Post by Trade facilitator on Jan 19, 2021 22:17:48 GMT 1
Risk is one of the hindrances to business success. Ability to reduce or lower risks in any business translate to business success.
So many risks are present in an international trade as import and export. We have these risks to contend with in doing export or import business either we like it or not.
Risk arising out of foreign laws under import and export business at various countries of the world, commercial Risks in import/export business, political Risks involved in international trade, Cargo Risks in international trade, Foreign Exchange Fluctuations Risks in international business, Credit Risks in international trade. We also have policies to contend with in an export and import business.
There are number of what influences pricing of commodities in an export and import business. Therefore exporters need to seek for services of an experienced hand on handling 'international risk associated with export/imports business'.
There are other unspecified risks involved in the trade, but with solution (eg, Risk covered by Marine Insurance).
In knowing many or all the risks involved in import and export business, you also need to study and know how to get export orders. How to settle disputes in export and import transactions, import clearance procedures and formalities. Bank finance to exporters as pre-shipment finance. Pre-shipment bank finance to suppliers for exports through other agencies, conditions to get export loans from banks to sub-suppliers.
POLITICAL RISKS
This is the risk of a political occurrence, wars, social unrest, bankruptcy of state... etc in the buyers country which may affect the interest of the seller, that are economic or human. These type of events can disrupt or cancel trade transactions to the detriment of the seller and thereby generate outstanding invoices. Such risk can apply to private and especially public purchasers. If it occurs however, remedies are very uncertain for the seller and may take a long time to complete.
It is therefore necessary to anticipate this risk and to cover it.
CURRENCY EXCHANGE RISKS
When the currency of the seller and the buyer are different, any change in the exchange rate has negative effects on one of the two actors. If the sale is made with the currency of the buyer, the risk is supported by the seller who can see the benefits of the sale melting due to devaluation of the currency of the customer. The evolution of the exchange rate can have several economic and political backgrounds that are not necessarily predictable.
 The longer is the business case, the greater is the risk.
 If the evolution of the exchange rate is the other way (appreciation of the dollar against the naira in this example), the effect is opposite for the seller who realizes a gain.
 If the sale is made in naira and the dollar depreciates sharply, there is a risk anyway because the buyer may not be able / want to honor its debt due to the loss that is generated for him.
Currency risk must be considered in its entirety. It can be reduced or eliminated through insurance or options on trading currency.
BANK RISK
This is the risk that a bank does not meet its commitments or because it is not impartial (connivance with the buyer), or because it is not solvent.
If this is the case, guarantees obtained from them may not be honored, which can lead to outstanding. Problems are common concerning transactions by cash against documents or letter of credit (without confirming and notifying bank).
DELIVERY RISK
The Incoterm defined during commercial negotiation has a major impact on the responsibility of actors including the seller in the delivery of the goods. It can be brought to bear hazard beyond its control if the transfer of responsibility was poorly negotiated.
This risk must be considered and narrowed by commercial negotiation (obtaining a more advantageous incoterm) or, if this is not possible, by insurance.
CONTRACTUAL RISK
Which law applies to the contract? Is it the law of the country of the seller or the buyer?
If it is the buyer law, the risk to the seller is not having the necessary skills in-house with consequences a commercial contract which includes clauses against him (no liability limit, no limit commitment ... etc..) and, in case of dispute, having to perform an action in the country of the buyer with all the uncertainties that this entails.
So many risks are present in an international trade as import and export. We have these risks to contend with in doing export or import business either we like it or not.
Risk arising out of foreign laws under import and export business at various countries of the world, commercial Risks in import/export business, political Risks involved in international trade, Cargo Risks in international trade, Foreign Exchange Fluctuations Risks in international business, Credit Risks in international trade. We also have policies to contend with in an export and import business.
There are number of what influences pricing of commodities in an export and import business. Therefore exporters need to seek for services of an experienced hand on handling 'international risk associated with export/imports business'.
There are other unspecified risks involved in the trade, but with solution (eg, Risk covered by Marine Insurance).
In knowing many or all the risks involved in import and export business, you also need to study and know how to get export orders. How to settle disputes in export and import transactions, import clearance procedures and formalities. Bank finance to exporters as pre-shipment finance. Pre-shipment bank finance to suppliers for exports through other agencies, conditions to get export loans from banks to sub-suppliers.
POLITICAL RISKS
This is the risk of a political occurrence, wars, social unrest, bankruptcy of state... etc in the buyers country which may affect the interest of the seller, that are economic or human. These type of events can disrupt or cancel trade transactions to the detriment of the seller and thereby generate outstanding invoices. Such risk can apply to private and especially public purchasers. If it occurs however, remedies are very uncertain for the seller and may take a long time to complete.
It is therefore necessary to anticipate this risk and to cover it.
CURRENCY EXCHANGE RISKS
When the currency of the seller and the buyer are different, any change in the exchange rate has negative effects on one of the two actors. If the sale is made with the currency of the buyer, the risk is supported by the seller who can see the benefits of the sale melting due to devaluation of the currency of the customer. The evolution of the exchange rate can have several economic and political backgrounds that are not necessarily predictable.
 The longer is the business case, the greater is the risk.
 If the evolution of the exchange rate is the other way (appreciation of the dollar against the naira in this example), the effect is opposite for the seller who realizes a gain.
 If the sale is made in naira and the dollar depreciates sharply, there is a risk anyway because the buyer may not be able / want to honor its debt due to the loss that is generated for him.
Currency risk must be considered in its entirety. It can be reduced or eliminated through insurance or options on trading currency.
BANK RISK
This is the risk that a bank does not meet its commitments or because it is not impartial (connivance with the buyer), or because it is not solvent.
If this is the case, guarantees obtained from them may not be honored, which can lead to outstanding. Problems are common concerning transactions by cash against documents or letter of credit (without confirming and notifying bank).
DELIVERY RISK
The Incoterm defined during commercial negotiation has a major impact on the responsibility of actors including the seller in the delivery of the goods. It can be brought to bear hazard beyond its control if the transfer of responsibility was poorly negotiated.
This risk must be considered and narrowed by commercial negotiation (obtaining a more advantageous incoterm) or, if this is not possible, by insurance.
CONTRACTUAL RISK
Which law applies to the contract? Is it the law of the country of the seller or the buyer?
If it is the buyer law, the risk to the seller is not having the necessary skills in-house with consequences a commercial contract which includes clauses against him (no liability limit, no limit commitment ... etc..) and, in case of dispute, having to perform an action in the country of the buyer with all the uncertainties that this entails.
