Risk in international trade

Companies doing business across international borders face many of the same risks as would normally be evident in strictly domestic transactions. For example,

• Buyer insolvency (purchaser cannot pay);
• Non-acceptance (buyer rejects goods as different from the agreed upon specifications);
• Credit risk (allowing the buyer to take possession of goods prior to payment);
• Regulatory risk (e.g., a change in rules that prevents the transaction);
• Intervention (governmental action to prevent a transaction being completed);
• Political risk (change in leadership interfering with transactions or prices); and
• War and Acts of God.

In addition, international trade also faces the risk of unfavorable exchange rate movements (and, the potential benefit of favorable movements).