International Trade Operations Essay Example | Topics and Well Written Essays - 3000 words

International Trade Operations - Essay Example This issue has been chosen as the central objective of this report and therefore, assessing various payment risks underlying the operations of the company concerned in international markets, this report highlights the crucial steps that need to be taken by ABC Ltd to reduce these risks to the extent that can enable the company to minimize the probability of incurring loss in the course of international trade. As the report declares the company confronts with two kinds of risks undermining the payment in consequence of international trade. These risks could be in two forms; either in the form of non-payment by the importer or in the form of late-payment due to a number of reasons. There are many factors that bring about the risk underlying payment in the international trade. As the business operations are carried out on the cross-border level, several international as well as domestic events taking place within both the exporting and importing countries may have their impact on the extent of risk associated with payment. This is the greatest risk underlying the export trade, which may cause substantial business loss to the exporter. ABC Ltd is providing electronic goods to both the developed as well as developing countries therefore, it comes across many cases in which it fails to receive export payments form the importers due to lack of credit worthiness, no or little information about im porter, government policies and protection, lack of legal action and due to insecure payment modes. RISK OF LATE PAYMENT This is another risk underlying export payments, which may also cause irreparable loss to the company. The manufacture of electronic goods requires continued flow of capital that is ensured by secured payment from the buyers of the products. Late payments may entail innumerable problems for the business in terms of re-scheduling its manufacturing process. Information about buyers and their countries can play an important role in pre-determining the probability of late payments and potential problems that may arise due to it. ASSESSMENT OF PAYMENT RISKS Following are the most common risks that are involved in receiving the payment of goods exported to other countries: Commercial risks The commercial risks that are associated with the export payment are intimately related to the importers credit worthiness. These risks may turn into business loss if the buyer becomes bankrupt or insolvent rendering the exporter unable to receive the payment for goods exported. The commercial risks also include the non-acceptance of goods on the part of importer, showing his unwillingness to pay (Trade Facilitation and Electronic Commerce, accessed 02.01.2006). ABC Ltd also confronts the risk of default on payment by a buyer or importer at the end of the credit period. The company risks the payment against goods exported when the buyer is less credit-worthy. Risks Associated With Different Payment Methods The following are the common modes of payment used by ABC Ltd. in export trade. Some of them are highly insecure and involve risk potential. The risks associated with t