Radha Exports has been toying with the idea of expanding its business in foreign countries. It is apprehensive of risks associated with its goods to be exported in overseas markets. You, as Company Secretary, have been a

Like any business transaction, risk is also associated with good to be exported in an overseas market. The various types of export risks involved in an international trade are Credit Risk, Poor Quality Risk, Transportation Risks, Logistics Risk, Legal Risks, Political Risk, Unforeseen Risks and Exchange Rate Risks. Methods and instruments to manage risks Forfaiting It is a form of supplier credit, which means that the supplier offers credit terms to the buyer and then sells the debt to a bank without recourse. This allows the seller to reduce his exchange rate risk and to eliminate most non-payment risks. Hedging Exporters and importers can manage foreign exchange risk by hedging through forward and future contracts. Export credit insurance Export credit insurance (ECI) protects an exporter of products and services against the risk of non-payment by a foreign buyer. Export credit guarantee Export credit guarantees are instruments to safeguard export-financing banks from losses that may occur from providing funds to exporters. EXIM Bank It issues guarantees (advance payment guarantee, performance guarantee, guarantee for release of retention money, guarantee for rising borrowings overseas) for project export contract.