International payment risk management in vietnam joint stock commercial bank for industry and trade hoang mai branch,graduation thesis

i STATE BANK OF VIETNAM BANKING ACADEMY Foreign Language Faculty -o0o - GRADUATION THESIS International payment risk management in Vietnam Joint Stock Commercial Bank for Industry and Trade – Hoang Mai Branch Lecturer: Tran Thi Hai Ly (MA) Student’s name: Hoang Phuong Thao Student’s ID: 12A7511163 Class: ATCB – K12 Hanoi, May 2013 ii ACKNOWLEDGEMENTS First of all, on the completion of the study, I would like to express my deepest appreciation to my supervisor, Ms Tran Thi Hai Ly of Foreign Language Faculty – Banking Academy for her considerable help and great support during the process to accomplish the study I also thank her for her valuable suggestions, helpful advice and careful comments on the research, which was of critical importance for this study Second, I am grateful to all trade finance’s staff of Vietinbank – Hoang Mai Branch for the internship period, in which I received welcomed condition and had opportunities to put all theory into practice I also owe a great debt of gratitude to all the lecturers of the Faculty of Foreign Languages for the precious knowledge and studying encouragement throughout the past four years at Banking Academy Last but not least, I would like to convey thanks to my family and friends for their understanding and unconditional love during the time of conducting the thesis Hanoi, May 2013 Hoang Phuong Thao iii ABSTRACT International payment is a characteristic and important off-table service in business activities of Vietnamese commercial banks Owing to the wide operating scope and many parties related in international payment transactions, there are risks which can occur at any time, affecting the parties badly In this activity, commercial banks are the intermediary providing payment services for customers Besides obtaining a specific amount of profit, they have to suffer particular risks which may be loss due to the inability to receive money, unnecessary-fee payments and the downgradation of banks’ reputation Therefore, to dig deeper into this issue, the research paper, “International payment risk management in Vietnam Joint Stock Commercial Bank for Industry and Trade – Hoang Mai Branch”, aims at examining the fundamental theory of risks in international payment; then exploring the real situation of Vietinbank – Hoang Mai Branch based on the secondary data analysis Finally, after discussing some suggestions for the bank to manage common risks in international payment, the thesis proposes several recommendations for the Government and corresponding Ministries, the State Bank of Vietnam and Vietinbank – Hoang Mai Branch so that risks can be controlled better iv TABLE OF CONTENTS ACKNOWLEDGEMENTS ii ABSTRACT iii TABLE OF CONTENTS iv LIST OF TABLES AND DIAGRAMS vi LIST OF ABBREVIATIONS vii INTRODUCTION 1 Rationale of the study Objectives of the study Research methodologies Scope and focus Structure of the Thesis CHAPTER 1: AN OVERVIEW ABOUT INTERNATIONAL PAYMENT AND RISKS IN INTERNATIONAL PAYMENT 1.1.1 Notion of International Payment 1.1.2 Terms and conditions applied to International Payment 1.1.3 Common international payment methods 1.1.4 International Payment’s role 12 1.2 Risks in International Payment 13 1.2.1 Notion of risk and risk in international payments 13 1.2.2 Types of risks in International Payment 14 CHAPTER 2: REAL SITUATION OF INTERNATIONAL PAYMENT ACTIVITY AND RISKS IN INTERNATIONAL PAYMENT IN VIETINBANK – HOANG MAI BRANCH 18 2.1 An overview about Vietinbank – Hoang Mai Branch 18 2.1.1 The formation and development history of Vietinbank – Hoang Mai Branch 18 2.1.2 Business activities of Vietinbank – Hoang Mai Branch from 2010 to 2012 19 2.2 Real situation of international payment activities from 2010 to 2012 23 v 2.2.1 Turnover of international payment 23 2.2.2 Proportion of International Payment’s methods 25 2.3 Risks of International Payment in Vietinbank – Hoang Mai Branch 26 2.3.1 Political risk and legal risk 26 2.3.2 Foreign exchange risk 27 2.3.3 Moral risk 28 2.3.4 Credit risk 29 2.3.5 Operational risk 30 CHAPTER 3: SOLUTIONS AND RECOMMENTDATIONS FOR INTERNATIONAL PAYMENT’S RISKS MANAGEMENT IN VIETINBANK – HOANG MAI BRANCH 32 3.1 Solutions for International Payment’s risks management in Vietinbank – Hoang Mai Branch 32 3.1.1 Political and legal risk management 32 3.1.2 Foreign exchange risk management 32 3.1.3 Moral risk management 33 3.1.4 Credit risk management 33 3.1.5 Operational risk management 34 3.2 Recommendations for International Payment’s risks management in Vietinbank – Hoang Mai Branch 35 3.2.1 Recommendations for Government and correspondent Ministries 35 3.2.2 Recommendations for the SBV 36 3.2.3 Recommendations for Vietinbank – Hoang Mai Branch 37 CONCLUSION 38 REFERENCES 40 vi LIST OF TABLES AND DIAGRAMS Number Name Page