Risks in International Trade
Commercial Risk
• The probability of not getting paid by a creditor, because this creditor does not have the funds to pay the debt or because the creditor refuses to pay the debt.
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Exposure
Terms of Payment
© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license. All rights reserved.
© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license. All rights reserved.
Terms of Payment
Characteristics of International Payment Issues Risks in International Trade Alternative Terms of Payment Cash in Advance Open Account Letter of Credit Documentary Collection Procurement Cards TradeCard Terms of Payment as a Marketing Tool
© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license. All rights reserved.
© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license. All rights reserved.
Risks in onal Trade
Country Risk
• Country risk is also known as political risk. • The probability of not getting paid by a creditor, because the
Characteristics of International Payment Issues
• Reduced Credit Information • Lack of Personal Contact • Difficult and Expensive Collections • No Easy Legal Recourse • Higher Litigation Costs • Mistrust
Terms of Payment
Characteristics of International Payment Issues Risks in International Trade Alternative Terms of Payment Cash in Advance Open Account Letter of Credit Documentary Collection Procurement Cards TradeCard Terms of Payment as a Marketing Tool
© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license. All rights reserved.
creditor’s country has:
▪ Insufficient foreign exchange reserves. ▪ Not allowed the creditor to pay the debt (political embargo).
• Political risk can also mean the probability of nationalization of a firm’s subsidiary by the host country.
Terms of Payment
Characteristics of International Payment Issues Risks in International Trade Alternative Terms of Payment Cash in Advance Open Account Letter of Credit Documentary Collection Procurement Cards TradeCard Terms of Payment as a Marketing Tool