What are the risks involved in International Trade?

   Release date: 27/08/2022     Hits: 3803    Comment: 0    
Note: Political risksPolitical risk arises when countries change their trade policies or impose trade barrier that directly or

Political risks

Political risk arises when countries change their trade policies or impose trade barrier that directly or indirectly affects the ability of two or more parties to carry out their trade.

Commercial risks

Commercial risks usually arise due to a lack of knowledge regarding carrying out trade. Some of the factors that contribute to commercial risk include lack of understanding of foreign markets, the inability of the shipper to come up with a product that suits the requirements of a foreign market, inability to deal with unforeseen situations that may arise while the goods are in transit, etc.

Intransit cargo risks

Most of the goods are shipped by sea. While in transit the goods are prone to risks such as storms, theft, collisions, fire, rough sea, leakage, explosion, containers falling off the carrier etc. To minimise the damage arising out of in-transit cargo risk, apt knowledge of marine insurance is a must.

Credit risks

Credit risk may arise as a result of the inability of the buyer to make the payments on time. At times, circumstances may arise where the buyer may make the payment but the seller may not receive it. Getting credit risk insurance is one way an exporter as well the bank financing the exporter can minimise this risk.

Foreign exchange fluctuations risks

Foreign exchange risk is the risk of fluctuations in currency value. It is typically related to the appreciation of the domestic currency of the concerned country relative to a foreign currency.


 
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