International Trade Risks: What They Are and How to Avoid Them

When entering into international trade, there are many risks companies face – not just locally, but globally as well. These risks are associated with currency, credit, intellectual property, transportation, ethics and more. While these risks may hinder business development or make new companies tentative about joining the international trade world, there are ways to limit the effect of these risks.

Legal Risk

Every country has its own laws and legal system, and the waters become even more murky when you begin to trade online. Not only that, but businesses need to know the rules and regulations in every country they want to trade with before they begin drawing up contracts. These things make it difficult for both importers and exporters to enforce their sales contracts. Taking legal action across borders can be both complicated and expensive – companies need to consider the court system, language differences, cost of international lawyers, and more.

Financial Risk

There’s financial risk with every kind of trade, but especially international trade. First and foremost, there are exchange rates to keep in mind. The fluctuate on an irregular basis, so this may affect the budget and profitability of a trade transaction. Luckily, different ways to manage exchange rates: foreign exchange policies such as natural hedging, selective hedging, or systemic hedging can help mitigate some the risks that come from differing exchange rates. There are also risks with buyer insolvency, banks’ ability to honor payments, a seller’s inability to provide enough product, and more. 

Logistical Risk

Whether shipping goods locally or abroad, you face risks such as breakage, loss, theft, vandalism, accident, seizure, and contamination. Taking out sufficient insurance is a necessity before shipping out any goods, and it is in your best interest to work with a forwarding agent. This should help mitigate some of the logistical risk involved with international trade.

Social Responsibility

Maintaining high ethical standards and being a good citizen can be a challenge in any market. When trading internationally, there are different customs and social conditions that can leave you questioning your values. This makes it important to stay vigilant and ensure that your foreign partners and suppliers adhere to your ethics rules and values wherever they operate.

Reduce your Risk with Export Portal

As a comprehensive international B2B trade hub, Export Portal provides everything a user needs to complete a trade transaction, from start to finish. Our platform works hard to help minimize the risk that exists within international trade, and our proprietary blockchain technology keeps your transaction information secure every step of the way. If you are looking for the safest way to participate in global trade, register with Export Portal today.