Risks in International Trade

Both sides face risks in an export transaction. This is because there is always the possibility that the other side may not fulfil the contract.
i amount of money.
For the importers there is the risk that the goods will be delayed and they might only receive them a long time after paying for them. This may be caused by port congestion or strikes. Delays in fulfilment of orders by exporters and difficult Customs clearance in the importing country can cause loss of business.
There is also a risk that the wrong goods might be sent.
It is to guard against such possibilities that different methods of payment have been developed.
Many of the risks in foreign trade are reduced by the work of the banks. They provide several services which give security to exporters and importers.
The risk of buyer default or non-delivery by exporters is removed by the method of payment against shipping documents. Also exporters' banks provide information about the financial reliability of their customers. They also help arrange buyer credit or finance for the sellers. Without this a lot of trade would not take place at all.
There is also a risk of financial loss because of a change in the exchange rate. If an Indian exporter agreed to sell goods for dollars and the value of the dollar in terms of rupees went down, the exporter would get fewer rupees for the dollars. Conversely, if the price of the dollar went up, the importers would lose money. An Arabian importer would have to pay more rials to buy the dollars. This kind of loss can happen in any export-import situation where the national currencies go up and down in terms of the payment currency, whether it is Deutschmarks, sterling, yen or francs. But the risk can be avoided, with the help of...

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