a highly skilled
labour force. Both will also have a definite export focus.
The financial intermediation that EDC provides will help Canadian companies along the
supply chain not only take advantage of the opportunities that will be created as projects
come into development, but it will also help position them to become more
knowledgeable about their respective industry and therefore more competitive for future
Over the planning period, EDC will continue to strengthen its relationships with project
sponsors and companies along the supply chain to adapt our solutions to their needs,
helping companies develop their competencies and move to international markets.
EDC as a Partner in Trade for Canada
The following chapter outlines how EDC will work with its public and privatesector
partners to help Canadian companies meet the challenges posed by an uncertain global
environment and take advantage of the many global opportunities.
20132017 CORPORATE PLAN 11
12 EXPORT DEVELOPMENT CANADA
CHAPTER 2: THE BUSINESS STRATEGY
EDC‟s 20122016 Corporate Plan introduced significant changes to our corporate
strategy, with a new approach, a new structure and new themes, setting the direction for
several years. The 20132017 Business Strategy represents an evolution of many of the
themes and initiatives introduced in last year‟s Plan, highlighting EDC‟s progress to date
and its response to some of the changes observed in the planning environment.
As always, EDC‟s mandate to support and develop, directly or indirectly, Canada‟s
export trade and Canadian capacity to engage in that trade, as well as respond to
international business opportunities forms the cornerstone of the corporation‟s business
strategy. The 20132017 Business Strategy is built around two fundamental strategic
objectives which support our mandate:
Trade Facilitation In the current credit environment, consistent and predictable
access to financial intermediation can make the difference between success and
failure for exporters and investors. EDC has over the years developed an offering of
effective services and solutions, which it will continue to adapt and improve as the
reality Canadian companies face keeps evolving. Trade facilitation continues to be
EDC‟s core business.
Trade Creation As Canadian companies strive to seize opportunities in a changing
environment, EDC has a critical role to play in identifying opportunities that
Canadian companies would not otherwise have been aware of, or able to access.
Productivity gains achieved within the organization enable EDC to invest in
innovative activities, which will effectively create trade opportunities for Canadian
These objectives are supported by the corporation‟s commitment to financial
sustainability. The Business Strategy and Financial Plan will identify areas in which the
corporation is exercising additional prudence in managing its operational costs, and
demonstrate how the investments it is making in its people, processes and technology will
enable the corporation to carry out its activities in an even more efficient manner.
20132017 CORPORATE PLAN 13
EDC’s Strategic Framework
Last year, the corporation adopted a new strategic framework which brings together the
complex dimensions of EDC‟s business. Three strengths enable us to create benefits for
Canada: our people and their unique talents, our financial capital and technology. To
deploy them in an optimal manner, we must take into account the four dimensions
present in everything we do: business development, operations, risk management and
financial sustainability. EDC‟s decisions are also guided by two overarching
commitments: our partnershippreferred philosophy and our commitment to Corporate
The following diagram illustrates how, when applied to the four dimensions of the
business strategy, the corporation‟s high performing workforce, effective leveraging of
technology and the prudent deployment of our capital base, generate benefits to Canada.
Figure 1 EDC's Strategic Framework
14 EXPORT DEVELOPMENT CANADA
2.2 CREATING BENEFITS FOR CANADA
Delivering benefits for Canada guides all of the corporation‟s decisions. By
facilitating the exports and investments of Canadian companies, EDC helps
to grow Canadian businesses, create Canadian jobs and contribute to the
economic growth of our country.
EDC delivers value to Canadians through its ability to take on and manage
financial risks that often exceed the appetite of other service providers in the industry,
particularly where Canadian companies seek to do business in unfamiliar and challenging
markets or in new sectors.
Working alongside our publicsector partners, particularly the Department of Foreign
Affairs and International Trade (DFAIT) and its Trade Commissioner Service (TCS), is
critical to fulfilling our mandate. As a member of the international trade portfolio, EDC is
able to leverage its expertise in trade financing and risk mitigation and contribute to the
common goal of expanding Canada‟s international footprint.
EDC continues to strengthen its engagement with its fellow Crown corporations.
Building on the ongoing collaboration between the Business Development Bank of
Canada (BDC) and EDC over the years, the two organizations signed a protocol in late
2011 to ensure that Canadian companies looking to expand their business in global
markets have access to the services and financial capacity that best suits their needs.
Over the planning period, EDC will also continue its efforts to work with the Canadian
Commercial Corporation (CCC), Canada‟s international contracting and procurement
agency, to deploy joint solutions to Canadian companies. Regular engagement continues
to take place in specific product areas, as well as partnering in key sectors and in markets
identified as high potential.
In Canada’s Economic Action Plan 2012, the government announced its intention to
refresh Canada’s Global Commerce Strategy (GCS) to align trade and investment
objectives with specific highgrowth priority markets, and ensure that Canada is branded
to its greatest advantage within each of those markets. EDC is actively participating in
this exercise, and will continue to engage with the government on ways in which it can
best contribute to the GCS in order to maximize opportunities for Canadian companies
2.3 OUR OVERARCHING PRINCIPLES
EDC‟s strategic direction is guided by two overarching principles: our Partnership
Preferred Philosophy and our commitment to Corporate Social Responsibility.
20132017 CORPORATE PLAN 15
A PARTNERSHIPPREFERRED PHILOSOPHY
Whenever possible EDC will use its financial capacity to complement the
activities of privatesector financial institutions. It will also seek to
collaborate with other publicsector partners where appropriate, with a
view to creating conditions that will favour the emergence of private
By working with other financial service providers, particularly private insurers and
banks, EDC ensures that customers have access to the financial solutions and services
best suited to their needs. Partnership with the private sector generally means sharing
risks on commercial terms, where the availability of privatesector capacity helps to
determine EDC‟s level of involvement. When credit is harder to access, EDC steps up
alongside the private sector to provide creditworthy companies with the capacity they
need. Similarly, as the private sector returns, EDC‟s capacity may no longer be needed to
the same extent, and consequently will be reduced or withdrawn. However, where
significant potential benefits exist for Canada, but privatesector capacity is limited or not
available to meet the needs of Canadian companies, EDC will also provide financial
intermediation to companies or sectors ahead of the private sector, deploying its expertise
in taking risks that other players may not be as familiar or comfortable with. This is
especially true in areas such as foreign buyer financing in challenging markets,
transactions with longer tenors in specific sectors, and financial solutions for
“breakthrough” companies such as those in the Cleantech sector or small business space.
In those circumstances, EDC will strive to create conditions that will favvour subsequent
In 2011, EDC completed nearly 6,000 transactions in partnership with the private sector.
Under its temporary powers in the domestic market, from March 2009 until July 2012,
EDC was involved in transactions with 661 Canadian customers: 117 for financing and
financial guarantees, 474 for credit insurance and 70 for bonding. All were consistent
with our PartnershipPreferred Philosophy.
The integrated and coordinated response to the recession by the global financial
community brought to light the many benefits of closer collaboration between public and
privatesector institutions. These benefits will only appreciate as Canadian companies
look to expand their business internationally. Looking ahead to 2013 and beyond, EDC
remains fully committed to working with the private sector to ensure that Canadian
companies have access to the financial solutions and services best suited to their needs.
2011 saw the creation of the Lending Practitioners‟ Forum, a joint consultative body with
Canada‟s private financial sector, chaired by the Canadian Bankers Association. This
forum is made up of senior executives from seven Canadian banks, EDC and its sister
Crown corporation, BDC. This forum helps to build partnership between organizations
by identifying the opportunities and challenges seen in the market, and fostering a
consistent and open dialogue around strategic issues affecting the field of trade and
16 EXPORT DEVELOPMENT CANADA
international finance. EDC will continue to strengthen its relationship with the banking
sector through this forum.
Canadian financial institutions are among Canada‟s largest exporters and foreign
investors. EDC will continue to enhance its solutions dedicated to helping Canadian
financial institutions be competitive and manage their risks in emerging markets.
In the insurance sector, EDC will continue to be an active participant in the Credit
Insurance Advisory Group (CIAG), a Government of Canadaled initiative. Involvement
in the CIAG is one of the most important ways EDC maintains and grows its partnership
with privatesector credit insurers.
Building on the positive experiences of EDC‟s deployment of domestic insurance and
export supplemental insurance in the wake of the credit crisis, the corporation is looking
to develop a more proactive partnershipdriven credit insurance solution to bring more
capacity to the credit insurance space for the benefit of Canadian companies. This
initiative will enhance EDC‟s facilitation of Canadian trade by offering capacity and
underwriting to private insurers to be deployed among their customers.
A COMMITMENT TO CORPORATE SOCIAL
EDC strives to meet the expectations of Canadians to act as a good
corporate citizen, upholding Canada‟s values both at home and abroad
while ensuring that Canadian businesses benefit from international business
opportunities. As such, Corporate Social Responsibility (CSR) is the second overarching
principle guiding our strategic direction.
CSR is a particular focus of the corporation‟s India Infrastructure Initiative. Through the
20132017 planning period EDC will continue to participate in infrastructure projects
which meet the corporation‟s standards of CSR performance and generate benefits to
Canada. Prior to developing this initiative, EDC conducted indepth due diligence,
including in market, of the CSR risks inherent to doing business in this market. EDC
concluded that we can do meaningful business in the market without compromising our
standards, providing we follow strict discipline, particularly in choosing our partners and
Over the planning period, EDC will continue to engage with its public and privatesector
partners to keep pace with evolving CSR standards. This will include promoting the
consistent implementation and application of the International Finance Corporation‟s
(IFC) Performance Standards to ensure a level international playing field for Canadian
companies, and continued engagement through EDC‟s membership in the Steering
Committee of the Equator Principles (EP) Association. EDC is the first export credit
agency and the first Canadian financial institution to be represented on the committee of
the EP Association, a financial industry benchmark for determining, assessing and
20132017 CORPORATE PLAN 17
managing environmental and social risk in project financing. This will also include
EDC‟s implementation of the revised Organization for Economic Cooperation and
Development (OECD) 2012 Recommendation of the Council on Common Approaches for
Officially Supported Export Credits and Environmental and Social Due Diligence (the
“Common Approaches”) and continued involvement with our ECA peers throughout the
planning period to improve common practices, develop guidance and promote a level
In addition, EDC will focus on creating greater transparency with respect to CSR
processes. In 2012, the corporation undertook efforts to increase the public‟s
understanding of our CSR reviews, including the publication of a guide on EDC‟s review
of environmental and social impacts in project financing transactions. As well, our 2011
CSR Annual Report described how we undertake CSR reviews in corporate financing
transactions. These activities, which promote transparency of our internal processes, will
continue through the planning period.
Lastly, EDC will continue its efforts to raise awareness among Canadian exporters about
the risks of corruption and bribery in international markets. Through this engagement,
EDC uses its expertise to help exporters identify and implement ways to strengthen due
diligence procedures and anticorruption programs, thereby better protecting themselves
from corruption risk when operating abroad.
2.4 INVESTING IN OUR STRENGTHS
Our resources are our strengths. In order to help Canadian businesses take advantage of
global trade and investment opportunities and generate benefits for Canada, EDC will
continue to invest in its people and its technology, while prudently managing its financial
capital. These three strengths together play a fundamental role in EDC‟s ability to adapt
to change in the face of unforeseen events.
A FOCUS ON PEOPLE
The corporation‟s overarching people strategy over the planning period is
to anticipate the people risks that could prevent EDC from achieving its
business priorities and have the right resources in place to achieve these
EDC competes for talent in a tightening labour market for highly skilled
knowledge workers which are increasingly diverse, distributed and operating in an
increasingly borderless world. The corporation is developing a rigorous and sustainable
workforce planning program to ensure that EDC continues to have the right people with
the right skills in the right place at the right time. Elements of this program will include a
workforce assessment and planning process which differentiates according to the roles
18 EXPORT DEVELOPMENT CANADA
that drive EDC‟s business, and a process to ensure that the corporation maintains the
right balance of strong technical skills and behavioural competencies.
EDC will also seek to leverage internal productivity gains of 1.5 annually by utilizing
the talent and expertise of its resiliency pool of employees. Launched in 2012, the
resiliency pool redeploys talented employees to focus on key challenges, such as trade
creation opportunities or high priority projects. This initiative enables EDC to work
smarter, develop individual and organizational resiliency and create capacity for when
and where demand is heaviest.
Financial sustainability is another key component of effective workforce planning. With
this in mind, EDC introduced a defined contribution component to EDC‟s pension plan
for all new employees in January 2012, reducing future pension funding volatility while
maintaining an attractive and competitive total compensation offering for employees.
EDC is also participating in the Crown corporation pension plan review launched
recently by Treasury Board Secretariat. In addition to participating in this review, EDC
will continue its own efforts to ensure the general alignment of its pension plan with
Finally, over the planning period, EDC will continue efforts to ensure the diversity of
experience and perspectives within its employee population in order to enhance employee
engagement, foster innovation and create a more global mindset. Efforts to increase the
overall level of bilingualism and a focus on the development of women in leadership will
also continue to be priorities for the corporation.
LEVERAGING TECHNOLOGY FOR SUCCESS
EDC‟s information technology (IT) is a critical component which allows
us to meet our mandate of delivering timely financial and risk
management solutions to our customers. EDC‟s IT systems, which
support our business platforms, need to be secure, efficient, flexible and
well aligned with the corporation‟s plans and activities. This makes
investments in technology, both in terms of capital and operating
expenses, a top priority for the corporation.
In order to promote continuous improvement of our service offering, as well as to address
future technology obsolescence, the corporation has undertaken a multiyear program to
modernize our key business systems.
This program will modernize EDC‟s proprietary business applications and systems
architecture, which are specifically designed to meet the needs of Canadian exporters.
The key objectives of this modernization effort are to improve our core transacting
systems to more flexibly meet evolving customer needs, to improve web access to EDC
services for our customers, to enable crossfunctional team collaboration in support of
our service levels and productivity and to provide employees with better access to the
20132017 CORPORATE PLAN 19
information required to make timely decisions. A particular focus on our investments in
technology will be our ability to serve a broader range of small business customers
through the web. Additionally, EDC will continue to find opportunities to collaborate
with our partners across government and share common technologies and technology
solutions when possible.
Modernizing our legacy business systems will require an increase in our level of capital
investments and will continue to be a significant draw on internal resources and operating
costs over the planning period.
MANAGING OUR CAPITAL BASE
EDC‟s Capital Adequacy Policy (CAP) supports the Business Strategy by
ensuring that the corporation has adequate capital to meet the demands of its
current and future business, while maintaining its ability to withstand future,
unpredictable risks. The policy also provides for the return of excess capital over time to
the Government of Canada via dividends.
As noted in the 20122016 Corporate Plan, EDC has been engaging in discussions with
the shareholder on potential updates to the CAP to ensure that it maintains a sufficient
capital base to meet the needs of Canadian businesses over the long term. Under this
policy, EDC has paid 1.45 billion in dividends to the government over the last five
years, partially offset by a capital injection of 350 million in 2009 as part of the
government‟s response to the financial crisis.
Capital management is an increasingly important focus for financial institutions around
the world in light of economic turbulence together with increased regulation of financial
markets and financial institutions. EDC is affected by these same trends, and in addition
takes on larger exposures for longer tenors in various industry sectors in response to the
needs of Canadian exporters. As a result, EDC has reviewed the CAP in light of these
2.5 THE FOUR CORE DIMENSIONS OF EDC’S BUSINESS
The following sections profile the most significant initiatives planned by EDC for 2013
2017 in order to meet its strategic objectives of trade facilitation and trade creation, with
a focus on productivity gains. Importantly, although initiatives have been grouped
according to the dimension of EDC‟s business with which it is most prominently
associated, all of the activities profiled in the Business Strategy are considered through
the prism of all four dimensions.
20 EXPORT DEVELOPMENT CANADA
THE BUSINESS DEVELOPMENT DIMENSION
The success of Canadian businesses is at the core of EDC‟s activities. Our
work over the planning period is focused on building our core activities to
help companies access opportunities and overcome challenges they face in a
changing and diverse global environment.