Table 2.1 Total capital mobilized from 2010 to 2012 19 Table 2.2 Lending activities of Vietinbank Hoang Mai 21 from 2010 to 2012 Diagram 1.1 The process of remittance method Diagram 1.2 The process of collection method Diagram 1.3 The process of documentary credit method 11 Diagram 2.1 The structure of Capital mobilization of 20 Vietinbank – Hoang Mai Branch in 2012 Diagram 2.2 Non-paid loan rate of Vietinbank – Hoang 22 Mai Branch from 2010 to 2012 Diagram 2.3 Turnover of international payment activities of 24 Vietinbank – Hoang Mai Branch from 2010 to 2012 Diagram 2.4 Proportion of international payment’s methods of Vietinbank – Hoang Mai Branch in 2012 25 vii LIST OF ABBREVIATIONS Number Abbreviations Original HO Head Office L/C Letter of Credit SBV State Bank of Vietnam SMEs Small and Medium Enterprises SWIFT Society for Worldwide Interbank Financial Telecommunication UCP Uniform Customs and Practice for Documentary Credits USD United State Dollar Vietinbank Vietnam Joint Stock Commercial Bank for Industry and Trade VND Vietnam Dong INTRODUCTION Rationale of the study International integration has brought many chances to Vietnam in economic development since the country became a member of World Trade Organization (WTO) in 2006 Foreign trade activities have also been widened recently, which leads to higher need for Vietnam to corporate with other countries The role of commercial banks, especially in international payment field, therefore, has been paid more attention to It has been shown in statistics that among external economic activities of Vietnamese commercial banks, international payment takes up a large proportion to raise banks’ turnover by fees collected from related doings Realizing its meaning, commercial banks have recently invested more in renovating international payment system For example, training staff specializing in this field, upgrading technology and organizing payment set-up suitable with international standards have been focused As a result, international payment services in banks have gained encouraging outcomes With the strength of being one of the biggest Vietnamese commercial banks, building wide business networks, supplying a variety of high-quality banking services, having good reputation and being a member of Society for Worldwide Interbank Financial Telecommunication (SWIFT), Vietnam Joint Stock Commercial Bank for Industry and Trade satisfies customers’ demands about international payment services Moreover, its modern technology is often updated and applied to the payment system to save time and expenses, as well as increase revenue from business activities However, continual changes of the international and domestic economy, together with the issuance and correction of regulations and laws challenge the bank to improve its payment process and ensure the efficiency of international payment operations Many other risks can also be seen during practice, resulting in the revenue and fame reduction Consequently, it is really important for the bank to be aware of risks so as to avoid them while working If risk management is handled well, banking services will develop more effectively From this fact, after an internship period in Vietnam Joint Stock Commercial Bank for Industry and Trade – Hoang Mai Branch, the topic “International payment risk management in Vietnam Joint Stock Commercial Bank for Industry and Trade – Hoang Mai Branch” has been chosen with the aim of providing related parties with deeper understanding and practical solutions and recommendations to enhance international payment business of the bank Objectives of the study The study is conducted to provide an overview of international payment and its risks in commercial banks, analyze and assess common risks, as well as propose solutions and recommendations to prevent them in international payment process in Vietnam Joint Stock Commercial Bank for Industry and Trade – Hoang Mai Branch Research methodologies After my internship period in Vietinbank – Hoang Mai Branch, I have collected important primary through personal interview and observation and secondary information from annual reports of the bank for my research Methods of data comparison, analysis and synthesis are used to clarify the content of the research issue Three main questions are interviewed in the writing They are: 1) What are common risks in international payment Vietinbank – Hoang Mai Branch has to face? 2) Why risks happen? 