Finance of International Trade

Chapter 2

Cross-border trading

The risks involved

If there were no risks involved in international trade, sellers would

transport their goods across the world by whatever means without

hindrance and buyers would remit funds in payment free from any

intervention by central banks and the operations of exchange control. But

no transaction can be undertaken without risk to the buyer and seller,

although those risks can be significantly reduced by banks and insurers.

For the exporter the main risks are:

 Commercial: delayed payment or non-payment.

 Political: intervention by central bank in importer’s country to delay or

prevent the release of foreign exchange.

 Exchange: depreciation in the currency in which he has invoiced his

goods.

For the impor