Facilitating and Creating Trade
Over the past several years, EDC‟s operational model for business development has
matured beyond following our customers‟ business through conventional account
management, towards increasingly bringing market opportunities to customers as these
opportunities emerge. More and more, this means going beyond our financial and risk
mitigation solutions and proactively looking for trade opportunities which might not
otherwise be known or accessible to the exporter. As introduced in the 20122016
Corporate Plan, EDC is making progress on its trade creating tools, bringing new global
opportunities to Canadian companies.
Canadian companies often do not have the size and international visibility required to be
included in the procurement plans of large foreign buyers. Through its participation in
financing facilities for certain targeted foreign companies, EDC is able to create
opportunities for Canadian suppliers. Whether through corporate or project lending, the
financial capacity EDC provides is leveraged to raise awareness of Canadian suppliers
and seek to influence the foreign buyer's procurement decisions and "pull" exports from
Canada. This allows EDC to promote Canadian suppliers to foreign buyers and promote
the development of future exporting opportunities.
Establishing a close relationship with foreign buyers is essential to understand their
current and future needs and identify Canadian exporters that can specifically meet these
needs. As this relationship strengthens over time, foreign buyers tend to purchase more
from Canadians than the amount of the original loan. EDC works closely with the
Department of Foreign Affairs and International Trade, specifically the Trade
Commissioner Service and the Sector Practices, to identify market opportunities for
Over the planning period, EDC will focus on facilitating “Pull” facilities with companies
in emerging markets, in order to better connect Canadian companies with business
opportunities in SouthSouth trade flows.
20132017 CORPORATE PLAN 21
Foreign multinationals with operations in Canada provide an important contribution to
Canada‟s economy. Many have large employment levels, sizeable investments and
annual expenditures that add to Canada‟s GDP. More generally, the foreign
multinational‟s activities in Canada will often be part of the company‟s overall value
chain. This is the case, for example, when Canadian operations conduct RD that is used
by the parent company or its affiliates based outside of Canada. Foreign multinationals
present in Canada may also have strong export levels and their parent or nonCanadian
affiliates may source goods and services from Canadian companies, which constitute
additional export trade from Canada.
To encourage this trade and to bring global supply chains closer to Canadian companies,
EDC undertakes agreements – or Protocols – with foreign multinationals. Under these
Protocols we leverage our financial capacity to influence foreign multinationals to grow
their exports or procurement from Canada, as well as their RD expenditures and
Canadian investment levels.
Targeted Trade Connections (or “Matchmaking”)
As a necessary complement to Pull facilities and Protocols, EDC leverages its
relationships with these key foreign buyers to introduce them to competitive Canadian
suppliers, something that is very challenging for many of these smaller Canadian
businesses. Working closely with our government partners, in particular the TCS, EDC
also participates in foreign missions to connect Canadian suppliers with targeted foreign
buyers. EDC also conducts “reverse trade missions,” where selected foreign buyers are
introduced, in Canada, to Canadian suppliers whose capabilities match the foreign
buyers‟ procurement requirements.
EDC is able to enhance business opportunities for Canadian companies by connecting them to
significant business relationships and partnerships by means of EDC’s network of international equity
funds. By participating in international equity funds, EDC is also able to gather market intelligence and
identify opportunities at the grassroots level, enabling Canadian companies to seize these opportunities
the moment they arise. This “connect strategy” serves as EDC’s primary focus in choosing equity funds.
Over the planning period, EDC will seek to further leverage this strategy, selecting funds in areas which
play to Canada’s existing strengths and present the greatest growth potential for Canadian industries.
Canadian Direct Investment Abroad
More and more Canadian companies are investing in foreign affiliates to better respond
to the needs of a global clientele. EDC estimates that one in ten small and mediumsized
Canadian exporters currently have some form of physical presence overseas, such as a
22 EXPORT DEVELOPMENT CANADA
plant, a warehouse or a sales and distribution
EDC is well equipped to assist companies
office. This overseas investment is referred to
engaging in CDIA through:
as Canadian Direct Investment Abroad (CDIA).
Loans and guarantees to help finance
There are multiple benefits to making these
investment abroad, and to support the
foreign investments, including increasing access
activities of foreign affiliates;
to key customers and markets, more cost
Political Risk Insurance to protect
effective production facilities, and new
their international investments; and
partnerships through global and regional supply
Accounts Receivables Insurance to
chain networks. Canadian companies operating
help manage the risks of selling
abroad today are generating about the same
level of sales from foreign operations as they
are from export sales from Canada. According to Statistics Canada, Canadian foreign
affiliate sales grew at twice the rate of Canadian exports over the past decade, with sales
originating in emerging markets nearly tripling during this period. Recent data however
indicates that this trend has softened in the last two years, underscoring the importance to
maintain efforts in helping Canadian companies establish and grow their presence abroad.
Foreign Direct Investment in Canada
In today‟s world of integrative trade, foreign direct investment (FDI) in Canada not only
leads to increased domestic economic activity, it enables Canadian firms – particularly
small and midmarket companies – to integrate into international supply chains and
provides opportunities to become known in markets and by customers they might not
Alongside the work of its partners in government, EDC is involved in FDIin activities
through the provision of access to financing. EDC‟s financing capacity can help to
strengthen Canadian capabilities and position Canada as a major global player in these
growing sectors. FDIin also provides increased financial capacity within the country
which will strengthen the competitiveness of Canadian companies, resulting in greater
Creating and Facilitating Trade in Emerging and Developed Markets
The most remarkable recent change to global trade patterns has been the rise of trade and
investment in and among emerging economies. Almost 40 of world trade is conducted
by developing countries and it is estimated that roughly 43 of this number can be
categorized as SouthSouth trade.
In addition to the use of its trade creating tools to integrate Canadian companies into
SouthSouth trade flows, EDC is also seeking ways to assist Canadian companies in
developed markets which are already integrated into SouthSouth trade corridors as a way
to help these Canadian companies integrate into SouthSouth supply chains..
Estimate based on EDC‟s Trade Confidence Index Survey, conducted during the Spring and in the Fall of 2012
20132017 CORPORATE PLAN 23
EDC is actively entertaining closer relations with internationalized Canadian financial
institutions that have demonstrated their intent of leveraging SouthSouth trade growth. It
is believed that increasing involvement with Canadian financial institutions with
emerging market footprints can positively contribute to facilitating Canadian CDIA and
foreign affiliate sales.
Partnering with the International Finance Corporation
Over the planning period, EDC will deepen its relationship with the International Finance
Corporation (IFC) to better connect Canadian exporters to opportunities in emerging
markets. In 2012, EDC signed an agreement with the IFC aimed at expanding its
partnership to facilitate Canadian companies‟ investments in emerging markets. The
agreement will leverage each other‟s strengths and capabilities in emerging market
projects, with a focus on infrastructure and clean technology (Cleantech) sectors.
Canadian companies are able to tap into opportunities with IFC‟s customer base of large
multinational companies, emerging market governments and investment companies, as
well as benefit from its ontheground networks in emerging markets.
EDC also continues to engage with its international counterparts, including Export Credit
Agencies (ECA), within the G11 forum and at the OECD. As the OECD Export Credit
Group and Participants to the Arrangement turn their attention to level playing field
issues, EDC will continue to participate in discussions on export credits within, and
external to the OECD forum, which could have a significant impact on how Canada
provides export credits to businesses across a number of sectors.
24 EXPORT DEVELOPMENT CANADA
Getting Closer to our Clients Abroad
EDC‟s ontheground representations in markets around the world, its research on global
economic trends and its ability to identify efficiencies through effective supply chain
management, contribute to the success of Canadian businesses. EDC‟s network of foreign
representations helps deepen its relationships with local buyers and borrowers, and
provide ontheground market information and intelligence to Canadian exporters and
investors. Understanding the financial and procurement needs of local borrowers and
buyers helps EDC to identify opportunities for Canadian supply and investment, and
offer marketspecific financial solutions that benefit Canadian companies.
The TCS is central to the Government of Canada‟s global trade presence. EDC and the
TCS play different complementary roles in promoting international trade, and share a
common goal of facilitating the success of Canadian exporters and investors. The TCS‟
efforts to open markets, secure access and promote Canadian interests inevitably
contribute to EDC‟s pipeline of leads, opportunities and transactions. Likewise, EDC‟s
ability to structure a transaction or to assist Canadian businesses in managing their risks
20132017 CORPORATE PLAN 25
and securing financing for their operations can help crystallize the TCS‟ trade
development efforts into specific transactions.
In order to strengthen Canada‟s trade capacity and effectively promote Canadian
exporters, it is essential that knowledge of each other‟s organizations is developed and
promoted. Building on existing collaborative achievements, EDC will continue to work
with the TCS on key initiatives in Canada and around the world over the planning period
with the common goal to increase Canada‟s trade capacity:
Overseas, EDC will continue building its relationships with the TCS in markets
where EDC has a presence and beyond. Greater sharing of information and
matchmaking will be two areas of focus. For example, EDC will leverage strong
partnerships with the TCS to widen EDC‟s reach in markets and collaborate closely
on matchmaking activities.
Training opportunities for the TCS on EDC products and services will remain an
important part of this collaboration. This will be accomplished through our annual on
site training and further facilitated with EDC‟s online training modules.
In 2013, EDC will develop a bilateral MOU with DFAIT that seeks to clarify
responsibilities and deepen existing collaboration with the TCS in order to optimize
service delivery to Canadian companies.
As it considers future opportunities to expand its international footprint, EDC will
continue to engage with DFAIT on how to position itself to effectively serve Canadian
companies in markets around the world, including how best to apply its ability to open
foreign offices outside Canada‟s consular and diplomatic network, further to 2010
amendments to the Export Development Act. The process will involve identifying
markets and locations with the greatest potential for Canada. The nature of services
needed inmarket in order to effectively convert business opportunities for Canadian
companies will need to be assessed to determine whether delivering such services is best
achieved with a location within Canadian missions.
Trade Creating Initiatives
EDC‟s 20122016 Corporate Plan highlighted three major initiatives in the area of trade
creation that remain a priority for the corporation throughout the planning period. These
initiatives represent areas of significant potential growth for Canada, in which EDC is
taking on higher levels of risk in order to maximize opportunities for Canadian exporters
and investors. The following section reviews their progress and objectives in 2013 and
Preparing for a New Chapter in Canada’s Aerospace Industry
Canada‟s aerospace sector spans the country, with companies of all sizes competing
successfully worldwide, both directly and as part of larger supply chains. The Canadian
26 EXPORT DEVELOPMENT CANADA
aerospace sector consists of more than 500 companies in eight provinces across Canada,
with total sales of 22.4 billion in 2011 and directly employing 37,000 workers. With
over 75 of revenues from exports, it is one of the most export intensive industries in
Canada. As the aerospace sector grows in depth and diversity, EDC will continue to be
present alongside its players, large and small, facilitating their trade and helping them
create new opportunities.
EDC is preparing to provide buyer financing for the early years of the CSeries, a pivotal,
industryshaping technology for the Canadian aerospace sector. EDC is continuing to
engage with both confirmed and potential CSeries customers and creating a pipeline of
commitments to be deployed when aircraft are ready for delivery. EDC will look at every
opportunity to bring in privatesector capacity, if and when it becomes available. EDC
will underwrite all transactions according to the OECD‟s Aircraft Sector Understanding
The development of the CSeries is a critical opportunity for aerospace companies all
along the supply chain and across Canada to move to the forefront of the global industry.
It will help them remain in Canada, invest in such areas as new composite material
fabrication, and develop stateoftheart technology that will keep them at the forefront of
design and sustainable innovation, effectively positioning them to serve not only the
CSeries, but other leading players in the aerospace industry.
Beyond the CSeries, EDC will continue to work with other Canadian aerospace industry
subsectors, such as helicopters and flight simulators, for which international prospects
appear bright over the planning period.
Helping Canada Achieve Success Globally in Clean Technology
Clean Technology (Cleantech) is a global opportunity that responds to a demand for
technologies that reduce negative environmental impacts and allow for a more efficient
use of the earth's resources. Canada has an active Cleantech sector with over 700
companies, of which many are well positioned to become global leaders in their area of
expertise. EDC‟s participation in this sector is aimed at propelling Canadian exporters
even further as global demand for Cleantech products and services grow.
EDC has been developing partnerships with leading organizations such as Sustainable
Development Technology Canada (SDTC), Cleantechfocused venture capital firms,
private equity firms and financial institutions. EDC‟s collaborative agreement with SDTC
signed in 2012 is designed to advance Canada‟s success in the Cleantech sector
internationally. Under the terms of the agreement, EDC will seek to provide financial
intermediation across its range of products to SDTC portfolio companies that are
considered ready for commercialization, while SDTC will share with EDC its assessment
of technology and performance risks. EDC will also look for opportunities for SDTC
companies within its network of foreign buyers and top global corporations.
20132017 CORPORATE PLAN 27
Working with the Department of Finance, DFAIT, Environment Canada and Natural
Resources Canada, EDC played an active role in the negotiations pertaining to the OECD
Climate Change Sector Understanding (CCSU), which Canada adopted in 2012. The
CCSU extends the scope of the current Renewable Energy and Water Sector
Understanding (which is part of the OECD Arrangement on Export Credits) to a number
of new industries and technologies in the Cleantech area. Moving forward, EDC will
explore the feasibility of expanding credit support for eligible sectors under the CCSU in
order to help more Canadian Cleantech companies overcome the high upfront costs
associated with acquiring their technology.
A component of EDC‟s Cleantech strategy is a targeted approach to higher risk
transactions, recognizing that many promising Cleantech companies which are at the
demonstration stage with their technologies may be considered to be high risk by banks
or insurance companies..
Over the planning period, EDC will continue to deepen its understanding of the sector,
developing the right tools and solutions to contribute to Canadian Cleantech companies‟
success in international markets. EDC will broaden its focus from early
commercialization firms to include the strategic goals of more established firms,
concentrating on additional areas of opportunity for the Canadian Cleantech sector,
including focused approaches to international markets and targeting of international
strategic players that have clean technology needs. EDC will also concentrate on specific
emerging markets that offer a critical mass of opportunities for postdemonstration stage
Canadian Cleantech companies.
EDC‟s longterm vision for the Cleantech sector is to help grow smaller companies into
larger ones. As Cleantech companies grow and are successful, EDC will look to
transition its service offering from workingcapital solutions to vendor financing or
hybrid corporate/project finance responses, to help Cleantech companies (which often
have a capitalintensive business model) grow their sales through completion of
commercial scale projects in various foreign markets.
Targeting India’s Infrastructure Boom for Canadian Companies
EDC has successfully helped Canadian companies of all sectors do business in India
since establishing a local market presence in 2005.
With more than 1 trillion in infrastructure spending planned for the next five years,
India represents a market that Canada cannot afford to ignore. Opportunities exist to more
effectively deploy EDC's financing and bonding solutions in India, as the country
embarks on significant plans to modernize its infrastructure. The objective of EDC‟s
India Infrastructure Initiative is to facilitate access for Canadians exporters and investors
to opportunities created by India‟s infrastructure development plans. The cornerstone of
this initiative is to selectively deploy project financing to infrastructure projects which
have the potential to source from Canadian companies and investors. Concurrently, we
28 EXPORT DEVELOPMENT CANADA
will provide any required direct service to those Canadian companies, to help them
capitalize on these opportunities.
To ensure that this initiative continues to progress, concurrent deployment of resources
will continue towards a more aggressive outreach program with identified customers who
want to penetrate the market, but have not yet done so. To date, EDC is aware of 300
Canadian companies who currently have a presence in India, as well as many others who
are interested, but have yet to enter the market. A program will be established to
prioritize these customers according to their ability to act as supply chain anchors, and
catalyze additional Canadian benefits. Further, efforts will be focused on better
coordinating our India Infrastructure Initiative with that of other Government of Canada
agencies, so that resources may be pooled and coordinated to achieve a more Canada
THE OPERATIONS DIMENSION
The operations dimension focuses on EDC‟s strategy to deliver high quality
products and services to Canadian businesses, as well as the continuing
deployment of Lean principles and investments in systems which will make
EDC more efficient and responsive to the changing needs of Canadian
businesses in the currently volatile economic environment.
