Either import of export both the business involves risks in it. Risks are the barriers under business. Removal of those barriers is the key of success in any business. Some of the risks in import business are as follows:
Payments and receipts in foreign currency are daily occurrence in international trade and exchange rates between most currencies fluctuate regularly because there is a time lag between entering into a contract and making the payment. The trader is always at the mercy of exchange rate fluctuations due to various economic, political and even purely speculative reasons. The currency risk can be reduced by implementing currency risk management solutions.
This is the risk of non-delivery of goods or supplier fails to deliver the goods on time which was specified in contract. This risk can be mitigated if the importer makes the import contract very specific, so that importer always has an option of refusing payment if it is apparent that goods have not been shipped by the specific shipment date.
In some case, supplier delivers the wrong, inferior or substandard goods. The supplier will not deliver the products that have been specified and not at the level of quality expected by the importer. To deal with such situations, importer must take necessary protective measures in advance. The best method to avoid such situation is to do a credit check on the company. Even before receiving the final product, inspection can be done from the importer side or exporter side or by an independent inspection agency. In case the importer has an agent in the supplier's country it may be possible for closer supervision to be maintained over shipments or importer personally visit them and inspect their premises, plant, and the quality of their output.
This risk arises due to the non-delivery of goods by supplier after the importer made payment. This could be happen in case the supplier or related parties of payment line become insolvent. For the mitigation of this risk an importer must consider the financial status of the supplier before entering into a contract and also use conditional payment methods such as documentary credit or documentary collection.
This risk arises due to change in government regulations, as it prevents or restricts importer’s ability to make payments or exchange foreign currency. Most of the countries regulate the transfer of money so unexpected regulatory changes may take place between entering and settling a contract. This risk can be reduced by consulting the expert insights into the foreign markets where you trade.
There is always a risk that your goods will be damaged or stolen while in transit. This could be by deliberately or accidently. So it is advisable that whether the goods are transported by Sea or by Air, they must be insured against transport risk with commercial insurance agencies. Mostly importers will wish to obtain insurance cover from their own insurance company under a 'blanket cover' called an 'Open Policy' thus taking advantage of bulk billing and other relationships.
Risk of Fraud
There are various types of fraud like documentary fraud, counterpart fraud, insurance scams, cargo theft, scuttling and piracy. Some unscrupulous suppliers attempts to take advantage of importers because of complexity of international trade. Forged documentary credits are always in circulation and fortunately, an experienced trade services officer can detect a dud credit more often than not. The risk of fraud can be minimize by the research potential trading partners, including third parties, to ensure they are reputable and have a proven track record.