Mitigating Risks of International Trading – Know What the Experts Have to Say
International trading – the phrases instantly spark the thought of lucrative business opportunities, growth beyond boundaries and huge profitability. However, it also exposes your business to higher risks imaginable. Complex international trading laws, geopolitical context, language & cultural differences, business practices and customs – businesses are constantly being challenged to mitigate the risks and explore new ways to increase their profitability. Wolfgang Zulauf, an expert banker and international trading consultant, shares ways to identify and reduce risks that come with trading beyond boundaries.
Common Types of International Trading Risks
Before knowing how to mitigate risks of international business, it is crucial to understand the most common types of adversities you can face in trading with an offshore partner. According to the banking and investment expert, types of risks that are likely to affect your business are:
- Lack of Knowledge: Inadequate knowledge of investing in a new product or service, market condition, consumer behavior, etc. poses a serious threat of business failure.
- Buyer’s Credit Risk of Insolvency: It involves the risks associated with the buyer’s inability to make full payment against delivery of goods and services on the due date.
- Risk of Buyer’s Acceptance: This type of risk arises when the buyer does not accept goods or services rendered. It may cause major difficulty to the seller.
- Economic and Cultural Risk: Unfavourable economic scenarios, political turmoil and cultural differences can affect both parties to international trading.
- Performance Risk of the Seller: If the seller or exporter is unable to perform the obligations as mentioned in the contract, it can be a huge risk for the importer.
- Risk of Trading in Foreign Exchange: In international trading, exporters and importers have to deal with foreign currencies, which certainly pose the threat of Forex market fluctuations.