Overview of EDC’s Financing and Insurance Solutions
EDC delivers its financing and insurance solutions efficiently and effectively on
commercial terms, focusing on its mandate and key competencies to ensure we add
financial capacity to the market where it is needed and deliver value to our customers.
EDC‟s solutions fall under four product groupings:
Financing: Through EDC‟s financing products, Canadian companies are able to
access more working capital, allowing them to successfully compete in the global
marketplace and to offer buyer financing when competing for export contracts.
EDC‟s Export Guarantee Program (EGP) allows small businesses to increase their
working capital by providing an EDC guarantee directly to their bank, enabling the
bank to lend more. Larger customers in the Commercial Markets space also benefit
from the EGP and other commercial guarantees to banks, as well as from direct
lending solutions to the exporters or their customers to facilitate export sales. Finally,
EDC‟s large strategic customers utilize direct lending solutions and guarantees as
well as EDC‟s participation in their corporate facilities. On the equity side, EDC
provides growth capital through private equity investments to enhance the growth of
small and medium Canadian enterprises (SMEs), focused on exporting, international
expansion and/or developing international affiliations. EDC‟s participation in equity
funds also helps connect Canadian companies to emerging international business
opportunities at a grassroots level.
20132017 CORPORATE PLAN 29
Credit Insurance: EDC provides Canadian companies with Accounts Receivable
Insurance (ARI) in order to help them mitigate credit risk and gain access to
additional working capital with their financial institutions. ARI helps Canadian
exporters and their foreign affiliates offer buyers more flexible payment options,
which enhance their competitiveness.
Contract Insurance and Bonding: EDC‟s bonding products are used by companies to
access capacity with sureties and banks that issue guarantees to buyers, regulatory
authorities and suppliers. EDC also offers exporters and their affiliates contract
related insurance products to mitigate various financial risks.
Political Risk Insurance: Political Risk Insurance provides peace of mind to
companies and their financial intermediaries that their overseas assets will be insured
should unpredictable political events adversely impact their foreign operations.
In addition to its core export activities, EDC continues to provide complementary
solutions to Canadian companies for their traderelated domestic financing needs. In
response to the credit crisis, the government temporarily suspended the corporation‟s
domestic financing regulations in March 2009 to provide additional flexibility for EDC to
respond to the financing needs of Canadian companies while remaining focused on
international traderelated business. This temporary flexibility has been extended until
Looking Ahead in 2013
As part of its commitment to continuous improvement, EDC is working to expand on
successful products and services as well as develop new ones that meet the changing
needs of our customers.
Enhancing Customer Experience for Selective Cover Insurance
In order to deliver better solutions to Canadian exporters, EDC is implementing an
enhanced selective cover accounts receivable insurance product. “Selective” accounts
receivable insurance enables the exporter to select specific contracts, buyers or markets
for which insurance coverage can be obtained with EDC, rather than insure all their
EDC currently has three direct offerings of selective coverage – Single Buyer Insurance,
Contract Frustration Insurance, and Named Buyer Accounts Receivable Insurance
underwritten by a number of teams throughout the Credit Insurance and Contract
Insurance and Bonding product groups, each with their own separate online systems and
processes. Based on the corporation‟s current portfolio of selective coverage products,
opportunities were identified to reduce cycle times, improve service delivery and provide
more predictable coverage.
30 EXPORT DEVELOPMENT CANADA
A new service offering for selective coverage has been designed which will significantly
improve EDC‟s customers‟ experience, including a fully integrated and largely
automated design, an interactive application form, a new policy and supporting
Serving Canadian Small Exporters
As discussed in the Planning Environment, EDC‟s service offering for Canadian small
business exporters is an important part of fulfilling our mandate.
The small business segment, defined by the corporation as companies with under 10
million in annual sales, is EDC‟s largest, as expressed in number of customers, typically
accounting for 5055 of the corporation‟s customer base. While the majority of these
companies are served under EDC‟s Accounts Receivables Insurance program, Canadian
small business exporters and their bankers also benefit from EDC‟s bonding and
guarantee solutions, as well as from our Pull transactions.
EDC‟s Accounts Receivable
Insurance and bonding solutions
are used by companies to address
Investments in innovation are critical for Canada to
both risk mitigation challenges and
enhance its trade capacity, particularly for companies
to maintain existing and access
in the small business space. EDC can play a valuable
additional working capital. EDC
role in spurring innovation by helping Canadian
also works closely with its bank
companies access private equity.
partners through its Export
Guarantee Program (EGP) in order
EDC’s Equity program provides growth capital private
to bring greater financing capacity equity investments both directly and through Canadian
and foreign equity funds to enhance the growth of
to the market. The EGP facilitates
small and medium Canadian enterprises (SMEs),
a broad range of small business
particularly those which involve exporting, international
financing needs, including general
expansion and/or developing international affiliations.
working capital, preshipment
financing, equipment financing,
and financing for CDIA.
Through the EGP, the corporation enhances credit capacity for small businesses and
provides a structure that encourages the private sector to use this capacity, by EDC often
taking a larger share of the risk and a lessthanproportional share of the return.
Beyond responding to the need for financial intermediation, EDC complements the work
being done by the TCS and other partners to address the network and information
challenges that currently exist for small businesses. The corporation has selectively
engaged in matchmaking activities, which bring together Canadian companies (many of
them small businesses) and potential foreign buyers. In addition, EDC disseminates
information on a wide range of topics related to international trade through its
20132017 CORPORATE PLAN 31
publications, website and through our Account Managers and Underwriters responsible
for serving Canadian small businesses.
Looking ahead, the corporation is exploring how it can further refine the current approach
such that EDC optimizes its impact on this segment. The objective is twofold: broaden
our offtheshelf offering to this segment at large in a cost efficient manner, notably by
leveraging technology, while providing more customized solutions to highpotential
As we implement this approach, we will also look at innovative ways to stretch our
capacity in favour of small business exporters. We will for instance, consider ways to
leverage the value of their Intellectual Property in order to optimize their access to
capital. If necessary, EDC will also participate in small business transactions without the
private sector in higher risk scenarios, and will continue to offer its solutions to small
business exporters until they are able to access capital from private financial institutions.
In support of these objectives, EDC will further stratify its approach to the small business
segment. First, in order to help those companies who either require a “lower touch” or
who are more reactive to export opportunities, the corporation will be making
investments in its online capabilities in order to develop a more relevant and effective
platform for serving its customers. This will be of particular benefit in the credit
insurance space where many customers are seeking greater flexibility for selfservice and
EDC is also making significant technological investments so that we can broaden our
service offering to a larger segment of the small business population in an efficient
manner, allowing us to focus our customized services on highgrowth small businesses
which need our expertise.
At all times, the corporation will continue to work closely with its partners so that
Canadian companies are effectively able to leverage the breadth of Canada‟s international
trade expertise. An important element of this stratified approach will be the corporation‟s
ability to connect Canadian companies to those players best suited to respond to their
needs. In this regard, the corporation‟s protocol with the BDC and its role as a member of
the Government of Canada‟s international trade portfolio (along with DFAIT and CCC)
will be important drivers of success.
Financial Intermediation within the Basel III Framework
As noted in the Planning Environment, EDC is currently exploring how it can refine its
financing solutions within the new Basel III framework, focusing on areas in which it can
deliver the greatest value for Canadian exporters, through or alongside their private
As higher capital requirements make it more expensive for banks to provide direct
lending, borrowers are expected to have greater difficulty accessing financing. EDC is
32 EXPORT DEVELOPMENT CANADA
reviewing how it could help address this challenge by providing financing to Canadian
exporters and foreign buyers either directly or on a colend basis with privatesector
financial partners. Similarly, EDC is exploring ways to make its guarantees more
affordable for Canadian companies.
As banks seek to find lending partners to form bank syndicates or club deals for longer
tenor financings, EDC is increasingly approached to participate in transactions,
particularly as a potential replacement for banks exiting facilities at time of renewal. In
situations where the risks are considered to be manageable and where benefits to Canada
are generated, EDC will participate in such transactions on a casebycase basis.
Delivering Value through Technology Integration
As the planning environment evolves, it is critical that EDC maintain its productivity and
resiliency in the face of uncertainty in order to meet the needs of its customers and
facilitate trade. A large part of this productivity and resiliency comes from leveraging
new technologies to enhance its business delivery.
As noted earlier EDC is in the process of modernizing much of its IT infrastructure.
Older legacy systems are being incrementally retired over the course of the planning
period and are being replaced with newer, more adaptable systems and business
processes which are specifically designed to meet the needs of Canadian exporters.
New Business Platforms Supported By Modernized and Flexible Systems
EDC is in the process of replacing the primary systems which support our core
underwriting business in both financing and insurance. This modernization program is
required to upgrade these systems to more flexibly meet customer needs as well as to
enable internal productivity and collaboration. EDC recognizes that the complexity of
this modernization program represents new and additional risks and has established
program governance and oversight appropriate to the scale and risk of this undertaking.
We have created a new group, Business Solutions and Innovation, which brings together
under executive leadership our expertise in technology, business process management,
lean principles and business intelligence. We have also established an independent
Enterprise Portfolio Management Office which reports to the Executive team and will
ensure proper management of a portfolio of interrelated projects being developed in
parallel. The modernization program will have executive sponsorship and oversight, as
well as incremental Board member oversight dedicated to guiding this program.
Developing an Enhanced Web Presence
In today‟s rapidly evolving world of information technology, Canadian companies are
becoming increasingly techsavvy and demand greater access to online resources from
their financial service providers. In response to this demand, EDC‟s external website
20132017 CORPORATE PLAN 33
(EDC.ca) was redesigned in 2011 to offer a more interactive, relevant experience with
more efficient content management. We anticipate continuing to evolve our web based
resources available to customers over the planning period, with a focus on leveraging
online tools to broaden our reach to small business exporters.
In particular, in concert with the modernization of our insurance and financing
underwriting applications, we plan to enhance EDC‟s customer and partner transaction
portal, EDC Direct. Specific objectives include enhancing the level of transacting which
customers can conduct with EDC via accessible web services, increasing reporting to
customers on their business activities with us and better supporting their access to EDC
through mobile devices.
Ensuring Reliable and Accessible Information
Easy access to reliable company data is essential for EDC staff to maintain a high level of
service to our customers. It is critical that EDC‟s company data be well defined and
properly governed while adhering to information security and privacy policies.
Therefore, we are improving our company data management system to reflect current
best practices for enterprise data management. This project entails replacing the system
by which key company data is managed on an enterprisewide basis, as well as enhancing
the governance rules which ensure that the quality of this data is maintained over time.
This investment will improve the customer experience, enable business intelligence
analytics and strengthen risk management within the corporation by ensuring a
comprehensive and consistent enterprisewide picture of our interactions with each
EDC's information systems are secured against rapidly evolving threats that have the
potential to impact the confidentiality, integrity, availability, intended use and value of
the information. To defend against these threats, an IT Security policy and Internet/E
Mail policy are in place, which respond to changes in threat conditions and support the
continuous delivery of services. EDC applies baseline security controls and additional
controls on an ongoing basis as identified and required through regular threat and risk
THE RISK MANAGEMENT DIMENSION
Risk management is at the heart of EDC, as our business activities expose us
to a wide variety of risks. EDC‟s ability to adequately manage these risks is
a key competency within the organization, supported by a strong risk
management culture and effective policies and processes. This has enabled the
corporation to continue deploying its lending and insurance solutions to Canadian
34 EXPORT DEVELOPMENT CANADA
companies throughout the business cycle, and ensured that we can withstand adverse
events and trends, predictable or not.
Enterprise Risk Management
At EDC, we manage risks by seeking to ensure that business activities and transactions
provide an appropriate balance of return for the risks assumed. EDC‟s risk appetite is
collectively managed throughout the organization, through adherence to our Enterprise
Risk Management (ERM) Framework. This framework gives us an overall view of
potential risks EDC faces and forms the foundation for appropriate oversight and
Effective risk management is a key component of maintaining EDC‟s ability to respond
to the needs of Canadian exporters and stretch in higher risk situations. Our risk
governance structure emphasizes and balances strong central oversight and control of risk
with clear accountability for, and ownership of, risk within each business unit. This
structure facilitates the flow of information between the business units, the members of
the Executive Team, who represent each significant businesss unit, the President and
Chief Executive Officer, and the Board of Directors who provides corporate oversight.
In 2012, EDC created an integrated Enterprise Risk Management group under executive
leadership, elevating the critical importance of identifying, understanding, preparing for
and mitigating the multitude of risks to which we, and our business, are exposed. This
includes: credit, market, financial and operational risks.
Also in 2012, an independent external assessment of the current status of EDC‟s ERM
practice determined that EDC has a strong risk culture, in terms of planning, managing
and controlling the market and credit risks faced by our business. However, the
assessment identified that operational risk management, risks that arise from people,
systems and processes, and external events, could be strengthened.
EDC will be proposing enhancements to EDC‟s ERM architecture with the goal of
creating a roadmap on how to fill defined gaps in its current risk management system.
Refinement and ratification of the roadmap will likely take place through the first half of
2013 with implementation to follow in late 2013 or early 2014.
During this process, we anticipate addressing several needs, including clarity around risk
appetite and tolerances, Board oversight and governance, alignment of risk identification
and assessment processes with EDC‟s business units and corporate objectives, and a
centralized and readily accessible register of risks. Through this process, EDC will look
to other financial institutions and industry experts to gain insights from their perspectives
and experiences. In addition, engagement with EDC‟s Board of Directors and internal
education on ERM will continue.
Credit risk is a central component of ERM at EDC. We are exposed to credit risk under
our loans and insurance programs, and our treasury activities. We manage credit risk in
the organization through policy requirements, established authorities and limits,
20132017 CORPORATE PLAN 35
mitigation activities and reporting. Our credit risk policies set out our requirements on
credit granting, concentration, counterparty and country limits, risk rating, exposure
measurement, monitoring and review, portfolio management and risk transfer, as well as
management and Board reporting.
EDC is in the process of implementing a new Credit Risk Rating Engine (CRRE), which
will update existing credit risk rating and assessment tools with a robust credit risk rating,
assessment and workflow solution. The CRRE was developed to update and standardize
EDC‟s risk rating methodologies to align with best industry practices and regulatory
directives, such as Basel III, and help improve the way the corporation makes credit
acceptance decisions for its customers. The CRRE project will improve EDC‟s existing
risk rating methodologies and processes, streamlining data flow to ensure effective and
efficient information is received on a timely basis and giving decisionmakers a better
tool to make informed decisions. EDC is committed to managing and using its capital
efficiently. Through the implementation of the new capital system along with the CRRE
project, we have refined and updated the way we calculate our capital needs. In 2012 we
have in particular increased the precision around our risk parameters thereby giving us
greater visibility on our capital requirements. This has resulted in a reduction of our
capital demand, giving us more capacity to facilitate future business. Additional
information on EDC‟s capital efficiency can be found in Chapter 3.
THE FINANCIAL SUSTAINABILITY DIMENSION
Sound financial management provides the foundation for EDC‟s
deployment of financial services. Through its commitment to financial
sustainability and focus on efficiency, EDC can effectively respond to the
demands of its customers today without compromising its ability to serve Canadian
global businesses in the long term. All initiatives profiled in the Business Strategy must
therefore be evaluated to ensure that they reflect the corporation‟s commitment to fiscal
prudence and the longterm viability of the organization.
The income that we generate is applied directly against Canada‟s fiscal accounts and it
provides us with a stronger capital base and the capacity to offer additional financial
solutions for Canadian exporters.
EDC ensures financial sustainability by focusing on our productivity ratio – the ratio of
administrative expenses to net revenue. By targeting a productivity ratio of 2426, the
corporation commits to spend no more than approximately 25 cents of every dollar
earned on overhead costs. In order to maintain this productivity ratio in the context of low
levels of inflation as well as pursuing new tradecreating initiatives, EDC must achieve
productivity savings every year. This ensures a constant focus on efficiency and
effectiveness throughout EDC‟s operations.