3) What does Vietinbank – Hoang Mai Branch to avoid risks? Scope and focus The study focuses on international payment risk management of Vietnam Joint Stock Commercial Bank for Industry and Trade – Hoang Mai Branch, supported by research data calculated in the last three years from 2010 to 31 December, 2012 Structure of the Thesis Beside the Introduction and Conclusion parts, the thesis is divided into three chapters as below Chapter 1: An overview about International Payment and risks in International Payment Chapter 2: Real situation of International Payment activities and risks in International Payment in Vietinbank – Hoang Mai Branch Chapter 3: Solutions and recommendations for International Payment’s risks management in Vietinbank – Hoang Mai Branch 26 than remittance, and having reasonable expenses, collection tended to be exercised more and more popularly in the recent years 2.3 Risks of International Payment in Vietinbank – Hoang Mai Branch During the recent years, Vietinbank – Hoang Mai Branch has kept trying to accomplish their target in international payment It has developed better with good results, promoting export and import activity However, along with its achievements, the branch’s international payment outcome has not been as beneficial as other branches in the whole system due to the fact that there are still potential risks in this activity 2.3.1 Political risk and legal risk In international payment, any change in the political and legal regulations of a country can affect parties in transactions Although Vietnam is a nation with rather stable political situation, as extracted from the article “Banking woes are burdening Vietnam” by Jeremy Weltman of Euromoney on July 26th 2012, because there is concern about the impact of stateowned enterprise debt for the Vietnamese economy and banking system, Vietnam’s bank stability risk is now the highest among east and southeast Asia’s emerging markets, as confidence in Cambodia’s banking stability (previously the lowestranking) has improved Because of being a high-risk country, it is hard for Vietnam to attract foreign banks or corporations to choose it as an intermediary bank in international payment The number of customers in international payment, therefore, remarkably decreases Being a branch of Vietinbank, Vietinbank Hoang Mai now has to face these challenges Moreover, the legal framework for banking activities or international payment of Vietnam is inadequate Despite banking law publication, there are not laws of foreign currency, bill of exchange and cheque Therefore, the branch’s staff are confused with taking care of mistakes happening during international payment process The current documents are amended and supplemented many times that it is complicated to apply and legal force is not high Currently, Vietnam has no law 27 adjusting the relation between parties in international payment They are only based on UCP to manage rights and responsibilities, but UCP is just an international practice Meanwhile, in many countries, there are laws and bylaws regulating documentary credit depending on international practices so that they are suitable for countries For example, a corporation supplying construction materials signed a sale contract to export wood to a Taiwanese company After that, the Government issued the decision of tax increase and export restriction of this product Therefore, Vietnamese corporation could not provide enough amount of wood according to schedule Taiwanese company depended on this slow delivery to punish Vietnamese corporation, resulting in the exporter’s financial lost The bank’s reputation was affected because Vietinbank – Hoang Mai Branch played the role of advising bank or the exporter’s bank in this transaction The risk here relates to changes in the Government’s policy which is not easy for Vietnamese corporation and Vietinbank to predict 2.3.2 Foreign exchange risk The fluctuation of foreign exchange rate has a big influence on corporations and banks, especially in export and import financing Because of this, Vietinbank Hoang Mai’s foreign currency status is unsteady, leading to foreign exchange risk For example, in terms of documentary credit, the branch usually lends its customers an amount of foreign currency to pay for L/C, which it may purchase from other banks or organizations When the buyer returns it to the bank, if the exchange rate increases, the bank will receive the differences In contrast, if it falls, it is not sure that the fee collected from this transaction can cover the lost caused by exchange rate differences Vietinbank – Hoang Mai Branch had difficulties in dealing with a situation in which its customer needed to buy foreign currency EUR to pay for L/C The bank sold EUR according to listed price Owing to the shortage of EUR reserve for big transactions, it had to buy in the market The price of EUR tended to go up and at the time of purchase EUR, the exchange rate of EUR and VND was higher than when the transaction with the customer Consequently, the branch suffered the risk of exchange rate fluctuation 28 In addition, export and import financing has limitations due to Vietinbank – Hoang Mai Branch’s poor source of foreign currency Consequently, it doesn’t meet customers’ demand in borrowing foreign currency for payment Vietinbank – Hoang Mai Branch also has