Other Risks In International Trade - Adam Wong
Foreign Exchange Risk
When the exporter is to receive payment in a currency other than that of his own country, there is the
risk that if there is a decline in the exchange rate (devaluation) during the time between the signing of
the contract and the receipt of the foreign currency the exporter will receive less and may incur a loss.
Interest Rate Risk
When the trade financing terms are fixed, there is the risk that a change in the interest rate may be
unfavourable to the seller or the buyer.
Political / Government Risks
An exporter shipping to a foreign country and expecting payment to be transferred from that country is
subject to political risks. These are broadly defined as risks that government's action of the importing
country may cause the shipment to be refused or prevent payment from being transferred out of the
When payment is to be made in a currency other than the importer's currency, the importer in order to
make the payment, must exchange his local currency for the required foreign currency
Incoming shipments are often subject to regulations of the importing country. The failure of the
exporter to prepare carefully and complete all required documents could result in :
- delays in clearing goods through customs;
- obtaining foreign exchange;
- or in some cases confiscation of goods and heavy fines.