36 EXPORT DEVELOPMENT CANADA
2.6 MEASURING SUCCESS
CREATING BENEFITS FOR CANADA
Every transaction that EDC undertakes is in pursuit of a singular goal: to create
benefits for Canada. EDC's success is a function of its customers' successes and,
through them, of Canada‟s success.
By facilitating the exports and investments of Canadian companies, EDC helps to
grow Canadian businesses, which in turn creates Canadian jobs and contributes to
Canada‟s economic growth – thereby improving Canadians‟ standard of living. Other less
tangible benefits derived from EDC‟s role fall under the objective of enhancing Canada‟s
export capacity. This means helping small companies participate in integrative trade and
using our financial capacity to take on riskier business, often in new emerging markets.
The Canadian Benefits Scorecard for the past three years and forecast for 2012 is below.
Canadian Benefits Scorecard 2009 2010 2011 2012
Total Business Facilitated (B) 82.8 84.6 102.8 96.2
of Exports Facilitated 20.6 19.0 19.0 16.5
SME – Number Served 6,886 6,628 5,872
Business in Emerging Markets (B) 18.7 24.7 31.2 29.6
Contribution to Canada’s GDP (B) 61.0 63.4 70.5
Contribution to Canada’s GDP () 5.0 4.9 5.1
of Jobs Supported 642,465 627,704 707,287
of National Employment 3.8 3.7 4.1
EDC’S SCORECARD FOR 2013
EDC‟s corporate scorecard drives the behaviours of its people and contributes to the
achievement of the strategic objectives laid out in the plan. For 2013, EDC‟s scorecard
will introduce changes which reflect our renewed focus on better serving small business
exporters and will refine how we measure our performance against our fundamental
objective: providing value to our customers and helping Canada succeed in trade.
EDC is not able to forecast certain items due to the unavailability of specific data used to produce certain forecasts
20132017 CORPORATE PLAN 37
Business in Emerging Markets: Using Revenue as a Measure of Value
Encouraging trade and investment in emerging markets has been a priority for EDC for
several years. To provide a more complete picture of the value EDC is delivering to
Canadian companies in emerging markets, in 2013 EDC is introducing revenue as the
base for measuring its activity in emerging markets.
This measure will be calculated using accounting revenue as reported in the income
statement. The revenue from emerging markets used for this measure will represent one
component of total accounting revenue reported in EDC‟s income statement. Although its
calculation will change, the measure will continue to be named “Business in Emerging
Helping Small Business Exporters Compete Internationally
EDC‟s current approach to serving the small business segment has evolved over time.
The corporation is exploring how it can further refine the current approach such that EDC
optimizes its impact on this segment. To ensure we focus on this segment of exporters,
EDC is introducing a related measure. The “Small Business Transactions” measure will
encompass all transactions related to small business exporters, closed over the course of
As well as the new measures detailed above, the following is a description of the
remaining measures included in the 20132017 Corporate Plan and how the corporation is
forecast to perform in 2012 and 2013.
Net Promoter Score: The Net Promoter Score (NPS) is the measure against which EDC
evaluates its success in customer satisfaction and loyalty. NPS measures EDC‟s
reputation and the likelihood that its customers would recommend the corporation to
business colleagues. EDC is forecasting its NPS score will stay within the same range in
2012, maintaining the very high level of customer satisfaction as compared with the
North American average.
Total Business Facilitated: This measure provides an order of magnitude of the business
Canadian companies carry out with the help of EDC‟s solutions. As mentioned in the
Planning Environment, as the Canadian economy continues to recover, more and more
exporters are choosing to selfinsure and are accessing the private sector for financing
and surety solutions.
Business in Emerging Markets (BEM 2012 definition): As noted in the Planning
Environment, as privatesector capacity returns, demand for EDC‟s solutions is expected
to decrease for 2012 and 2013. This decrease also impacts EDC‟s projections for BEM in
the near term.
Canadian Direct Investment Abroad (CDIA) Transactions: Investments in foreign
markets by Canadian companies are an important source of benefits to Canada. The
facilitation of CDIA transactions has been incorporated into EDC‟s Business Strategy
38 EXPORT DEVELOPMENT CANADA
over the past several years and has now become an integral part of the corporation‟s core
Partnership Transactions: EDC‟s ability to effectively serve Canadian companies is
enhanced by partnering with both public and privatesector players. In 2012, the
corporation expanded its definition of partnership transactions to include signed
transactions resulting from referrals from EDC to BDC and from BDC to EDC, thereby
underscoring the importance of the partnership with our sister Crown.
Value for Money (VFM) to Total Cost of Ownership (TCO): While every
organization must determine an optimal level of technology investment based on its
corporate needs, the desired trend is to devote more resources to delivering on VFM
objectives while managing TCO.
Productivity Ratio (PR): EDC's Productivity Ratio captures, in aggregate form, how
well the corporation uses its resources. It is the ratio of administrative expenses to net
revenue, excluding debt relief. As noted in the Financial Sustainability section of the
Business Strategy, EDC operates under the philosophy of ensuring that our productivity
ratio remains between 24 and 26. EDC is forecasting a PR of 23.8 for 2012.
Sometimes extraordinary factors combine to warrant an increase in administrative
expenses. The overlap of significant investments in the corporation‟s technology and
systems on EDC‟s capital and operating expenses is expected to result in a temporary
increase in the PR for 2013.
20132017 CORPORATE PLAN 39
Performance Measures 2011 2012 2012 2013
Actual Plan Forecast Plan
Net Promoter Score 70.0 – 76.0
70.0 – 76.0
71.2 71.7 73.8
Total Business Facilitated (B) 3 – 6
3 – 6
Business in Emerging Markets –
Until 2012 (B)
31.2 4 – 8 29.6
Business in Emerging Markets – N/A 36
424 2013 target to
2013 and beyond (M) growth
on basis of new
3 – 6 1 – 4
4 – 8 3 – 6
VFM to TCO Ratio
37:63 35:65 35:65 35:65
22.8 2426 23.8 2426
Productivity Ratio ()
645 917 1,030 835
Net Income (M)
Employee Measures Rank same as Rank same as
Employee Retention ()
New Measures for 2013
This measure is currently under development and will be tracked beginning
Small Business Transactions in 2013. Baseline results for 2012 and target for 2013 will be determined
according to the final definitions.
In 2013 the definition of Business in Emerging Market will be modified. It will now be based on Accounting Revenue as reported in our
Income Statement, and no longer on the volume of business done by our customers. Revenue represents what companies are willing to pay for
the services EDC provides and is therefore a better proxy of the value these services represent for them. A new target will be set at the beginning
of 2013 to reflect this change in definition.
40 EXPORT DEVELOPMENT CANADA
CHAPTER 3: EDC’S FINANCIAL PLAN
As noted earlier, EDC‟s focus on financial sustainability will continue to be a priority for
the corporation. This involves earning a return sufficient to pay the bills and build capital
to support more business, controlling administrative expenses, and minimizing losses.
Under normal operating conditions, we expect to earn net income in the range of 600 to
800 million annually, operating on a capital base of approximately 11 billion.
Fluctuations in the fair value of longterm debt and derivatives, claimsrelated expenses
and provision for credit losses could cause net income to fall outside this range.
In the Financial Plan, we will first present the key business assumptions which were used
to derive EDC‟s projected financial results, followed by a discussion of our projected
operating expenses and planned capital expenditures. Projected financial statements and a
discussion of our capital management and the statutory limits by which we must manage
our organization are also included.
20132017 CORPORATE PLAN 41
3.1 KEY BUSINESS ASSUMPTIONS
A series of key assumptions, including those with respect to business facilitated, risk
profile of business facilitated, foreign exchange and interest rates, all of which have an
impact on the corporation‟s business activity and financial performance, drive the
financial plan. Using these assumptions, which are developed in line with our business
strategy and economic outlook, EDC develops projected financial statements for all years
throughout the planning period, including a forecast to the end of the current fiscal year.
We discuss the assumptions in the following pages. As is the case with any assumption,
each is subject to volatility which is currently further amplified by the twotrack economy
discussed in Chapter 1. Also, any changes to EDC‟s business strategy or to the
underlying assumptions may materially affect the projections over the planning period.
The Financing business facilitated in 2012 has increased to 15.4 billion compared to last
year‟s Corporate Plan mainly due to growth in the extractive sector, particularly with key
borrowers in Latin America and due to strong results in the domestic financing program
much of which is also tied to the extractive sector.
The 2012 Corporate Plan assumed that the domestic powers would end in March 2012;
however, the government subsequently extended these powers to March 2013. Generally
speaking, the challenges experienced in the European banking sector have contributed to
the domestic demand by Canadian exporters for financing in the extractive sector.
Forecast business facilitated in respect of our insurance offerings is lower than shown in
the 2012 Plan across all insurance programs. There are market considerations that explain
this decline such as greater liquidity in the Canadian market which has meant that banks
can manage their counterparties within their own limits therefore requiring less capacity
from EDC. In addition, surety companies are no longer seeking reinsurance from EDC to
the same extent as during the crisis period.
Also contributing to the reduction in forecast business facilitated for our insurance
programs is a decline in business with several customers as well as some structural
changes to our financial institutions insurance program which has impacted the type of
business that we facilitate.
We are currently projecting core financing activity to decrease by 9 to 12.7 billion in
2013 mainly due to unusually strong demand in the project financing space in 2012 that
is not projected to recur to the same extent in 2013. In addition, the plan assumes that
42 EXPORT DEVELOPMENT CANADA
EDC‟s domestic powers will end after the first quarter of 2013. As commodity prices
retreat from their high, we expect this to result in less demand for corporate loans.
The level of export business facilitated by our core insurance programs is expected to
decrease by a further 2.7 billion to 77.5 billion in 2013.
The financial crisis and recession of 200809 caused a widespread freezeup of liquidity
that saw the world‟s financial institutions retreat from risk en masse. The phenomenon
was global, and it extended to Canada. At the time, the higher risk and lower available
credit brought a flood of new requests to EDC. Our credit insurance requests were up
almost overnight by about 70 and financing requests were up by about 20. Our
market share peaked during the crisis.
Just as demand for our financing and insurance solutions grew substantially in the wake
of the credit crisis, as lending conditions continue to ease and the economy continues to
recover, we are expecting more and more exporters to access credit from the private
sector and more companies to choose to selfinsure, returning our market share to pre
RISK PROFILE OF BUSINESS FACILITATED
Generally speaking, EDC assumes more risk than a typical financial institution this
increased risk appetite is mandate driven. We take on larger single counterparty
exposures and larger concentration exposures by sector, most notably in the
transportation and extractive sectors which lead Canadian exports, than other institutions.
We take on this exposure while maintaining limits based on best practice and benchmarks
which incorporate our unique nature as an Export Credit Agency.
Risk Profile of Financing Portfolio
The risk profile of the Financing portfolio is one way the corporation can track its risk
appetite. The risk profile is also one of the key drivers of both loan provision for credit
losses and capital demand for credit risk.
Table 1 provides the projected risk profile for new loan signings for the remainder of
2012 and throughout the planning period.
20132017 CORPORATE PLAN 43
Table 1: Risk Categories for New Loan Signings (20112017)
(Based on value of signings) Inv. Grade Below Inv.
Actual 2011 53 47
2012 Corporate Plan 45 55
2012 Forecast 71 29
2013 Corporate Plan 62 38
2014 Projected 58 42
2015 Projected 55 45
2016 Projected 51 49
2017 Projected 50 50
If we exclude project finance, pull deals and transactions greater
than 100 million, the proportion of investment grade deals drops
The proportion of investment grade signings forecast for 2012 (71) is significantly
higher than the 2012 Corporate Plan. This is not a reflection of EDC taking on less risk in
the below investment grade space. These results are driven by several large unanticipated
investment grade deals, which have impacted the overall risk mix for new signings in the
portfolio including, but not limited to, important pull transactions and deals in the project
finance space. EDC is currently filling a gap in the investment grade market where
European lenders have retrenched, and also with respect to revolvers (facilities which
may or may not be drawn) where banks are reducing their appetite in anticipation of new,
higher capital charges for these types of facilities.
Although this increase in dollar volume of investment grade signings naturally causes a
temporary spike in the ratio mentioned above, EDC continues to facilitate a large number
of higher risk, lower dollar value loan transactions. Based on number of transactions,
more than 80 of new signings in 2012 are below investment grade loans.
Risk Profile of Insurance Portfolio
The risk profile of EDC‟s credit insurance and financial institutions insurance portfolios
is assessed on a basis similar to that used for the Financing program with one of several
risk ratings (low, moderate, medium, high, priority or critical) assigned to each buyer.
EDC assesses the risk profile of our contract insurance and bonding (CIB) and political
risk insurance (PRI) portfolios using various risk rating methodologies that are then
translated into similar rating scales as those used for our Financing program risk
44 EXPORT DEVELOPMENT CANADA
EDC‟s Financial Plan uses a simple yeartodate average as the U.S. dollar foreign
exchange rate assumption for the remainder of the year and all subsequent years. This
removes the volatility associated with yearly dollar fluctuations and ensures more easily
comparable projections. The rate used in this plan, as represented by the average rate for
the period January 2012 through June 2012 is U.S. 1.00.
As the majority of EDC‟s business transactions are denominated in U.S. dollars,
fluctuations in the CanadaU.S. exchange rate have a direct impact on EDC‟s bottom line
as well as on its capital position. As discussed in Section 3.5, we have changed our
Capital Adequacy Policy to help protect EDC‟s capital position against foreignexchange
There is also the indirect impact on EDC that occurs via our customers, the Canadian
exporters. Since at least 70 of Canada‟s exports are priced in U.S. dollars, Canadian
companies are highly exposed to fluctuations in the CanadaU.S. exchange rate. For a
Canadian company that receives U.S. dollar revenues for its exports, appreciation of the
Canadian dollar causes revenues to fall (when converted back to Canadian dollars). So
even if there is no change in the physical volume of shipments, the stronger Canadian
dollar automatically translates into lower export receipts in Canadian dollar terms.
Since 2007, the Canadian dollar has fluctuated between U.S. 0.78 and U.S. 1.09. The
main reason for the volatility is that the Canadian dollar is often referred to as a
“commodity currency”, because its value moves when oil and other nonenergy
commodity prices move. The Canadian dollar also responds to swings in interest rate
spreads and in U.S. dollar movements against other currencies.
INTEREST RATES AND YIELDS
This forecast assumes that as growth resumes, the U.S. Federal Reserve will reverse the
extraordinary monetary stimulus currently in place and interest rates will gradually return
to normal levels.
3.2 ADMINISTRATIVE EXPENSES PRODUCTIVITY
The Corporation continues to exercise additional prudence in managing its operational
costs which is depicted through our administrative expense projections for 2013 and
beyond. Items of significance are as follows:
1. We are targeting administrative expenses of 330 million for 2013 in line with
our current forecast for 2012, as we continue our strong focus on cost
containment. We are committed to holding flat or reducing discretionary expenses
20132017 CORPORATE PLAN 45
such as travel and external business development. As highlighted in Chapter 2,
EDC‟s people are one of our key strengths and also the driver of our largest costs
– human resources. Retaining this talent pool is of utmost importance for the
ongoing success of the organization in meeting its mandate so we do anticipate
normal salary increases as we expect to maintain our existing staff complement.
We are projecting a flat overall head count throughout the planning period.
2. The administrative expenses projections include a significant amount related to
accounting pension expense in each year. The pension expense is an actuarially
determined amount and is difficult to predict, as it is determined using a discount
rate which is dependent on yearend market data. The discount rate used for each
year of the plan aligns with the EDC Economics‟ outlook on the interest rate
environment. Included in the administrative expense projections are substantial
pension cost reductions over the planning period as a result of the projected
increasing discount rate.
