Topic is covered in easy understanding language for the students of B.Com., B.B.A, MBA

1. RISK IN
INTERNATIONAL TRADE
Prepared By:
Mohd. Shahnawaz
(Assistant Professor)
MBA (UGCNET-Management)
MA (UGCNET-Education)
B.Ed.

2. RISK IN INTERNATIONAL TRADE
MEANING: In the context of international
trade, risk is the assumption that the
chosen investment may fail to deliver the
anticipated outcome.

3. Types of Risk in international
Trade
The various kinds of risks that an
international trade faces are divided into
the following:
1. Commercial Risks
2. Political Risks
3. Foreign Laws Risks
4. Cargo Risks
5. Credit Risks
6. Foreign Exchange Fluctuations Risks

4. 1. Commercial Risks
It arises due to:
➢ Lack of knowledge about the foreign
markets.
➢ Inadaptability of the export product to alter
to the conditions of the foreign market
necessities.
➢ Longer transit time.

5. The price realized in export market may be
influenced by:
➢ Change in exchange rates
➢ Change in import duties or tariff barriers
➢ Change in transport prices

6. 2. Political Risks
Following are the factors, affecting in political
situation:
➢ Changes in party in power in concerned
countries;
➢ Civil wars and rebellion;
➢ Wars between the countries;
➢ Enemy capturing the cargo during war.

7. 3. Foreign Laws Risks
➢Each country has its own commercial law. So
different laws prevail both in exporter and
importer countries.
➢Legal procedure are complex as well as
expensive.

8. 4. Cargo Risks
➢Most of the goods are transported by sea.
➢The list of dangerous risks in transit is long
viz. storms collisions, theft, leakage,
explosion, fire, and international water
theft.

9. 5. Credit Risks
➢Risks are inherent in credit transactions,
more so in international business.
International business is invariably riskier
than the domestic trade.

10. 6. Foreign Exchange
Fluctuations Risks
➢Risks arising due to changes in home
currency or foreign currency affects the
price realization.
➢If the value of in-house currency is less, the
competitive capacity of the exporter is
enhanced

11. THANK YOU