3 Trade Finance Risks Exporters Should Beware of

Trade finance can make or break the success of your business. What can you do to prevent finance risks affecting your export business? Our upcoming webinars look at some of the answers. 

Trade finance can make or break the success of your business. What can you do to prevent finance risks affecting your export business? Our upcoming webinar looks at some of the answers. 

As the world becomes more and more connected, and with advances in technology, trading around the world has become easier. From the biggest corporations to the smallest firms exporting and importing can be managed simply at the click of a mouse.

Platforms like Cogoport’s marketplace community help ease the logistical challenges of doing business globally. 

 However, many businesses face several challenges, including managing trade finance. Getting it wrong can be costly to your business. 

So what risks do exporters have to bear in mind when thinking about their trade?

1. The trading environment

Not everywhere may be as stable as your home market. Consignments can get lost or held up, payments can be delayed or complicated or communications difficult. Before taking on a transaction overseas, an exporter does well to think about and plan for: the ease of doing business due to the efficiency of local systems covering customs, banking and transportation communications reliability in terms of telecoms and shared understanding the stability and transparency of the regulatory environment whether any major players control aspects of the market already.

Solution: As well as conducting due diligence, consider working with an agent or partner who understands the market which you are entering. 

2. Fluctuating finance risks

Currency volatility has always been a concern for exporters, especially when consignments have to travel a long way or run the risk of delays in port or customs. With high-value shipments, variations of just a few percentage points can represent a significant risk to an exporter.

Solution: Investigate a hedging strategy with your bank or finance partner. You can also attempt to negotiate terms with your consignees that share some of the exposure.

3. Borrowing Risks

Borrowing risks, also known as credit risks, are derived from the possibility of financial loss. This is due to failure to repay borrowed funds or meeting contractual obligations. Even if you do eventually get paid, the delay in your cash flow can be a nightmare when you have staff and suppliers to pay!

Solution: Have a solid understanding of whom you are dealing with and their ability to pay on time. Assess their creditworthiness, gather informal intelligence among your contacts to see what reputation your consignee has and price your goods accordingly. Our webinar will also touch on strategies to manage these risks. 

Assessing trade finance risks is essential for successful business growth and development. Want to know more in detail about international trade finance and its risks to protect your export business? Join our webinar to get the best information from experts in the market!