Risk Management in Export-Import Business
Risk Management in Export-Import Business
Now since the world is all connected and globalization became normal in this century, many investors and traders turn into international trading. International trading opens a very likely chance of benefiting market to do successful business. International trading includes exporting and importing which allows the businessman to connect personally with all the necessary suppliers and manufacturers which will eventually lead to cost effectiveness. However, doing global business overseas has many risks that we need to keep in mind and be aware of. Exchange rates are always in the risk of fluctuating which is clearly a risk that faces importers and
Importers
Importers should keep their goals as a priority which is to postpone paying for the merchandise for as long as they can. Also, managing the cash flow in the period during paying for the merchandise and being paid by the local customers who would buy the imports. They should also do this to reduce the risk of fraud from suppliers or doing business in unfamiliar environment.
Some examples of importing risks are the following:
1. currency risk, 2. non-delivery risk 3. credit risk, 4. transfer risk 5. country risk 6. transport risk
Currency risk is when the local currency used to pay for the merchandise might be higher than the total amount to be calculated and used to enter the contract because of the fast changes of the currency market price. Exchange rates between most currencies have very high chances of fluctuation all the time, and there is a time difference and period between entering into a contract and making the payment. Importers should control for this risk and keep it in mind by using solutions for controlling currency risks.
Non-delivery is when the suppliers don’t follow the sales contract by making mistakes such as delivering the wrong items or not delivering by the time frame stated in the contract. This risk can be controlled by
Now since the world is all connected and globalization became normal in this century, many investors and traders turn into international trading. International trading opens a very likely chance of benefiting market to do successful business. International trading includes exporting and importing which allows the businessman to connect personally with all the necessary suppliers and manufacturers which will eventually lead to cost effectiveness. However, doing global business overseas has many risks that we need to keep in mind and be aware of. Exchange rates are always in the risk of fluctuating which is clearly a risk that faces importers and
Importers
Importers should keep their goals as a priority which is to postpone paying for the merchandise for as long as they can. Also, managing the cash flow in the period during paying for the merchandise and being paid by the local customers who would buy the imports. They should also do this to reduce the risk of fraud from suppliers or doing business in unfamiliar environment.
Some examples of importing risks are the following:
1. currency risk, 2. non-delivery risk 3. credit risk, 4. transfer risk 5. country risk 6. transport risk
Currency risk is when the local currency used to pay for the merchandise might be higher than the total amount to be calculated and used to enter the contract because of the fast changes of the currency market price. Exchange rates between most currencies have very high chances of fluctuation all the time, and there is a time difference and period between entering into a contract and making the payment. Importers should control for this risk and keep it in mind by using solutions for controlling currency risks.
Non-delivery is when the suppliers don’t follow the sales contract by making mistakes such as delivering the wrong items or not delivering by the time frame stated in the contract. This risk can be controlled by
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