Changes in the actuarial assumptions associated with our pension liability can cause
considerable variations in our administrative expenses between years. The introduction of
a defined contribution plan for new employees in 2012 will reduce future pension
funding volatility while maintaining an attractive and competitive total compensation
offering for employees.
EDC has committed to targeting a Productivity Ratio (PR) of 2426 throughout the
planning period. This is a challenging undertaking, which will be especially difficult
given inflationary pressures as well as the three tradecreating initiatives. While our
administrative expenses increase with inflation, our revenue streams do not benefit from
rising inflation – our loan revenue is linked to interest spreads. We will need to leverage
productivity gains achieved through our investments in people, process improvements
and technology to offset these pressures. By focusing on the productivity ratio rather than
solely on expenses, it allows us some degree of flexibility to increase costs, where
appropriate and/or when required provided there is a commensurate increase in value
delivered to our customers as reflected by revenue. Managing the PR is key to ensuring
EDC‟s financial sustainability.
As previously mentioned, our pension costs can fluctuate greatly from year to year based
on changes in assumptions used to value our pension obligation. To provide greater
perspective, Table 2 provides both a historical view and a projected view of EDC's PR.
The graph also depicts the PR with normalized pension costs which generally falls within
our targeted range throughout the planning period. This graph clearly demonstrates that
the increase in PR as a result of the increasing pension expense is temporary and, based
on our plan assumptions, should return to a more normal level by 2016.
46 EXPORT DEVELOPMENT CANADA
Table 2: Historical and Projected Productivity Ratio (20072017)
Historical and projected
Productivity Ratio (normalized
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
3.3 PLANNED CAPITAL EXPENDITURES
Table 3: Projected Capital Expenditures (20112017)
2011 2012 2012 2013 2014 2015 2016 2017
(in millions of Canadian dollars) Actual Plan Fcst Plan Proj Proj Proj Proj
Head Office and Facilities 43.9 5.3 3.7 4.3 3.0 1.2 2.1 0.8
Information Technology 20.2 17.6 17.6 22.5 27.1 25.0 19.5 15.4
Total Capital Expenditures 64.1 22.9 21.3 26.8 30.1 26.2 21.6 16.2
Capital expenditures for 2013 2015 are projected to be higher than the 2012 Forecast,
primarily as a result of the modernization of our legacy systems. There will continue to
be a significant draw on capital, internal resources and operating costs over the planning
period, as we redesign and rebuild our business platforms while continuing to maintain
There is a governance and oversight structure in place, appropriate to the scale and risk of
each undertaking, to manage technology capital requirements in the most effective way
over the planning period. Approval of specific technology projects is provided by the
Board of Directors or management, depending on project costs.
20132017 CORPORATE PLAN 47
3.4 FINANCIAL RESULTS
STATEMENT OF COMPREHENSIVE INCOME
Table 4: Projected Condensed Consolidated Statement of Comprehensive Income (20112017)
for the year ended December 31 2011 2012 2012 2013 2014 2015 2016 2017
(in millions of Canadian dollars) Actual Corp Plan Fcst Plan Proj Proj Proj Proj
Financing and investment revenue
Loan 1 ,009 986 1 ,104 1 ,108 1 ,237 1,628 1 ,984 2,472
Finance lease 7 6 6 5 5 4 2 –
Operating lease 21 15 20 60 64 59 55 54
Debt relief 4 1 – – – – – –
Marketable securities 46 47 41 46 59 89 109 121
Investments 19 19 34 22 28 35 41 47
Total financing and investment revenue 1 ,106 1,074 1 ,205 1 ,241 1 ,393 1 ,815 2 ,191 2 ,694
Interest expense 99 103 145 145 268 802 1 ,087 1 ,551
Leasing and financing related expenses 32 21 38 46 43 38 37 29
Net Financing and Investment Income 975 950 1,022 1 ,050 1 ,082 975 1,067 1,114
Loan Guarantee Fees 32 34 39 32 34 37 38 40
Insurance premiums and guarantee fees 238 251 233 227 222 234 246 257
Reinsurance assumed 13 6 9 6 6 6 6 6
Reinsurance ceded (1 7) (20) (2 1) (1 8) (1 8) (1 9) (20) (20)
Net Insurance Premiums and Guarantee Fees 234 237 221 215 210 221 232 243
Other Income (Expenses) 60 (3 0) (33) (25) (25) (26) (2 2) (2 2)
Administrative Expenses 284 303 329 330 330 329 326 327
Income before Provision and ClaimsRelated Expenses 1 ,017 888 920 942 971 878 989 1,048
Provision for (Reversal of) Credit Losses 125 (125) (136) 47 198 280 351 398
ClaimsRelated Expenses 247 96 26 60 69 103 111 109
Net Income 645 917 1 ,030 835 704 495 527 541
Other Comprehensive Income – – – – 11 2 2 2
Comprehensive Income 645 917 1,030 835 715 497 529 543
Productivity Ratio 22.8 25.5 23.8 25.9 25.4 27.2 24.8 23.8
Investments (formerly called equity revenue) was reclassified from Other Income (Expenses).
2012 Forecast versus 2012 Corporate Plan
We are forecasting a net income of 1,030 million for 2012, an increase of 113 million
over the 2012 Corporate Plan. Items of note regarding this forecast are as follows:
The forecast reversal of provision for credit losses of 136 million is in line with the
provision reversal projected in the 2012 Corporate Plan. However, there are several
components within the provision reversal which have changed significantly,
o A decline in the collateral values used in the calculations of the allowance
on our secured aerospace portfolio, resulting in a 48 million increase in
provision for credit losses.
o An increase in provision of 71 million mainly due to the impact of
downward credit migration for three obligors within the mining, telecom
and light manufacturing sectors, in excess of that forecasted in the 2012
48 EXPORT DEVELOPMENT CANADA
o At the time the 2012 Corporate Plan was prepared, a provision release of
approximately 100 million was anticipated upon the updating of the
probability of default rates, and there was no quantifiable impact for the
update of loss given default rates. However, the actual impact of updating
these two variables was a release of provision of 219 million.
Net disbursements are forecast to be 2.5 billion higher than was projected in the
2012 Corporate Plan, resulting in increases in loan revenue and interest expense; and
Pension costs (included within administrative expenses) increased 31 million as a
result of changes in actuarial assumptions (lower discount rate, lower expected return
on assets and change in mortality rates) associated with the pension liability. The
remaining administrative expenses are forecasted to be below Plan.
2013 Corporate Plan versus 2012 Forecast
The planned net income for 2013 is 835 million, which represents a decrease of 195
million from 2012 mainly due to a release of provision in 2012 resulting from the update
of independent variables discussed above that is not expected to recur in 2013.
2014 to 2017
As noted in the planning environment section in Chapter 1, we expect the economy to
recover and settle into a steadier growth path after a period of continued volatility in the
shortterm. As the economy begins to settle, we are projecting that interest rates will rise
throughout the period from 2014 to 2017; thereby significantly increasing both projected
loan revenue and interest expense. Although the individual components are increasing,
the rising interest rates have very little impact on net financing and investment income
because a large proportion of our book is match funded. As a result, our net financing and
investment income is impacted mainly by changes in spreads.
Included in the administrative expense projections are substantial pension cost reductions
over the planning period as a result of a projected increase in the pension accounting
discount rate from 4.5 in 2012 to 6 by 2017. These increasing rates align with the
EDC Economics‟ projected outlook on the interest rate environment. If this increase in
rates does not materialize, projected administrative expenses in each year would be
higher than currently projected in the plan.
Due to the volatility and difficulty in estimating fair value gains or losses on longterm
debt, investments and related derivative instruments, no forecast for these items is
included in the Corporate Plan financial results. To provide perspective on the potential
magnitude of these items, we have reviewed the period from 2008 to 2011 to determine
the actual fair value gains or losses recorded in each of these periods – these amounts
varied from an accounting gain of 255 million to an accounting loss of 179 million.
20132017 CORPORATE PLAN 49
STATEMENT OF FINANCIAL POSITION
Table 5: Projected Condensed Consolidated Statement of Financial Position (20112017)
as at December 31 2011 2012 2012 2013 2014 2015 2016 2017
(in millions of Canadian dollars) Actual Corp Plan Fcst Plan Proj Proj Proj Proj
Cash 90 89 154 154 154 154 154 154
At fair value through profit or loss 3 ,720 3 ,054 3 ,606 4,109 4,109 4 ,109 4 ,109 4,109
At amortized cost 76 73 76 76 76 76 76 76
Derivative instruments 1,541 2,082 1 ,497 1,497 1,497 1 ,497 1,497 1,497
Loans receivable 2 8,680 2 7,170 30,983 31,733 33,260 34,979 3 9,014 44,271
Allowance for losses on loans (1,680) (1,253) (1 ,441) (1 ,364) (1 ,464) (1 ,550) (1 ,712) (1 ,901)
Investments at fair value through profit or loss 385 503 450 500 537 563 576 579
Equipment available for lease 55 53 548 517 488 462 436 413
Net investment in aircraft under finance leases 92 78 81 70 58 46 15 –
Recoverable insurance claims 44 218 82 80 89 76 69 79
Reinsurers' share of policy and claims liabilities 129 142 90 101 99 107 118 128
Other assets 174 141 205 201 197 192 208 217
Property, plant and equipment 74 74 68 60 59 56 51 51
Intangible assets 40 41 39 39 42 46 47 43
Building under finance lease 176 162 169 162 155 148 141 134
Total Assets 3 3,596 32,627 36,607 37,935 3 9,356 40,961 44,799 49,850
Liabilities and Equity
Accounts payable and other credits 159 138 132 128 123 119 114 109
Designated at fair value through profit or loss 21,505 2 1,312 24,432 2 5,679 2 8,104 2 9,650 3 3,423 3 8,374
At amortized cost 2 ,065 994 2 ,031 2,031 1,026 1 ,026 1 ,006 1,006
Derivative instruments 178 130 181 181 181 181 181 181
Obligation under finance lease 177 166 173 169 166 162 158 154
Retirement benefit obligations 74 84 86 307 297 292 313 334
Allowance for losses on loan commitments 41 100 66 63 88 134 176 230
Policy and claims liabilities 875 787 548 565 552 581 620 657
Loan guarantees 266 169 172 170 166 161 151 146
25,340 23,880 2 7,821 2 9,293 3 0,703 32,306 3 6,142 4 1,191
Share capital 1,333 1,333 1,333 1 ,333 1,333 1 ,333 1 ,333 1 ,333
Retained earnings 6 ,923 7,414 7,453 7,295 7 ,295 7,295 7,295 7 ,295
Accumulated other comprehensive income – – – 14 25 27 29 31
8 ,256 8 ,747 8,786 8,642 8,653 8 ,655 8 ,657 8,659
Total Liabilities and Equity 33,596 32,627 36,607 37,935 3 9,356 4 0,961 44,799 49,850
Certain amounts in the 2012 Corporate Plan Statement of Financial Position have been reclassified to conform with the presentation of EDC’s
2011 actual financial results. Changes in classification include:
Pension obligation (84 million) reclassified from Accounts payable and other credits to Retirement benefit obligations
Deferred insurance premiums (106 million) included in Policy and claims liabilities.
2012 Forecast versus 2012 Corporate Plan
Total assets for 2012 are forecast at 36.6 billion, an increase of 4.0 billion over the
2012 Corporate Plan mainly due to forecast growth in loans receivable. Two key items
have contributed to this growth:
50 EXPORT DEVELOPMENT CANADA
The 2011 actual yearend balance was 2.2 billion higher than anticipated at the time
of preparing the 2012 Corporate Plan due to a higher level of loan signings in 2011
than forecast and a weaker Canadian dollar, and
Net loan disbursements in the current forecast for 2012 are 2.5 billion higher than
projected in the 2012 Corporate Plan due to an expected higher level of loan signings
in 2012 as well as greater utilization of revolvers.
While the above items have led to increases in loans receivable, the growth has been
tempered by the return of aircraft by an impaired obligor under bankruptcy protection to
EDC. As part of their restructuring, they returned to EDC aircraft for which EDC
provided secured financing. As a result, the corresponding loans will be removed from
our books and our equipment available for lease portfolio will increase.
Loans payable for 2012 are forecast to be 4.2 billion higher than the 2012 Corporate
Plan amount of 22.3 billion mainly due to the impact of the increased loan signings
discussed above and increased liquidity needs. Our borrowing requirements are driven
largely by the activity within our loan portfolio.
2013 Corporate Plan versus 2012 Forecast
Loans receivable are planned to be 0.7 billion higher than the 2012 forecast of 31.0
billion as result of net disbursements in 2013. Loans payable are growing in tandem with
the projected increase in loans receivable.
The retirement benefit obligation is projected to increase by 221 million in 2013 mainly
because of a change in the pension accounting standard whereby actuarial gains and
losses can no longer be deferred and amortized. Therefore, 259 million of unamortized
actuarial losses must be added to the outstanding liability in 2013. The amended standard
is further discussed in the following section.
20132017 CORPORATE PLAN 51
STATEMENT OF CHANGES IN EQUITY
Table 6: Projected Condensed Consolidated Statement of Changes in Equity (20112017)
for the year ended December 31 2011 2012 2012 2013 2014 2015 2016 2017
(in millions of Canadian dollars) Actual Plan Fcst Plan Proj Proj Proj Proj
Share Capital 1,333 1 ,333 1,333 1,333 1 ,333 1,333 1 ,333 1,333
Balance beginning of year 6,628 6 ,960 6 ,923 7,453 7 ,295 7,295 7 ,295 7,295
Transitional adjustment on application of IAS 19 – – – (2 54) – – – –
Net income 645 917 1,030 835 704 495 527 541
Dividend paid (3 50) (463) (500) (739) (7 04) (495) (527) (5 41)
Balance end of year 6,923 7,414 7 ,453 7,295 7,295 7 ,295 7,295 7 ,295
Accumulated Other Comprehensive Income
Balance beginning of year – – – – 14 25 27 29
Transitional adjustment on application of IAS 19 – – – 14 – – – –
Other comprehesive income – – – – 11 2 2 2
Balance end of year – – – 14 25 27 29 31
Retained earnings and accumulated other comprehensive income 6,923 7,414 7 ,453 7 ,309 7,320 7,322 7 ,324 7,326
Total Equity at End of Year 8,256 8 ,747 8 ,786 8,642 8 ,653 8 ,655 8 ,657 8 ,659
Table reflects payment of eligible dividend as per the policy outlined in section 3.5 on Capital without consideration of other factors.
Effective, January 1, 2013, retirement benefit obligations are reported using the amended
International Accounting Standards (IAS) 19 Employee Benefits standard, which
removes the option to defer and amortize gains and losses, requires that the impact of re
measuring pension assets and liabilities be recorded in other comprehensive income and
enhances disclosure requirements. At transition, we will need to restate the 2012
comparative results. So as not to include two versions of the 2012 results in the Plan, we
have included all transitional adjustments related to this standard in the 2013 results, as
A 254 million reduction in opening retained earnings. This results from the inclusion
of the December 31, 2011 unamortized actuarial losses totalling 259 million in the
retirement benefit obligation. In addition, the 2012 pension expense is expected to be
lower by 5 million in the restated 2012 comparatives. The main factors causing this
reduction in pension expense are:
o the elimination of the corridor approach which reduces pension expense
by 16 million by removing the portion of the expense related to the
amortization of actuarial losses; and
o the requirement to set the expected return on assets to the accounting
discount rate which leads to an increase in the restated pension expense of
A 14 million increase in opening accumulated other comprehensive income (OCI).
