Understanding Risks in International Trade :
While selling abroad, you undergo the following risks.
I. Credit risk
2. Currency risk
3. Carriage risk
4. Country risk
These risks can be insured to a great extent by taking appropriate steps.
Credit risk against the buyer can be covered by insisting upon an irrevocable letter of credit from the overseas buyer. An appropriate policy from Export Credit Guarantee Corporation can also be obtained for this purpose.
Country risks are also covered by the ECGC.
As regards currency risk, i.e. possible loss due to adverse fluctuation in exchange rates,
you should obtain forward cover from your bank authorised to deal in foreign exchange. Alternatively, you should obtain export order in your currency.
Carriage risk, i.e. possible loss of cargo in transit can be covered by taking a marine insurance policy from the general insurance companies.
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