Home Investing Risks to be Aware of When it comes to International Trade

Risks to be Aware of When it comes to International Trade

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There are many risks involved when it comes to trading internationally.

Not only do you have to be aware of what’s going in the global market as a whole, there are also political implications in the country you’re trading with and a greater risk of unforeseen circumstances which may arise and cause added complications.

Here are a few of the most important risks to be aware of when it comes to trading overseas:

Political risks

If a country’s government decide to make any changes, costs can quickly change and this can lead to changes in tariffs and the overall success of your business.

It can also mean that shipping certain items become prohibited or special rules can be announced with very little warning.

One of the biggest risks is that political decisions cause turbulence in the trading market meaning your income becomes an unstable source.

As the political systems in different countries are all individual and work in different ways, it means you have to stay on top of the political happenings in the country you’re trading with to ensure that you don’t miss the passing of any new laws or rules which could well affect your trade.

Foreign exchange risks

The main problem which can occur when it comes to trading internationally is that the value of your investment can fluctuate depending on trends in the currency exchange.

If the exchange rate plummets then you’re business could suffer greatly, especially if there is a lot of fierce competition in that particular market, keeping an eye on the exchange rate is crucial to success.

Transport risks

International trade has a far greater risk than domestic trade, partly due to the amount of risk involved with transporting goods overseas using air travel or ships.

As the journey is much longer and involves more stringent checks, there is a much higher chance of goods going missing or not arriving on time.

One of the best ways to mitigate this risk is to work with a courier who is experienced with transporting goods overseas, and global shipping franchise organisations like Inxpress who deliver great carrier solutions to businesses so, you know that you will be guaranteed a good service.

Being in a financial position to start trading internationally before you begin helps to further mitigate the risks and you have money to fall back on if the worst is to happen.

Although these risks are significant, as long as you manage to stay on top of them, trading overseas is very profitable and a great way to grow your business.

5 COMMENTS

  1. I don’t personally do international trading. However, I’m very much aware of the risks involved with currency fluctuation. I was once connected to a Korean company and our cash flow was indeed affected with the changes in currency. I could still remember back in 2008 when the financial crisis hit. It was truly problematic when the value of the won was done. Our company in Korea had to shell out more won to convert to USD, which in turn were sent to our branch country. The branch received money in USDs. While the cost of operations remain the same dollar-wise, the same cannot be true of the Korean won. So yeah currency fluctuation needs to be thought out carefully when deciding to do business outside one’s own soil.
    tabby recently posted…my stock market journey with COL Financial IncMy Profile

    • I would not know the first place to start if I had to factor in international trading dynamics into what I think about when it comes to investing. It is probably a good thing for everyone, though, and I will gladly just sit on the sidelines.

  2. When shipping a product overseas, the exporter should aware of the packing, labeling, document as necessary, and don’t forget the insurance requirements. There is a big risks of transporting goods overseas the risk of goods being damaged, especially over long distances.

  3. I remember that I had a friend about ten years ago who was dating this guy and he said he worked in finance. After talking with him a little it was really interesting because his whole job was monitoring hostile political situations, so he was kind of like a journalist/investor mix, and I just always thought that was really interesting, and I never even knew such a position existed. Makes sense, but it still threw me for a loop. Anyways, thanks for sharing.

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