International trade adds to or increases some risks compared to domestic trade; ensure that you know the risks in order to eliminate or reduce them.
These are some of the additional risks you need to understand and manage:
- Customer risk or commercial risk is not only the risk that the supplier is not financially able to deliver as agreed but can also include his will to deliver as agreed.
- Country risk or political risk includes for instance the risk of war, civil riots, acts of God and changes in trade regulations, etc.
- Foreign exchange risk arises when you are invoiced in a currency in which you do not have an income and consequently are forced to buy the needed currency at the time of payment.
- Other risks could include the transportation of the goods and/or interest rate fluctuations.
Get the optimal benefit of your international trade transactions.
By offering your supplier payment under a collection a documentary credit you will more easily obtain credit from the supplier, and the supplier will more easily obtain financing from his local bank.
The same applies if you offer your supplier a guarantee such as a payment guarantee.
Using the flexibility of Collections, Documentary Credits and Guarantees, you will have a vast number of possible solutions to the financing needs of your international trade.
Payment and Cash Management
Find a solution that suits both your and your supplier's requirements.
As a buyer you would probably prefer to receive the goods before you make the payment while the supplier would probably ask for payment before delivery is made. By using the right payment method and structuring it the right way you can always find a solution that meets the requirements of both parties.
These are the most common standard payment methods in international trade:
- Clean payment
- Documentary Credit
- Combined with a Guarantee, you have a large variety of options in order to achieve the solution needed for your international trade.