Under the amended standard, all actuarial gains and losses must be immediately
recognized in OCI. This means that for any instance in which the results differ from
52 EXPORT DEVELOPMENT CANADA
actuarial assumptions the variance will be recognized in other comprehensive income
STATEMENT OF CASH FLOWS
Table 7: Projected Condensed Consolidated Statement of Cash Flows (20112017)
for the year ended December 31 2011 2012 2012 2013 2014 2015 2016 2017
(in millions of Canadian dollars) Actual Plan Fcst Plan Proj Proj Proj Proj
Cash Flows from (used in) Operating Activities
Comprehensive income 645 917 1 ,030 835 715 497 529 543
Adjustments to determine net cash from (used in)
Provision for (reversal of) credit losses 125 (1 25) (1 36) 47 198 280 351 398
Actuarial change in the net allowance for claims
179 29 (276) 9 (6 ) 24 27 25
Depreciation and amortization 48 16 50 67 65 64 63 54
Changes in operating assets and liabilities
Change in derivative instruments receivable 174 – 42 – – – – –
Change in derivative instruments payable (1 38) – 23 – – – – –
Other 175 271 699 (87) (5 7) 36 67 107
Loan receivable disbursements (10,393) (1 0,011) (12,673) (12,143) (1 2,586) (14,182) (15,815) (16,561)
Loan receivable repayments 8 ,735 9 ,324 9 ,462 1 1,325 1 1,041 12,336 1 1,631 1 1,149
Net cash from (used in) operating activities (450) 421 (1,779) 53 (630) (9 45) (3,147) (4 ,285)
Cash Flows from (used in) Investing Activities
Investments disbursements (106) (140) (1 14) (109) (109) (109) (109) (110)
Investments receipts 29 68 32 59 72 83 96 107
Finance lease repayments 9 10 10 11 12 12 10 2
Net (purchases)/sales/maturities of marketable
securities at fair value through profit or loss 59 – 114 (503) – – – –
Net (purchases)/sales/maturities of marketable
securities at amortized cost (55) – – – – – – –
Distribution from investment in joint ventures 54 5 2 – – – – –
Net cash from (used in) investing activities (1 0) (57) 44 (542) (25) (1 4) (3) (1 )
Cash Flows from (used in) Financing Activities
Issue of longterm loans payable designated at fair
value through profit or loss 5,708 6 ,418 8 ,656 6 ,476 4 ,603 8 ,418 1 1,497 8 ,935
Repayment of longterm loans payable designated
at fair value through profit or loss (6,135) (5 ,142) (6,782) (5,787) (3,564) (7 ,734) (8,283) (5 ,230)
Repayment of longterm loans payable at amortized
cost – (9 74) – – (1,006) – (2 0) –
Net change in shortterm loans payable designated
at fair value through profit or loss 881 (2 03) 424 539 1,326 770 483 1,122
Change in derivative instruments receivable 296 – 13 – – – – –
Change in derivative instruments payable 25 – (12) – – – – –
Dividend paid (3 50) (463) (500) (7 39) (704) (4 95) (527) (541)
Net cash from (used in) financing activities 425 (364) 1,799 489 655 959 3,150 4,286
Effect of exchange rate changes on cash 1 – – – – – – –
Net increase (decrease) in cash (3 4) – 64 – – – – –
Beginning of year 124 89 90 154 154 154 154 154
End of year 90 89 154 154 154 154 154 154
20132017 CORPORATE PLAN 53
ACCOUNTING POLICIES AND FUTURE ACCOUNTING
The accounting policies used in the preparation of this Financial Plan are in accordance
with International Financial Reporting Standards (IFRS). The earnings of the corporation
and its subsidiary are not subject to the requirements of the Income Tax Act.
The International Accounting Standards Board (IASB) has a number of projects
underway, some of which will affect the standards relevant to EDC, such as IAS 19
We are also closely monitoring the progress on IASB projects related to the impairment
of financial assets, insurance contracts and leases. Revisions made to these standards
could potentially have a significant impact on EDC‟s financial statements in future
periods. There are a number of other amendments to standards that will come into effect
throughout the planning period but we are expecting the impact to be limited to additional
disclosure requirements with no impact on the financial results.
3.5 CAPITAL MANAGEMENT
CAPITAL ADEQUACY POLICY (CAP)
EDC efficiently manages its capital, through its Boardapproved CAP, in order to be able
to meet the demands of its current and future business while maintaining its ability to
withstand future, unpredictable risks. At its foundation, the CAP has a guiding
philosophy and set of principles that balance the requirement to fulfill our public policy
mandate while remaining financially selfsustaining. The CAP also contemplates the
need to maintain sufficient capital to protect the corporation from risk uncertainties.
A key principle of our CAP is the establishment of a target solvency standard for EDC
that determines the level of capital that is required to cover its exposures even in
exceptional circumstances. As a corporation, we target the maintenance of a AA solvency
rating, a solvency level consistent with the level which leading financial institutions
target. Maintaining a AA target solvency rating ensures that our capital position is strong
enough to enable us to remain a selfsustaining Crown corporation and to contribute, in a
positive manner, to Canada‟s bottom line. Our capital position is also subject to downside
vulnerabilities, and a AA target provides an appropriate level of resilience to the risks we
take on in order to fulfill our mandate.
Both our demand for capital and our supply of capital are calculated using methodologies
that are generally consistent with the Basel II framework. The introduction of Basel III
54 EXPORT DEVELOPMENT CANADA
will not affect our capital framework but is consistent with our objective of maintaining
strong levels of capital relative to our risk assets. EDC defines capital supply as the sum
of total equity and allowances, as determined in accordance with IFRS. Under the capital
management framework, we determine whether we have adequate capital by comparing
our supply of capital to our demand for capital. EDC quantifies demand for capital
arising from credit, market, operational and business risk using rigorous models and
EDC measures and reports changes to capital supply, capital demand and its implied
solvency rating to executive management monthly. We report these capital measures to
the Board quarterly together with forward looking stress tests, which model the potential
impact on capital of portfolio migration and other key risk events.
EDC‟s capital is first and foremost available to provide capacity to Canadian exporters
and investors for the benefit of Canada and it is our intention to fully utilize our capital in
support of our mandate. We have refined and updated the way we calculate our capital
needs through the implementation of our new capital system. In 2012 we increased the
precision around our risk parameters which has given us greater visibility on our capital
requirements. This exercise has resulted in a reduction in EDC‟s capital demand which
leads to increased capacity for EDC to facilitate exports going forward.
The CAP also recognizes that there may be situations in which EDC‟s Board of Directors
may authorize a dividend payment from surplus capital. Therefore, the CAP includes a
potential eligible dividend methodology to guide the Board of Directors in determining
any dividend amount.
Our objective for managing capital over the planning period is to grow the corporation‟s
capital base to a level that will enable EDC to sustain both our existing base of business
and potential new opportunities for Canadian exporters. In addition, EDC must remain
resilient to potential portfolio stresses in the current global environment, “black swans”
have the potential to occur more frequently. Our capital position should be strong enough
to absorb these potential market shocks.
EDC is currently forecasting a capital surplus of 3.5 billion in 2012 compared to a
capital surplus of 2.0 billion in 2011. The yearly increase in the capital surplus from
2011 to 2012 is due to the elimination of strategic risk capital, the appreciation of the
Canadian dollar relative to the U.S. dollar, along with the introduction of new estimates
of probability of default and loss given default within the loans portfolio.
As was noted in the 20122016 Corporate Plan, in light of a new capital system
implementation in 2011, EDC embarked on a review of the CAP. It was determined that
three areas in the CAP relating to the eligible dividend methodology needed to be
20132017 CORPORATE PLAN 55
Protecting EDC‟s capital position against foreignexchange risk: the potential eligible
dividend methodology has added the ability for EDC to withstand a oneyear fluctuation
within its solvency target.
In addition, management and the Board will take into account an analysis on two
other areas of consideration in assessing dividend eligibility:
o Allocated Demand: This represents capital earmarked to cover the demand
for a specific purpose that is outside the normal demand growth built into
the Corporate Plan.
o Stress Tests: A set of standard stress tests will be performed according to
current market practice.
Since the introduction of the CAP in 2006, EDC's demand for capital has included a
demand component for Strategic Risk Capital (SRC). SRC was designated for supporting
higher risk business opportunities of strategic importance to EDC‟s customers and their
industries, but which are outside of EDC‟s typical operational norms. The inclusion of an
allocated demand consideration in the dividend eligibility methodology captures EDC's
estimated need for capital related to strategic initiatives. For this reason the SRC capital
demand component has been eliminated from the CAP.
We calculate the eligible dividend in the first quarter of the following year once we have
finalized our yearend results. For yearend 2012 this is currently estimated to be 739
million, assuming 2012 net income reaches 1,030 million as forecast.
After consultation with the Minister of International Trade and the Minister of Finance,
management provides the Board of Directors with the results of the dividend eligibility
calculation, along with the two considerations for review together with a recommendation
as to the amount of the dividend to pay, if any. The Board makes the final determination
of whether EDC will pay a dividend. Provided the Minister of International Trade
supports the approved dividend, we normally pay the dividend prior to March 31 of the
In 2012, EDC paid out a dividend of 500 million. Since 2002, EDC has paid a total of
1,545 million in dividends to the Government of Canada.
3.6 STATUTORY LIMITS
EDC is subject to two limits imposed by the Export Development Act:
1. A limit on our contingent liability arrangements which is currently 45.0 billion
(„contingent liability limit‟) and
2. A limit on our borrowings („Loans Payable Limit‟).
Our projected position against each of these statutory limits at yearend throughout the
planning period is provided in the table below.
56 EXPORT DEVELOPMENT CANADA
Table 8: Statutory Limits (20112017)
2011 2012 2012 2013 2014 2015 2016 2017
(in millions of Canadian dollars) Actual Plan Fcst Plan Proj Proj Proj Proj
Contingent Liability Limit 4 5,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000
Credit insurance 7,909 1 0,604 1 2,291 1 1,490 1 1,152 1 1,926 1 2,691 13,407
Financial institutions insurance 6 ,939 4,788 2,017 2 ,119 2,057 2,199 2,341 2,472
Contract insurance and bonding 9 ,367 9 ,972 8,386 8,423 8,892 8,650 8,803 8 ,984
Political risk insurance 1,795 2,072 1,773 1,314 1 ,287 1 ,399 1,555 1,555
Loan guarantees 2 ,740 2,095 2,107 2,230 2 ,400 2,568 2 ,607 2,800
Position against limit 2 8,750 2 9,531 2 6,574 25,576 25,788 26,742 27,997 2 9,218
Percent used 64 66 59 57 57 59 62 65
Loans Payable Limit 122,715 124,395 123,840 131,790 129,420 129,420 129,420 129,420
Position against limit 23,570 22,306 26,463 27,710 29,130 30,676 34,429 39,380
Percent used 19 18 21 21 23 24 27 30
3.7 ASSET/LIABILITY MANAGEMENT AND BORROWING
In accordance with the Export Development Act (ED Act) and the Financial
Administration Act (FAA), EDC raises its funding requirements in international and
domestic capital markets through borrowings by any appropriate means, including
issuing bonds, commercial paper or other debt instruments. EDC‟s objective is to borrow
at an attractive cost of funds relative to the market while prudently managing interest
rate, foreign exchange and credit risks arising from its Treasury operations.
ASSET LIABILITY AND MARKET RISK MANAGEMENT
EDC manages its exposures to interest rate, foreign exchange and credit risks arising
from its Treasury operations utilizing a policy framework, including risk and liquidity
limits, which is consistent with industry practices and approved by the corporation‟s
Board of Directors. The policy framework is compliant with the Minister of Finance
Financial Risk Management Guidelines for Crown Corporations (FRMG).
Market risk is the potential for loss as a result of movements in interest and foreign
exchange rates. EDC is exposed to movements in interest rates and the impact they have
on the corporation‟s book of assets, as well as its liability positions. EDC is exposed to
foreign exchange risk as it reports its financial results and maintains its capital position in
Canadian dollars whereas its asset book and much of its liabilities are in U.S. dollars or
Through its policies and procedures, EDC ensures that market risks are identified,
measured, managed and regularly reported to management and the Board of Directors.
EDC‟s Market Risk Management Policy sets out interest rate and foreign exchange risk
20132017 CORPORATE PLAN 57
limits, and exposure to market risk arising from any mismatch between assets and
liabilities is managed within these limits. EDC believes that prudent funding and risk
management at the portfolio level, rather than the matching of individual assets with
specific liabilities, provides management with the flexibility to achieve attractive funding
costs while managing market risks within EDC‟s policy requirements. EDC manages its
exposure through its funding strategy and using derivatives to hedge exposures.
Credit risk from Treasury activities arises from two sources: investments and derivatives.
In each case, there is a risk that the counterparty will not repay in accordance with
contractual terms. The Market Risk Management Policy establishes minimum
counterparty credit rating requirements and maximum exposure limits for the
management of credit risk. In addition to limits, EDC utilizes other credit mitigation
techniques to assist in credit exposure management. Currently, EDC has a collateral
program in which 19 of Treasury‟s swap counterparties participate; EDC‟s counterparties
pledge sovereign debt from any of Canada, the United States, Great Britain, France
and/or Germany (held by EDC‟s collateral agent) which typically offset a major portion
of EDC‟s credit exposure.
EDC continually monitors its exposure to movements in interest rates and foreign
exchange rates as well as its counterparty credit exposures. Positions against policy limits
are reported on a monthly basis and any policy breach is immediately reported directly to
the Chair of the Board of Directors. EDC‟s Asset Liability Committee meets, at least
quarterly, to review current and future compliance with the corporation‟s Market Risk
Management policies. EDC‟s market risk positions are reported quarterly to the Risk
Management Committee of the Board of Directors.
Statutory Borrowing Authorities
The ED Act permits the corporation to borrow and have outstanding loans payable up to
a maximum of 15 times the aggregate of its current paid in capital and retained earnings
which are determined in accordance with the corporation‟s audited financial statements
for the previous year. Based on the 2012 forecast, the maximum limit for 2013 is
estimated at 131.8 billion, compared to forecasted loans payable at the end of 2013 of
In determining the amount of capital markets borrowing authority which is sought from
the Minister of Finance, a margin of prudence is added to facilitate intrayear
management of the debt program. For the money market borrowing authority, a buffer is
required to ensure that EDC can respond to any rapid escalation in the drawdown of
revolvers (approximately U.S. 10.4 billion undrawn forecast at December 31, 2013),
meet its current obligations and maintain sufficient money market borrowing capacity to
provide liquidity. The temporary expansion of EDC‟s mandate to include facilitation of
58 EXPORT DEVELOPMENT CANADA
domestic business as well as the uncertainty sweeping capital markets in Europe
heightens the importance of this cushion.
On an annual basis, EDC obtains approval from the Minister of Finance for the amounts
it plans to borrow in the capital and money markets. EDC follows the Minister of
Finance‟s guidelines in all of its borrowing and capital market activities. Board
resolutions are put in place, annually, which permit EDC to operate within the authorities
prescribed by the Minister.
As a backstop to the borrowing strategy, EDC maintains a liquid investment portfolio
that allows the corporation to bridge unfavourable market conditions and respond to rapid
changes in demand for asset funding. Under the corporation‟s Liquidity Policy, EDC and
the Department of Finance have a formalized process in which EDC could access the
Consolidated Revenue Fund if required. The authority to access this Fund is granted in
the shortterm and longterm borrowing approvals and is available should market
conditions warrant. These borrowings would be subject to the normal operating limits
already in effect for the year.
The primary objective of EDC‟s funding programs is to ensure that commitments are
met. This is done within the parameters of the corporation‟s Liquidity Policy and Risk
EDC issues commercial paper (CP) to meet EDC‟s operating requirements and issues
capital market debt to refinance maturing debt and to fund EDC‟s asset portfolio. This
philosophy may change during periods of market stress.
EDC can customize debt products to meet investors‟ preferences. Investor sentiment is
balanced by EDC‟s internal asset/liability management, cash requirements and business
development driven market priorities. The timing, currency and maturity of issues are
influenced by market demand. EDC offers a wide range of debt products with various
Derivatives are used as part of the asset/liability management process and to reduce fixed
or floating rate funding levels. EDC‟s internal policies do not allow for the issuance of
any financial instrument, derivative, or structured note whose value and hence financial
risk cannot be calculated, monitored and managed internally on a timely basis.
The execution of the borrowing and liquidity strategies are monitored on a daily basis by
the EDC Treasury team‟s management. Monthly reports are provided to senior
management and quarterly reports are provided to the Audit Committee of the Board.
