This document discusses different types of political, cargo, and commercial risks that can affect international business. It defines political risk as any governmental action that could negatively impact a company's profits or value. Specific political risks mentioned include confiscation, expropriation, and domestication. Cargo risks pertain to damage or loss of goods during transport and are covered by different cargo clauses in insurance policies. Commercial risks refer to potential losses from unreliable trading partners or market conditions like insolvency. Factors that influence commercial risk and ways to minimize it are also outlined.

1. POLITICAL, CARGO AND
COMMERCIAL RISKS
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prasun rai
bba/4564/13

2. POLITICAL RISK
• Political Risks may be defined as any
governmental action or politically motivated
event that could adversely affect the long-term
profitability or value of a firm. Political risk
affects different firms in different ways. It can
threaten the market of an exporter, the production
facilities of a manufacturer or the ability of a firm
to repatriate its profits from a host country to
home country.

3. Political Risk of International
Marketing
• Confiscation
• One of the major political risks that can occur is
the confiscation of assets. This is when a
government goes into a business and seizes all of
its assets without compensation
• Expropriation
is a lesser form of confiscation because the
government will make some compensation
available for seizing the assets.

4. Domestication
Domestication is when a foreign government tries
to take foreign investment and transfer it to
national control and ownership.
Domestication can occur by the government
mandating the following:
• Transfer ownership to nationals
• Managers in the company must be nationals
• Decisions must be made by nationals

5. Economic Risks
• Exchange controls
• Local-content laws
• Import restrictions
• Tax controls
• Price controls
• Labour problems

6. Cargo Risk
• The word cargo refers in particular to goods or
produce being conveyed, generally for commercial
gain by ship, boat, or aircraft, although the term is
now often extended to cover all types of freight,
including that carried by train, van, truck,
or intermodal container.
• The term cargo is also used in case of goods in
the cold-chain, because the perishable inventory is
always in transit towards a final end-use, even when
it is held in cold storage or other similar climate-
controlled facility.

7. CARGO CLAUSES "A“ / AIR
• Cover against all risks of loss physical or damage to the
subject matter insured.
• Ordinary leakage, ordinary losses in weight or volume
or ordinary wear and tear.
• Insufficient or unsuitability of packing or preparation of
the subject matter insured.
• Inherent vice or nature of the subject matter insured.
• Delay
• Insolvency or financial default of carrier.
• Deliberate damage or destruction.
• Loss arising from nuclear weapons.

8. CARGO CLAUSES "C“
 Cover loss of or damage to the subject matter insured,
“reasonably attributable to”.
• Fire or explosion
• Vessel of craft being stranded, grounded, sunk or
capsized.
• Overturning or derailment of land conveyance.
• Collision or contact of vessel, craft or conveyance with
any external object other than water.
• Discharge of cargo at a port of distress.

9. CARGO CLAUSES "B“
 Similar to "C" clauses, but offers additional cover “reasonably
attributable to”:
• Earthquake, volcanic eruption or lightening.
• Washing overboard.
• Entry of sea, lake or river water into the vessel, craft, hold,
conveyance, container, lift van or place of storage.
• Total loss of any package lost overboard or dripped while
loading on to or unloading from vessel or craft.

10. COMMERCIAL RISK
• Commercial risks refer to potential losses arising
from the trading partners or the market. It is
important to secure that the trading partners are
reliable. In addition, it is important to take into
account the trading partner's possible insolvency or
unwillingness to pay.

11. Factor influencing commercial risk
• Weak partner
• Operational problems
• Timing of entry
• Competitive intensity
• Poor execution of strategy

12. How to overcome commercial risks
• Commercial risks can be minimized by using
forecasting techniques and keeping a careful watch on
the changing business conditions in the concerned
country, in particular, and also keeping a track of the
changes in the world economy.
• Exporters have to be prepared to face any eventuality
and wisdom lies in forecasting and anticipating, of
course, finally, quick responding, at the earliest hour.

13. THANK
YOU