difficulties in purchasing foreign currency from Vietinbank because of the bank’s harsh policy, so the customers’ needs in buying currency are not responded Many customers choose another bank with more relaxing policies to transactions, which reduces the number of customers in the branch Furthermore, swap and forward exchange are essential tools to prevent risks in international payment Particularly, swap exchange can be simply explained that if firms in separate countries have comparative advantages on interest rates, then a swap could benefit both firms For example, one firm may have a lower fixed interest rate, while another has access to a lower floating interest rate These firms could “swap” to take advantage of the lower rates Forward contract which is a special type of foreign currency transaction is an agreement between two parties to exchange two designated currencies at a specific time in the future These contracts always take place on a date after the date that the spot contract settles, and are used to protect the buyer from fluctuations in currency prices Nevertheless, these businesses are used limitedly in Vietinbank – Hoang Mai Branch because of inadequate knowledge of the staff The bank is short of diversity in foreign currency trading and mainly applies spot exchange 2.3.3 Moral risk To domestic customers, Vietinbank is one of the credible banks that they choose in international payment However, they are mostly small and medium enterprises such as Chau Phong Rice Exporting Corporation and Dong Tien Seafood Products Importing Company which are not confident enough to pour much money into projects Sometimes it is complex for the branch to the investigation about these enterprises’ recent business relations Therefore, the bank’s export and import activities are restricted and not ensured Furthermore, many foreign banks in developed countries not choose the bank as a partner in international payment 29 owing to Vietnam’s high rate of country risk Vietinbank – Hoang Mai Branch has business relation with underdeveloped nations without carefully monitoring their business situation For example, The United Arab Emirates (UAE), Iran and Kuwait are partners of the bank It is not convenient for Vietinbank – Hoang Mai Branch to explore these countries’ current business situation because of lack of information published and high cost in information extraction As a result, these parties may have intention of cheating to refuse payment or extending payment time without Vietinbank’s vigilance, causing turnover lost of the bank Not only Vietinbank – Hoang Mai Branch but also other Vietnamese commercial banks and corporations have to be careful with cheating behavior of international companies On the official website of Vietinbank, http://www.vietinbank.vn, there is an article alerting the bank when cooperating with countries in Middle East This is a market with high demands in importing Vietnam’s products but risky As extracted in the article, because of Vietnamese corporations’ beyond belief, they are deceived by their counterparts In fact, there are customers of the branch ask it to release guarantee for them to receive money and agree to pay even when documents contain errors However, after that they request Vietinbank – Hoang Mai Branch not to make payment when finding mistakes in the documents To these customers, the bank feels it hard to maintain the reputation 2.3.4 Credit risk It is very difficult for parties in international payment to avoid credit risk Despite conducting the partner’s business status research before making decision to cooperate with, Vietinbank – Hoang Mai Branch also stands facing this kind of risk when the counterparts from countries with unstable economy fail to make payment because of bankruptcy or erratic economic status Corporations not receive money and the bank loses not only return from international payment transactions but also its reputation Furthermore, many customers of Vietinbank – Hoang Mai Branch are small corporations whose current business situation is not updated or published usually The bank has difficulties looking for exact information about them, so there 30 are some problems happening during cooperation period For example, the organizations can make losses resulting in bankruptcy or it can be other factors from government in tightening trading policy, which brings unforeseen challenges to them in business In international payment of Vietinbank – Hoang Mai Branch, the number of L/C issued by the bank’s loans makes up a large proportion (approximately 60% in the total number of L/C sent out by the branch) To L/C made by the customers’ capital, the bank requires a comparatively small deposit ratio (from 5% to 10% of L/C’s value) for regular clients with opening L/C’s credit line In this situation, if the importer is unlucky to get bankruptcy or inability of payment, the bank has to