A critical part of EDC‟s borrowing approach is high execution standards. Broad support
from underwriters ensures solid primary placement within a diversified investor base.
EDC‟s Treasury team seeks to price debt issues fairly in the primary market and closely
20132017 CORPORATE PLAN 59
monitors secondary market performance in an effort to ensure debt service costs are
SOURCES OF FINANCING
Money Markets Borrowing Program
The money markets borrowing program, with a current authorized limit of U.S. 8.0
billion, consists of various international CP programs designed to ensure that sufficient
funds are available to meet EDC‟s daily and other shortterm financial commitments.
Daily cash requirements are managed proactively to reduce the cost of funds and rollover
risk. It is typical for the size of the CP programs to increase as they fund EDC‟s daily
activity and to decrease as the proceeds from a capital markets borrowing are absorbed.
The amount of CP outstanding is typically managed within a range. A minimum
threshold is set due to the need to maintain a market presence while the upper end of the
range is governed by the corporation‟s Liquidity Policy.
The Liquidity Policy requires EDC to maintain sources of liquidity in amounts equal to or
greater than a forecast of three months of anticipated cash requirements. Sources of
liquidity are unused CP capacity and the liquidity portfolio of investments. This level of
liquidity is maintained to safeguard the corporation against cash flow interruptions in the
capital markets and unexpected cash flow demands. Unexpected cash flow demands most
often result from EDC‟s undrawn revolver commitments, estimated at U.S. 10.4 billion
at December 31, 2013, which have a typical notification period of two days. A portion of
undrawn revolver requirements is included in the calculation of anticipated cash
EDC‟s business development effort can impact the liquidity and funding strategies and
require a rapid response. Specifically, total revolver commitments have increased by
approximately 175 or U.S. 8.0 billion over the last five years and are forecast to
increase by a further U.S. 2.5 billion in 2013, adding to shortterm financing
requirements. With the addition of the domestic mandate, domestic revolvers have
rapidly grown as a proportion of total revolvers, comprising about onethird of such
commitments in 2012.
EDC is therefore seeking approval from the Minister of Finance to increase the short
term borrowing program limit to U.S. 12.0 billion. The limit will enable EDC to meet
the forecast peak in CP outstandings of U.S. 7.5 billion. It will also ensure that the
unused CP capacity combined with the investment portfolio is adequate to cover the three
month anticipated cash requirements as defined under the Liquidity Policy. EDC is
seeking approval to approach the Minister for additional CP capacity of U.S. 2.0 billion
should business requirements warrant.
60 EXPORT DEVELOPMENT CANADA
Capital Markets Borrowing Program
The capital markets borrowing program diversifies its funding sources by offering debt
securities to investors around the world, both through global offerings and by way of
borrowings designed to meet the needs of specific markets or types of investors. Typical
longterm instruments include, but are not limited to: benchmark global bonds, plain
vanilla bonds, structured and mediumterm notes.
In order to smooth its maturity profile, respond to investor demand and to access local
currency funding in priority emerging markets, EDC may issue structured and medium
term notes. Structured notes can be issued in a variety of maturities including some which
are longerdated (investor preference can extend out to 30year maturities) with callable
features. Longer dated callable instruments include an option for EDC to terminate the
instrument at certain points up to and including at the 10 year anniversary of the
instrument and are swapped into floating or fixed rate obligations. The mix of funding is
guided by numerous factors including relative cost, market conditions and the profile of
the loan assets portfolio.
Funding raised in any given year is used for EDC‟s general operations, including loan
disbursements, refinancing of maturing debt and prefunding for future lending activities.
The corporation determines its funding requirements from a baseline amount as
established in the Corporate Plan adding a buffer for increased needs due to stressed
market conditions or additional new business demand.
The Corporate Plan projects a baseline borrowing requirement of U.S. 6.5 billion which
is driven by capital markets refinancing requirements. Borrowing requirements resulting
from net loan disbursements are expected to decrease as EDC‟s product mix changes and
the continued global slowdown affects economic growth. EDC is requesting a capital
markets borrowing limit of U.S. 9.0 billion from the Minister of Finance based on the
Corporate Plan calculations plus a margin for prudence reflecting potential increases to
longterm financing requirements.
DRIVERS OF CAPITAL MARKETS BORROWING
In 2013, capital markets refinancing needs are projected to be approximately U.S. 5.5
Treasury considers opportunities to buy back its debt in order to smooth its maturity
profile or to take advantage of refinancing opportunities at lower costs. Buybacks are also
considered part of our investor relations strategy, offering assistance to investors that are
20132017 CORPORATE PLAN 61
unable to find a reasonable market for our nonbenchmark maturities. EDC has
maintained this program for several years which gives investors confidence that they will
have no concerns when making adjustments to their portfolios.
Potential Increases to Cash Requirements
The actual amount borrowed for the year may differ from the Corporate Plan due to the
uncertainty with respect to economic conditions and the timing of cash transactions. Any
changes to the planned debt program will be communicated to market participants on an
as needed basis.
Increased Lending Activity (New Business)
The level of business facilitated by EDC is dependent upon the import spending of other
countries. If a global recovery outpaces EDC‟s forecasts and/or world liquidity tightens
further, capital markets funding requirements could increase. As part of the Corporate
Plan process, a sensitivity analysis was prepared. Based on the analysis, an additional
U.S. 1.0 billion of financing business facilitated could increase borrowing requirements
by approximately U.S. 310 million.
Reduce CP Outstanding
As market conditions change and investor demand permits, additional capital markets
funding may be accessed. If the amount of capital markets funding exceeds that which is
planned, EDC may reduce the amount of CP outstanding to a level that is closer to the
lower end of its targeted range.
PreFunding of 2014 Business Facilitated
Uncertainty plaguing capital markets due to Eurozone insolvencies and U.S. deficit and
debt levels, as well as associated credit rating agency actions, have resulted in sharp
increases in funding costs for certain sovereigns and somewhat lacklustre reception to
some capital market issues. Continued uncertainty could result in market stress with
attendant increased funding levels and/or reduced access to capital in 2014. As a result,
EDC may seek to prefund some of its 2014 capital markets financing requirements in an
effort to minimize debt service costs and lockin longer term funding.
62 EXPORT DEVELOPMENT CANADA
Table 9: Capital Markets Borrowing Requirement Projection for 2013
(in millions of U.S. dollars) Plan
Decrease/(Increase) in Cash from Operations (53)
Net increase (decrease) in cash
Other cash requirements 39
Eligible Dividend 735
Activity from Operations 721
Decrease/(Increase) in ShortTerm Loans Payables (536)
Net (purchase) sales of heldfortrading marketable securities 500
Refinancing of Debt Maturities 5,493
Callable Debt 13
Activity from Liabilities 5,719
Forecast Borrowing Requirements for Corporate Plan 6,440
Potential Increases to Cash Requirements
Changes to assumption on Lending Activity 310
Changes to assumption on Revolving Facilities 1,000
Reduction of Outstanding Commercial Paper 500
Prefunding of 2014 Volumes/Maturities 500
Potential Additional Borrowing Requirements 8,750
Table 7 Statement of Cash Flows Issue of longterm loans payable in Canadian
dollars (FX rate 1.0057) is 6,476.
From time to time, as a result of unforeseen financial market conditions or unexpected
variances in approved corporate activity, there may be a need to amend the terms and
conditions as approved by the Minister of Finance, following the approval of the
Corporate Plan. In such instances, EDC will continue to seek the approval of the Minister
of Finance and report on any changes in the subsequent Corporate Plan.
Under extraordinary circumstances where the corporation could not access funds to meet
its obligations, the corporation could request a loan from the Minister of Finance to
enable it to continue to meet its payment obligations going forward.
20132017 CORPORATE PLAN 63
Table 10: Projected Borrowing Plans (2011 – 2017)
2011 2012 2012 2013 2014 2015 2016 2017
(in millions of Canadian dollars) Actual Plan Fcst Plan Proj Proj Proj Proj
Capital Markets Borrowing Limit
(U.S. 9.0 billion) 9,148 8,767 9,051
Position 5,708 6,418 8,656 6,476 4,603 8,418 11,497 8,935
Percent used 62 73 96
Short Term Borrowing Limit
(U.S. 8.0 billion) 8,131 7,793 8,045
Position 3,567 2,922 5,306 5,809 6,533 6,979 7,595 8,379
Percent used 44 37 66
The limits are set each year in consultation with the Department of Finance, and accordingly, there are no limits set for
2013 to 2017.
64 EXPORT DEVELOPMENT CANADA
3.8 PROGRESSION OF EDC PLANS FOR 2011 AND 2012
Table 11: Progression of 20112012 Plans
2011 2011 2011 2012 2012
(in millions of Canadian dollars) Plan Fcst Actual Plan Fcst
Financing and investments business facilitated 10,200 1 1,175 14,627 1 1,000 1 5,575
Insurance business facilitated 76,000 85,200 8 8,192 88,100 8 0,400
Condensed Consolidated Statement of Comprehensive Income
Financing and investment revenue
Loan 1,067 1,005 1 ,009 986 1,104
Finance lease 7 7 7 6 6
Operating lease 32 21 21 15 20
Debt relief 6 3 4 1 –
Marketable securities 57 47 46 47 41
Investments 18 19 19 19 34
1,187 1 ,102 1,106 1,074 1 ,205
Interest expense 168 110 99 103 145
Leasing and financing related expenses 60 36 32 21 38
Net Financing and Investment Income 959 956 975 950 1,022
Loan Guarantee Fees 19 34 32 34 39
Net Insurance Premiums and Guarantee Fees 229 230 234 237 221
Other Income (Expenses) (30) 67 60 (3 0) (3 3)
Administrative Expenses 300 300 284 303 329
877 987 1 ,017 888 920
Provision for (reversal of) Credit Losses 130 41 125 (1 25) (1 36)
ClaimsRelated Expenses 136 264 247 96 26
Net Income 611 682 645 917 1,030
Other Comprehensive Income – – – – –
Comprehensive Income 611 682 645 917 1 ,030
Condensed Consolidated Statement of Financial Position
Cash and marketable securities 3 ,369 3 ,216 3 ,886 3 ,216 3,836
Financing and leasing assets 28,748 25,825 2 7,708 2 6,713 30,790
Other assets 2 ,433 2,709 2,002 2,698 1,981
Total Assets 34,550 3 1,750 3 3,596 32,627 36,607
Loans payable 24,625 21,850 23,570 22,306 26,463
Other liabilities 1,570 1,607 1,770 1 ,574 1 ,358
Equity 8 ,355 8 ,293 8,256 8,747 8,786
Total Liabilities and Equity 34,550 31,750 33,596 3 2,627 36,607
Position Against Statutory Limits
Contingent Liability Limit 4 5,000 45,000 45,000 4 5,000 45,000
Position against limit 27,888 3 0,044 2 8,750 2 9,531 2 6,574
Percent used 62 67 64 66 59
Loans Payable Limit 1 21,275 119,415 122,715 124,395 123,840
Position against limit 24,625 21,850 23,570 22,306 26,463
Percent used 20 18 19 18 21
Note: To conform with the current presentation, Building Under Finance Lease has been reclassified to Financing and
Leasing Assets, and Investment in Joint Ventures has been reclassified to Other Assets in all results presented.
20132017 CORPORATE PLAN 65
3.9 OPERATION OF SUBSIDIARY
EDC incorporated Exinvest Inc. in 1995 and acquired shares of Exinvest Inc. in
accordance with the applicable provisions of the Financial Administration Act and the
Export Development Act. The authorized objectives of Exinvest Inc. are to establish
and/or invest in corporations, partnerships, joint ventures or any other form of
unincorporated bodies (financing vehicles), all of which will provide financial assistance
for, or to the benefit of, sales or leases of goods, or the provision of services, or any
Exinvest‟s investment in joint ventures represents its ownership in two entities which
were established for the purpose of financing the sale of regional jet aircraft. In 2011, the
related aircraft loans were fully repaid and the majority of the proceeds were returned to
the shareholders. Over the planning period we intend to dissolve the two entities.
During 2012 and over the planning period, no new financing vehicles and no potential
business transactions are anticipated. The following tables set out the consolidated
financial results of Exinvest Inc. for the planning period. No Capital Expenditure Plan is
provided, as Exinvest Inc. does not anticipate entering into any such expenditure over the
Table 12: Exinvest Inc. Projected Statement of Income (20112017)
for the year ended December 31
2011 2012 2012 2013 2014 2015 2016 2017
(in millions of Canadian dollars) Actual Plan Fcst Plan Proj Proj Proj Proj
Investment – – 1 1 1 1 1 1
Income from investment in joint ventures 1 – – – – – – –
1 – 1 1 1 1 1 1
Reversal of impairment loss on investment
in joint ventures (1 1) – – – – – – –
Administrative and other – – – – – – – –
(1 1) – – – – – – –
Net Income 12 – 1 1 1 1 1 1
Retained earnings at beginning of year 20 33 32 33 34 35 36 37
Retained earnings at end of year 32 33 33 34 35 36 37 38
66 EXPORT DEVELOPMENT CANADA
Table 13: Exinvest Inc. Projected Statement of Financial Position (20112017)
as at December 31
2011 2012 2012 2013 2014 2015 2016 2017
(in millions of Canadian dollars) Actual Plan Fcst Plan Proj Proj Proj Proj
Cash and marketable securities 76 79 77 80 81 82 83 84
Investment in joint ventures 2 – 2 – – – – –
Total Assets 78 79 79 80 81 82 83 84
Liabilities and Equity
Share capital 46 46 46 46 46 46 46 46
Retained earnings 32 33 33 34 35 36 37 38
Total Liabilities and Equity 78 79 79 80 81 82 83 84
20132017 CORPORATE PLAN 67
68 EXPORT DEVELOPMENT CANADA
EXPORT DEVELOPMENT CANADA
Export Development Canada (EDC) is a Crown corporation which provides trade finance and
risk management services to facilitate the trade and investment activities of Canadian companies.
EDC revised its vision statement in 2011 to spell out clearly for its stakeholders, starting with its
employees, the kind of organization it wants to become. The new vision orients both strategy and
everyday conduct. Being the most knowledgeable, the most connected and the most committed
partner in trade for Canada is a call to action, and a benchmark to which all employees can
This reference guide is intended to complement the information provided in the Business
Strategy by providing additional background, including information relating to EDC‟s:
Mandate and Operating Principles, as prescribed under the Export Development
Act and the new strategic framework outlined in the Corporate Plan 20132017.
Legislative Powers and Obligations, as prescribed under the Export Development
Act and the Financial Administration Act.
Managerial and Organizational Structure, the executive team manages the
operations of EDC within the strategic goals and objectives as laid out in the
Board and Committee Structure, the Board plays a pivotal role in setting the
strategic direction of EDC and in ensuring that public policy objectives are met by
EDC in the most effective manner. The Board also reviews the development and
refinement of the various financial services, approves certain loans, insurance and
guarantee contracts, authorizes funding transactions, and monitors EDC‟s
Products and Services, the solutions which are structured to facilitate the needs of
Canadian exporters in an ever changing global trade environment.
This information has been provided in accordance with the Treasury Board of Canada‟s
Guidelines for the Preparation of Corporate Plans.
20132017 CORPORATE PLAN 69
MANDATE AND OPERATING PRINCIPLES
Mandate EDC’s mandate was temporarily expanded for a twoyear period through the 2009 Budget
Implementation Act. In 2012, the Government of Canada extended until March 2013 the
temporary powers granted to EDC in 2009. The government also announced in Budget 2011 a
review of the regulatory framework that governs EDC's role in the domestic financing market.
Subsection 10(1) of the Export Development Act was amended to read:
“The Corporation is established for the purposes of supporting and developing, directly or
(a) domestic trade and Canadian capacity to engage in that trade and to respond to domestic
business opportunities; and
(b) Canada’s export trade and Canadian capacity to engage in that trade and to respond to
international business opportunities.”
In 2012, EDC adopted a new framework to guide its decisionmaking on key corporate initiatives.
