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  • Forms of Risk - Solution

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    Gerti Wurm
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    International business carries greater risks than domestic trade due to differences in laws and regulations between countries. There are political risks from instability, policy changes, and labor conflicts. Currency risks exist if payment is made in a currency other than the seller's own. Financial risks include the costs of purchasing, producing, and shipping goods. Commercial risks include the buyer becoming bankrupt or unable to meet contractual obligations. Proper risk management is important for international trade.

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    International business carries greater risks than domestic trade due to differences in laws and regulations between countries. There are political risks from instability, policy changes, and labor conflicts. Currency risks exist if payment is made in a currency other than the seller's own. Financial risks include the costs of purchasing, producing, and shipping goods. Commercial risks include the buyer becoming bankrupt or unable to meet contractual obligations. Proper risk management is important for international trade.

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    6 views1 page

    Forms of Risk - Solution

    Uploaded by

    Gerti Wurm
    International business carries greater risks than domestic trade due to differences in laws and regulations between countries. There are political risks from instability, policy changes, and labor conflicts. Currency risks exist if payment is made in a currency other than the seller's own. Financial risks include the costs of purchasing, producing, and shipping goods. Commercial risks include the buyer becoming bankrupt or unable to meet contractual obligations. Proper risk management is important for international trade.

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    International Business

    1. Risk Management
    All forms of business contain elements of risk, but in international trade, the risk profile enters a new dimension. Internationally, you seldom have common laws that can support the transaction. Instead established trade practices and conventions are used to settle the undertakings made by the parties. The main source for international trade practices is the International Chamber of Commerce (ICC). Political risks Political instability (terror, war, violence, sanctions, blocades) Unexpected change in economic policy (nationalization) Labour market conflicts (strikes, lockouts) Changes in laws (demand for product standards, changed environmental requirements)

    Adverse business risks Corrupt practices (bribery, money laundering)

    Currency risks If payment is going to be made in a currency other than the own and exchange rates fluctuate

    Financial risks Purchasing, production and shipment form a financial burden that forces the seller to determine how this should be financed.

    Product, production and transport risks The sellers inability to provide the required quantity or quality Risk of non-acceptance: when the product is tailor-made, there is no other available buyer if the transaction cannot be completed Damage to or loss of goods during the physical movement from the seller to the buyer

    Commercial risks (=purchaser risk) The risk of the buyer going into bankruptcy or being in any other way incapable of fulfilling the contractual obligations

    INGT 2011/12 MMag. Gertrude Wurm

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