suffer all the risk Vietinbank still makes payment for the exporter when he presents complying documents without claiming money from the importer 2.3.5 Operational risk Operational risk often happens in documentary credit which is the most frequently used method in international payment of Vietinbank – Hoang Mai Branch Despite recruiting trained staff, the branch is lack of skilled ones in this field to deal with or realize errors and fake documents, even many bankers not meet requirements in foreign language In fact, when customers come to the branch and ask for help in choosing suitable international payment method, the staff cannot give them helpful advice because they not have enough knowledge and experiences in this business area Accordingly, the transactions have many mistakes, affecting both corporations and the bank During the process of international payment in Vietinbank – Hoang Mai Branch, sometimes the staff not find the errors in L/C and state that the documents are complying while they are not, so the bank and its customers not obtain payment or suffer lost Moreover, although it is a newly established branch of Vietinbank – one of the biggest banks in Vietnam, Vietinbank Hoang Mai’s modernization in technology has limitations which cause disruption in the process performing transactions The information about other countries’ economic situation is updated slowly, having an effect on the bank’s reputation For instance, in the request 31 to open L/C of a company to Vietinbank – Hoang Mai, there was a regulation that certificate of quality was issued by the importer at unloading port When transferring into the contents of L/C, a banker misreported that certificate of quality was issued by the exporter This error falsified the nature of document and the importer’s advantages Although the bank recognized and corrected the mistake timely, due to irrevocable L/C, Vietinbank – Hoang Mai Branch had to wait for the exporter’s allowance, which influenced the company’s business activities and the bank’s reputation In addition, Vietinbank is one of the short-listed banks establishing and running operational risk management department moderately well Following closely the HO of Vietinbank’s guidance, this department of Hoang Mai Branch operates relatively efficiently Despite this, the bank has not built a complete legal framework in operational risk management Along with Joint Stock Commercial Bank for Investment and Development of Vietnam – BIDV, Vietinbank has contemporary regulations about operational risk administration, applied to the whole system However, because they are firstly created dependent on foreign data, they haven’t been standardized and contained inadequacies 32 CHAPTER 3: SOLUTIONS AND RECOMMENTDATIONS FOR INTERNATIONAL PAYMENT’S RISKS MANAGEMENT IN VIETINBANK – HOANG MAI BRANCH 3.1 Solutions for International Payment’s risks management in Vietinbank – Hoang Mai Branch 3.1.1 Political and legal risk management Political and legal risks are unforeseeable, so it is difficult to have effective solutions However, to avoid these risks, Vietinbank – Hoang Mai Branch should operate with its corporations in international payment to make thorough researches about counterparts’ investment environment, economic and political situations In this type of risk, the information of customers and market is very important With the recent development of technology, the sources of information can be easily searched on the Internet but need careful selection In order to reduce this risk, Vietinbank – Hoang Mai Branch should advise its corporation to learn precisely about the commercial law of parties that they transactions with and to diversify market to spread risk Moreover, the branch should provide its customers with country risk rating of nations in the world as indicated by reputational magazines such as Euromoney, Institutional Investor, etc 3.1.2 Foreign exchange risk management Foreign exchange risk is often seen in international payment in Vietnamese commercial banks because it is related to not only domestic but also foreign currency trading Vietinbank Hoang Mai, therefore, should find solutions to lessen it during working course To handle foreign exchange risk in international payment, the branch needs to balance and sustain required foreign currency position to meet customers’ importing demands Furthermore, the branch should look for customers to supply exporting services and maintain equilibrium of foreign currency supply and demand Specifically, the work of keeping on track with importers’ needs in foreign currency, 33 including payment demand, the type of currency and the priority for clients and importing goods should be focused on After that, Vietinbank – Hoang Mai Branch should also assess its own fulfillment of foreign currency usually On the basis of these methods, the bank will be more active in foreign currency