This talks about the various risks faced in international trade and the ways to mitigate these risks. It talks about various risks - currency risk, buyer's insolvency risk, transit risk, country risk, documentation risk etc.

1. Risk Management in
International Trade
Abhirup Lahiri (3A), Anshuman Vijayvargiya (7A),
Kanaad Bhat (15A), Mansi Dixit (20A), Samarth
Karan (38A), Sanket Dubey (39A), Shawon Sikder
(41A)
International Trade Operations Documentation
Group 3

2. Introduction
ITOD | Group 3

3. Risk Mitigation
for Sellers

4. Risk Mitigation for Sellers
ITOD | Group 3
Risk Mitigation For the Seller ƒ
Deal with buyer with sound reputation or established track records. ƒ
Engage a reputable credit agency or credit insurer to minimise buyer’s insolvency or credit risk. ƒ
Engage on more secured methods of payment such as documentary credit or advance payment. ƒ
Avoid granting excessive credit period or limit to the buyer. ƒ
Ensure that the sales contract or documentary credit does not contain ambiguous or erroneous terms and
conditions that are subject to future disputes. ƒ
Acquire sufficient knowledge in document preparation to mitigate against documentation risk. ƒ
Acknowledge and respect cultural differences with the buyer. ƒ
Buy and sell in same currency to minimise foreign exchange risk. Alternatively, the buyer can hedge against foreign
exchange risk by entering a forward or option foreign exchange contract with a bank. ƒ
If financing is needed, enter into a fixed interest rate loan or interest rate swap agreement to mitigate against
interest rate risk. ƒ
Ensure sufficient insurance coverage against transit risk. ƒ
Engage a representative in the buyer’s country to deal with the goods or relevant parties in case of non-payment
or non-acceptance by the buyer. ƒ
Always have a contingency plan against unfavourable event.