Risks in International Trade

Both sides face risks in an export transaction. This is because there is always the possibility that the other side may not fulfil the contract.
For the exporters there is the risk of buyer default; the customers might not pay in full for the goods. There are several possible reasons for this: the
. importers might go bankrupt; a war might start or the importers' government might decide to ban trade with the exporting country; or they might ban imports of certain commodities. Another possibility is that the importers might run into difficulties getting the foreign exchange to pay for the goods. It is even possible that the importers are not reliable and simply refuse to pay the agreed
i amount of money.
For the importers there is the risk that the goods will be delayed and they might only receive them a long time after paying for them. This may be caused by port congestion or strikes. Delays in fulfilment of orders by exporters and difficult Customs clearance in the importing country can cause loss of business.
There is also a risk that the wrong goods might be sent.
It is to guard against such possibilities that different methods of payment have been developed.