trading with customers and putting off the foreign exchange risk It is also important to diversify foreign currency business Not only is spot exchange used but forward and swap should also be combined in foreign currency trading because they are effective methods to reduce foreign exchange risk To improve these businesses, the branch has to advance staff’s professional and linguistic skills 3.1.3 Moral risk management It is really important for the bank to cooperate with reliable customers because the appearance of moral risk is the bank’s worry in transaction When it occurs, the bank’s turnover will be affected seriously To deal with this problem, Vietinbank Hoang Mai should perform thorough research about its counterparts to select the most suitable ones The way of exploring partners can help the bank to build a reasonable customer policy and have appropriate services for each So as to judge customers exactly, the branch should not only look at their own business activities but also study their counterparts Only by combining these actions can the branch identify whether there are illegal or cheating situations of the customers In addition, the bank should have preferential policies for loyal and reliable customers to keep a good relation In contrast, in case of new clients with potential risks seen, intense regulations should be set up to ensure the bank’s safety The bank should also follow them seriously to give out right solutions in time if any risk is found 3.1.4 Credit risk management Credit risk is another common risk in international payment that Vietinbank – Hoang Mai Branch suffers In order to avoid credit risk, the branch firstly should strictly monitor customers according to Vietinbank’s monitoring process Based on the 34 result and customers’ business aims, Vietinbank – Hoang Mai Branch provides a suitable credit line, asks for appropriate deposit level and has methods of collateral (mortgage assets, pledge of valuable papers, the guarantee of a prestigious bank, etc.) to assure customers’ payment ability Credit and International Finance Department need to closely coordinate with each other in international payment and export and import financing 3.1.5 Operational risk management In recent times, with the strong development of banking technology, Vietinbank Hoang Mai should have specified strategies in handling operational risk To prevent this type of risk, the bank needs to focus on strengthening the organization and staff management model, consolidating mechanism, policy and regulation, training staff specialized in international payment and using modern information technology systems One of the most essential approaches to avoid operational risk is the improvement of the institute and human resources running pattern It is vital that qualified staff should be assigned to work in the international payment area Their carefulness and deep comprehension during performance will contribute to operational risk prevention Moreover, inexperienced bankers need to be under the control and management of the skilled ones so that they can learn how to deal with each situation happening in the reality The consolidation of the bank’s mechanism, policy and regulation in international commerce is another way to minimize the risk These are the legal documents issued by the bank, defining clearly each step and the individuals departments’ responsibility in the international payment process By giving out comprehensible regulations, the staff will have to strictly follow and complete their duties Then, the capability in international payment management can be improved, which cuts down the risk effectively It is also more convenient for the branch to control the mistakes during operating process and find out people who break the rules while working 35 Moreover, staff training should be taken into consideration, particularly people who are in charge of international payment activities Vietnamese economy now seems to have over-required human resources but is short of trained and skillful people The bank industry is not an exception In this situation, Vietinbank Hoang Mai should organize scheduled and efficient training program for its banker, update new regulations related to international payment for working staff simultaneously Beside professional education, there should be guidance classes in order to raise bankers’ awareness about the branch’s working environment or culture If the training programs are implemented, people will have profound comprehension and desire to devote more to the bank As a result, operational risk can be avoided Another indispensable factor is the upgrading of information technology in the banking system There can be a lot of risks happened when the branch use the out of date technological equipments in international payment, which reduce its reputation and turnover Along with the fast development of technology, it