GE 2015 Annual Report Download - page 147

RISK FACTORS
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Funding access/costs - Failure to maintain our credit ratings, or conditions in the financial and credit markets, could
adversely affect our access to capital markets, funding costs and related margins, liquidity and competitive position.
The major debt rating agencies routinely evaluate our debt. This evaluation is based on a number of factors, which include financial
strength as well as transparency with rating agencies and timeliness of financial reporting. As of December 31, 2015, GE and GE
&DSLWDO¶V long-term unsecured debt credit rating from Standard and 3RRU¶V Ratings Service (S&P) was AA+ (the second highest of 22
rating categories) with a negative outlook. The long-term unsecured debt credit rating from 0RRG\¶V Investors Service 0RRG\¶V for GE
and for GE Capital was A1 (the fifth highest of 21 credit ratings), both with stable outlooks. As of December 31, 2015, GE and GE
&DSLWDO¶V short-term credit rating from S&P was A-1+ (the highest rating category of six categories) and from 0RRG\¶V was P-1 (the
highest rating category of four categories). There can be no assurance that we will be able to maintain our credit ratings and failure to
do so could adversely affect our cost of funds and related margins, liquidity, competitive position and access to capital markets. Various
debt and derivative instruments, guarantees and covenants would require posting additional capital or collateral in the event of a ratings
downgrade, which, depending on the extent of the downgrade, could have a material adverse effect on our liquidity and capital position.
Furthermore, to the extent that we rely on the availability of the unsecured debt markets to access funding for term and commercial
paper maturities for 2016 and beyond, external conditions in the financial and credit markets may limit the availability of funding at
particular times or increase the cost of funding, which could affect our overall profitability. Factors that may affect the availability of
funding or cause an increase in our funding costs include decreased capacity and increased competition among commercial paper
issuers, and potential impacts arising in the United States, Europe or China from developments in sovereign debt situations, currency
movements or other potential market disruptions. If GE or GE &DSLWDO¶V cost of funding were to increase, it may adversely affect our
competitive position and result in lower net interest margins, earnings and cash flows as well as lower returns on VKDUHRZQHUV¶ equity
and invested capital.
Social costs - Sustained increases in pension and healthcare benefits costs may reduce our profitability.
Our results of operations may be positively or negatively affected by the amount of income or expense we record for our defined benefit
pension plans. GAAP requires that we calculate income or expense for the plans using actuarial valuations. These valuations reflect
assumptions about financial market and other economic conditions, which may change based on changes in key economic indicators.
The most significant year-end assumptions we use to estimate pension expense for 2016 are the discount rate and the expected long-
term rate of return on the plan assets. In addition, we are required to make an annual measurement of plan assets and liabilities, which
may result in a significant reduction or increase to equity. At the end of 2015, the GE Pension Plan was underfunded, on a GAAP basis,
by $16.9 billion, and the GE Supplementary Pension Plan, an unfunded plan, had a projected benefit obligation of $6.1 billion. Although
GAAP expense and pension funding contributions are not directly related, key economic factors that affect GAAP expense would also
likely affect the amount of cash we would contribute to pension plans as required under the Employee Retirement Income Security Act
(ERISA). Failure to achieve expected returns on plan assets driven by various factors, which could include a continued environment of
low interest rates or sustained market volatility, could also result in an increase to the amount of cash we would be required to
contribute to pension plans. In addition, there may be upward pressure on the cost of providing healthcare benefits to current
employees and retirees. Although we have actively sought to control increases in these costs, there can be no assurance that we will
succeed in limiting cost increases, and continued upward pressure could reduce our profitability. For a discussion regarding how our
financial statements can be affected by our pension and healthcare benefit obligations, see the Other Consolidated Information ±
Postretirement Benefit Plans section and Notes 12 and 27 to the consolidated financial statements. See also the Critical Accounting
Estimates ± Pension Assumptions section for a discussion regarding how our financial statements can be affected by our pension plan
accounting policies.
LEGAL & COMPLIANCE RISKS
Legal and compliance risk relates to risks arising from the government and regulatory environment and action, including resulting from
the Dodd-Frank Wall Street Reform and Consumer Protection Act; and legal proceedings and compliance with integrity policies and
procedures, including those relating to financial reporting, environmental health and safety. Government and regulatory risk includes the
risk that the government or regulatory actions will impose additional cost on us or cause us to have to change our business models or
practices.
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