It will allow EDC to be more responsive and resilient, while focusing all its efforts on improving
Canada’s trade and investment performance.
EDC’s goal is to create benefits for Canada. Our ability to fulfill this goal requires us to deploy our
resources: our people and their unique talents, our financial capital and our technology. To deploy
these resources in an optimal manner, we must take into account the four dimensions present in
everything we do: business development, operations, risk management and financial
sustainability. For the organization to be effective and able to quickly adapt to changes requires
that all four dimensions remain well balanced in all our key decisions. Two overarching principles
guide our decisions: our PartnershipPreferred Philosophy and our commitment to Corporate
70 EXPORT DEVELOPMENT CANADA
MANDATE AND OPERATING PRINCIPLES
Statement of Priorities and As a Crown corporation, EDC’s Business Strategy must align with and reflect the priorities
Accountabilities (SPA) outlined by the Minister of International Trade in the Statement of Priorities and Accountabilities
In the SPA, the Minister encourages EDC to deploy its full range of financial services and market
knowledge to continue to provide critical support to Canadian exporters and investors,
complementing the Government’s efforts to expand market access and implement international
business development strategies, with particular emphasis on emerging markets.
As the Government of Canada moves forward in the Global Commerce Strategy Refresh (GCS),
the Minister asks that EDC to participate on the implementation of this Strategy in close
collaboration with business and trade partners across the government community.
In addition, the Minister provides guidance to EDC in a number of areas. The SPA directs EDC to:
report on the level of access by small business to its suite of financing solutions, and
how this is communicated to these clients as well as how it works with the Business
Development Bank (BDC) and the private banks to coordinate financing for small
ensure the Corporation is fully deploying its capital to support exporters;
work with its counterparts at the Canadian Commercial Corporation (CCC), the
Department of Finance and DFAIT officials in exploring the transition of CCC’s trade
financing activities in Cuba to EDC to better align portfolio responsibilities and allow for
the Cuba exposure to be managed as part of EDC’s broad trade finance portfolio;
develop a bilateral MOU between DFAIT and EDC that seeks to clarify responsibilities
and deepen existing collaboration in order to optimize service delivery to Canadian
companies and avoid duplication and minimize any potential confusion for clients with
respect to these services;
undertake all necessary due diligence and consultations with government regarding the
possible creation of a standalone office in India, ensure that requisite controls are in
place to ensure this model is collaborative, effectively serves the needs of Canadian
exporters, and does not compete with the Canadian financial sector and work closely
with department officials to address any outstanding issues prior to seeking government
deepen partnerships with private insurers such as the Credit Insurance Advisory Group,
and continue exploring innovative ways to leverage private sector capacity;
align its practices to ensure its compliance with the revised OECD Common Approaches,
proactively expand credit support for eligible sectors under the CCSU, and fully
participate in the OECD Export Credit Group and Participants to the Arrangement on
level playing field issues, in particular sectorspecific financial terms and conditions; and
Following the spirit and intent of the Deficit Reduction Action Plan, continue efforts to
identify efficiencies in the 20132017 planning period.
20132017 CORPORATE PLAN 71
LEGISLATIVE POWERS AND OBLIGATIONS
Legislative Powers The Export Development Act (The Act) and subsequent regulations, as amended from time to
time, provide the legislative basis for EDC’s activities. Section 10 of the Act outlines the powers
that EDC may exercise in pursuit of its mandate. Transactions supported under Section 10 are
considered to be Corporate Account transactions as they are funded and supported by the
corporation’s own balance sheet and income generating capacity, and not through annual
In addition to its Corporate Account activities, under Section 23 of the Act, EDC may be
authorized by the Minister for International Trade, with the concurrence of the Minister of
Finance to undertake certain transactions of a financial nature to support and develop Canada’s
export trade. While EDC strives to find ways to structure transactions under its Corporate
Account, there are a number of factors which might lead EDC to refer a transaction to Canada
Account. For instance, the transaction could exceed EDC’s exposure guideline for a particular
country or involve markets or borrowers representing exceptionally high risks, amounts or
financing terms in excess of what EDC would normally undertake. The monies required to
discharge Canada Account transactions are made available from the Consolidated Revenue
The Act limits Canada Account’s outstanding commitments to borrowers and liabilities under
contracts of insurance and other agreements to an aggregate of 20.0 billion. As of March 31,
2012 such commitments and liabilities totaled 3.5 billion.
The Regulations under the Act related to domestic financing and insurance were suspended for
a twoyear period as part of the 2009 Budget Implementation Act. In 2012, the Government of
Canada extended until March 2013 the temporary powers granted to EDC in 2009. The
government also announced in Budget 2011 a review of the regulatory framework that governs
EDC's role in the domestic financing market. This suspension enables EDC to provide such
support under its traditional export mandate without having to seek Ministerial authorization.
72 EXPORT DEVELOPMENT CANADA
LEGISLATIVE POWERS AND OBLIGATIONS
Legislative Section 25 of the Act requires that the Minister of International Trade, in consultation with the
Obligations Minister of Finance, initiate an independent review of the provisions and operation of the Act
every 10 years. The 2008 review concluded in July 2010 with the passage of the Budget
Implementation Act, which amends the Export Development Act to enable the corporation to
open offices in foreign markets, and clarifies existing asset management powers for EDC’s
corporate account and the Canada Account.
To respond to private insurers about EDC’s role in the shortterm credit insurance market that
arose in the review process, the government has established a credit insurance advisory group
with a view to promoting partnership and reinsurance support for both domestic and shortterm
export credit insurance.
The outstanding issue stemming from the review is EDC’s request to amend its domestic
financing regulations in order to better respond to the needs of Canadian global businesses.
EDC is currently engaging with the government on whether regulatory amendments should be
made to enable EDC to play a longer term role in providing services to companies engaged in
In addition to the Legislative Review, a special examination is mandated every five years under
the Financial Administration Act (FAA) and a report on the findings must be submitted to the
Board of Directors. The last special examination was conducted in 2008. The report has been
presented to EDC’s Board of Directors, the Minister of International Trade and the President of
the Treasury Board a copy of the report has been posted on EDC’s webpage.
The Act also stipulates that an audit of the design and implementation of EDC’s Environmental
Review Directive (the Environment Audit) must be undertaken by the Office of the Auditor
General (OAG) every five years. The 2008 review was presented to the EDC’s Board of
Directors and was tabled in Parliament in June 2009 a copy of the review is available at
Accountability to The Government of Canada primarily regulates Crown corporations through their enabling
Parliament legislation and through the FAA. EDC is currently listed under Part I of Schedule III to the FAA,
and as such is required to, among other things:
submit an Annual Report, a Corporate Plan and an Operating Budget to the responsible
make public the quarterly financial report within 60 days of quarterend; and
Undergo regular audits by the OAG.
20132017 CORPORATE PLAN 73
MANAGERIAL AND ORGANIZATIONAL STRUCTURE
President and CEO
Internal Audit Enterprise Risk Management
Financing Human Resources and Business Development Insurance
Business Solutions and Corporate Affairs and Secretary
74 EXPORT DEVELOPMENT CANADA
BOARD AND COMMITTEE STRUCTURE
Chair of the Board
Board of Directors
Executive Committee Nominating and Corporate Governance Committee
Handling of urgent matters between Board meetings Appointment process for CEO, Board Chairperson,
Authority to exercise certain Board powers
Board and Committees effectiveness
Audit Committee Human Resources Committee
HR strategic planning
Financial and management control systems
Compensation policy and budgets
Succession planning, including approval of or
recommendations to the Board re certain senior
Approval of certain major expenditures appointments
Ethical compliance, including Compliance Officer President’s objectives, recommendations re
oversight performance, salary and benefits
Internal and external audit matters, including audits Design and compliance of EDC pension plans
of the Directive on the environment, and special
Oversight of pension plan administration
Dividend: review eligibility
Risk Management Committee Business Development Committee
Oversight of management of credit, market and
Input into strategic policy direction, including
other enterprise risks and of overall capital
recommendations to the Board re: Corporate Plan
adequacy relative to EDC’s risk profile and
Corporate Plan Objectives
Oversight of analysis of market conditions, and
Recommendations to the Board re risk management
and capital adequacy policies and strategies
Monitors performance as against business
strategies and policies including review of Canadian
Review of proposed transactions, and policy limit
increases for recommendation to Board
20132017 CORPORATE PLAN 75
EDC’S FINANCING AND INSURANCE SOLUTIONS
Insurance protects policyholder against various types of risks.
Products CUSTOMER Applications
Accounts Receivable Protects policyholders against commercial credit risk such as nonpayment by their buyers,
Insurance whether due to insolvency, default, repudiation of goods or termination of contracts, as well as
against political risks such as difficulty in converting or transferring currency, cancellation of export
or import permits, and warrelated risks. Coverage is available for companies of all sizes and
some products have been streamlined to meet the needs of SMEs.
Export Protect See Online Products and Tools.
Documentary Credits Protects banks in Canada confirming or negotiating irrevocable letters of credit (ILCs) issued by
Insurance foreign banks to exporters of Canadian goods and services. The policy provides insurance against
the risk that the foreign bank may fail to pay the insured bank for payments due to the exporter
under the ILC. This enables the exporter to look to a bank in Canada for payment rather than the
buyer’s bank abroad.
Contract Frustration Tailored coverage used for oneoff goods, services and project contracts.
Political Risk Insurance Protects Canadian companies with investments in foreign countries and/or lenders which finance
investments pursued by Canadian companies abroad. Traditional policies cover investors or
lenders against currency conversion and/or transfer difficulties, expropriation by the host
government, and political violence. Availability of political risk insurance can also allow companies
to leverage additional financing for projects. The political risk insurance program includes the non
honouring of a sovereign payment obligation to a lender; the nonpayment to an investor of an
arbitral award against a sovereign entity; and coverage of the rights associated with mobile
assets. In addition, EDC has made a number of changes to the program to accommodate small
76 EXPORT DEVELOPMENT CANADA
Contract bonds assist Canadian companies to post or secure surety, guaranteeing their bid, performance and certain
other obligations related to an export trade. They are issued in the form of a letter of guarantee by banks or as surety
bonds by licensed sureties.
Products Customer Applications
Performance Security Provides banks with a guarantee against any calls pursuant to the guarantees issued by the
Guarantees bank on an exporter’s behalf and frees up working capital for the exporter.
Performance Security Protects exporters from wrongful calls made on their bank letters of guarantee and is also
Insurance available online under the Wrongful Call Program.
Foreign Exchange Provides a second demand guarantee to the financial institution (FI) for 100 of the
Facility Guarantee collateral provided to the FI with respect to the exporter’s forward contracts facility, in the
event that the exporter does not close the forward contract on the “settlement date”.
Financial Security Provides the bank with a second demand guarantee to secure exporters' obligations in
Guarantee respect of suppliers and offshore working capital facilities.
When an exporter, with existing but limited surety lines, is required to post surety bonds
Surety Risk Sharing
instead of bank letters of guarantee, EDC offers surety capacity in the form of Surety Re
Insurance to licensed sureties to increase capacity to facilitate the issuance of such bonds.
Surety Fronting Available to exporters when financial profiles or volume of business do not meet normal
Services surety underwriting guidelines. Surety bonds are thus issued by licensed sureties with the full
support of EDC. This allows smaller exporters to access a surety market that is not typically
available to them.
20132017 CORPORATE PLAN 77
Enables Canadian companies to provide their customers with flexible, medium or longterm financing. EDC offers a
variety of structures that can be tailored to meet today’s evolving market conditions the world over.
Products Customer Applications
Provides a fast and inexpensive means by which exporters can promote sales via prearranged
Lines of Credit
financing facilities between EDC and foreign banks or corporations. That is, EDC may lend to a
foreign bank for onlending to buyers of Canadian exports, or EDC can establish a line with a
major foreign corporation which is purchasing from one or more Canadian exporters.
Loans between EDC and a buyer/borrower can be arranged for any export transaction. Two
basic types of loans are available:
Buyer Credit involves a financing arrangement between EDC and the buyer (or a separate
borrower on behalf of the buyer) to finance Canadian exports generally related to a specific
Supplier Credit transactions are structured to provide the exporter (supplier) with the ability to
provide its buyer with extended payment terms. EDC can also provide preshipment financing
to exporters, in conjunction with their bank, to finance costs directly related to an export
EDC may also provide financing to Canadian companies to support their export business or
their foreign investments.
Project Finance Provides limited recourse financing to fund the construction of industrial and infrastructure
projects across various sectors in support of Canadian exports to, or Canadian sponsor
investment in, such projects. Project sponsors can additionally benefit from EDC’s considerable
expertise in arranging project finance transactions in cooperation with other lenders.
Guarantees EDC may issue a guarantee to a financial institution to cover loans to foreign borrowers for the
purchase of Canadian exports, or to exporters to provide financing to support their export
business or foreign investments.
Equity and other EDC may provide equity and/or other forms of related investments (including fund investments)
Forms of Related in support of next generation Canadian exporters and to facilitate globalization of existing
Investments Canadian companies. This allows EDC to offer broader support to Canadian firms, leverage
additional sources of financing, foster cooperation among Canadian firms and their partners,
and assist Canadians to compete globally.
78 EXPORT DEVELOPMENT CANADA
ONLINE PRODUCTS AND TOOLS
Provides another channel to inform, contact, transact with and serve Canadian companies.
Products Customer Applications
EXPORT Protect Provides online single transaction insurance coverage on a foreign buyer.
EXPORT Check Provides a credit profile of a foreign buyer and/or a Dun Bradstreet business information
EXPORT Able Helps potential exporters assess their company’s overall readiness to export.
EXPORT Finance Centralizes information about the wide range of solutions for an exporter’s financing needs
Guide based on their location in the transaction cycle
Country Information Provides comprehensive market intelligence on a variety of regions and countries enabling the
user to assess business opportunities outside of Canada.
Online Solutions A diagnostic tool that helps to identify the appropriate EDC product or service based on the
Advisor exporter’s need(s).
Currency Converter Provides conversions into and from a variety of world currencies, for both current day and past
dates (provided by the Bank of Canada).
Provides exporters with webreferrals to government and certain notforprofit providers of
exportrelated information and services.
20132017 CORPORATE PLAN 79
ANNEX II: CANADIAN EXPORT FORECAST BY SECTOR AND
SHARE OF TOTAL
SECTOR MARKET ( GROWTH)
Developed 31.3 7.5 1.7 9.5
Emerging 12.9 3.1 26.5 11.1
Developed 111.4 26.6 5.1 10.9
Emerging 3.5 0.8 18.8 4.6
Developed 20.5 4.9 3.5 10.9
Emerging 6.5 1.6 9.5 14.5
Developed 58.3 13.9 0.8 2.2
Ores and Metals
Emerging 8.1 1.9 0.8 1.3
Developed 5.6 1.3 3.3 5.4
Other Industrial Products
Emerging 0.7 0.2 1.0 11.8
Developed 32.1 7.7 0.8 6.6
Emerging 3.1 0.7 3.5 11.0
Developed 5.7 1.4 6.2 6.1
Emerging 2.9 0.7 5.4 17.4
Developed 8.5 2.0 3.2 7.4
Aircraft and Parts
Emerging 1.7 0.4 21.9 11.8
Developed 11.7 2.8 5.2 2.5
Emerging 2.2 0.5 3.0 4.1
Developed 21.9 5.2 9.8 7.7
Emerging 4.6 1.1 25.9 11.5
Developed 53.2 12.7 14.4 2.2
Emerging 1.3 0.3 4.8 9.0
Developed 7.7 1.8 8.1 6.3
Emerging 0.3 0.1 2.7 8.9
Developed 3.2 0.8 0.1 8.1
Emerging 0.2 0.0 3.9 10.6
TOTAL Merchandise 419 100.0 4.9 6.7
Developed Markets 371 88.5 4.1 6.3
Emerging Markets 48 11.5 10.9 9.6
Source: EDC Economics.2011 is actual data, 2012 and 2013 are forecasted (Fall 2012 GEF)
80 EXPORT DEVELOPMENT CANADA