Export Import business is a way of expanding the existing businesses to international levels. Such ventures can yield huge revenue or can prove to be a great risk, especially when it comes to managing payments.
The need to minimize this risk becomes a necessity as businesses are threatened to collapse if and when risk management fails.
Given below are a few steps to mitigate the financial risk involved in Export Import Trade.
Identification of potential risks
It is imperative to address all the potential risks involved in starting or expanding an export business.
Once the identification is done, categorize the risk involved based on its severity. Such risks may involve the risk of inflation, which ultimately leads to civil unrest or economic sanctions in a particular region or country at large.
Formation and evaluation of the strategies must be performed to mitigate the types of risks involved in exporting. This includes customization of payment terms, targeting business partners, insuring against significant risks etc.
Finally, monitoring of strategies made for risk management and improvising with time is the key.
Types of Risks:
While doing international business unforeseen circumstances are bound to appear. Many overseas companies may be affected by the various national and international policies. Business culture and trade policies may differ and hence it is important that prior knowledge about the country and the company is acquired.
Let’s dive deep into the types of risks involved in the Export trade.
Payment failure:
Even when a proper strategy is made, some risks can still pose a threat, such as one of the most common risks of all, payment risk. Such risk occurs when a customer dodges or requests to extend the payment time for operational reasons or others.
The best way to secure this risk is by a well-written contract.