is very important that Vietinbank Hoang Mai need to emphasis on machine replacement or promotion Thanks to advanced information technology, many risks that exist in manual work can be prevented 3.2 Recommendations for International Payment’s risks management in Vietinbank – Hoang Mai Branch 3.2.1 Recommendations for Government and correspondent Ministries The expansion of international payment gives Vietinbank – Hoang Mai Branch an opportunity to enhance its business activities However, there are many challenges that interrupt international payment operations of Vietinbank Hoang Mai Therefore, the Government and related Ministries should have solutions to improve this situation The convenient economic environment for international payment is the first way to develop international payment results Only in a stable financial atmosphere can international payment activities bring about higher benefit The Government has also presented policies alleviating economic surroundings so as to expand the effectiveness of international payment recently Despite this, in the future, the 36 Government needs to issue more efficient strategies for the development of this field Especially, it should concentrate on monetary policies which affect the stability of the market by maintaining the market exchange rate under the Government’s control Foreign exchange plan, therefore, is better-organized Furthermore, the perfection of legal documents governing international payment is so important that it should be paid attention to International payment activities are related to both domestic and global relations, so it is also associated with the laws of the country taking part in this activity and worldwide regulations During the period, the Government has published many legal documents to give a favorable condition for not only banking business but also international payment For example, the issue of the State Banking Laws, Laws of Credit Institutions, the decision of SBV about service fee collection, documents about usance L/C, etc., creates a legal framework for external economy and international payment However, they should be changed suitably with international practices and national customs to minimize the risk happening during the performance of sale contract in external activities The Government should also maintain and establish relations with other countries to build the convenient environment for international payment’s enhancement By holding professional trade fairs or exhibitions, it advertises a Vietnam image with major export items to the world At the same time, there should be financial support for commercial banks to modernize banking technology 3.2.2 Recommendations for the SBV The role of the SBV in controlling banking activities is essential to ensure commercial banks’ operations It is important that there should be an effective model of foreign exchange management because it affects directly to business activities of export and import corporations, having effects on international payment of commercial banks In addition, along with keeping an eye on banks’ financial situations, the SBV should support commercial banks with reducing risk methods so that the banks and customers can avoid the risks The combination between the SBV and other ministries is 37 necessary in developing regulations and laws in international payment to match global standards and national practices 3.2.3 Recommendations for Vietinbank – Hoang Mai Branch Beside impacts of the Government, relating Ministries and the SBV, Vietinbank – Hoang Mai Branch should also pay attention to the improvement of international payment services The branch can introduce its customers a model of clean documents so that they can be based on it to make another documents without unexpected errors The number of staff performing international payment services should grow with the intention that the quantity of work can be shared and balanced By this way, the working pressure of each person is also reduced, leading to better business results In addition, the problem of monitoring firmly the procedure of international payment activities and departments’ presentation should be noticed 38 CONCLUSION The better situation of global economy can result in hard-hitting competition in the market It also means that there are more possible risks in business activities The requirement of risk management is both the solutions and responsibilities to assure the effectiveness of business As there goes a saying “Higher risk, higher return”, of all industries, banking and finance is one of the most profitable fields but risky, especially with international payment activities It is a principle in international commerce that the exporter or the seller obtains payment and the importer or the buyer after making payment receives goods according to conditions which two parties agreed However, the process to perform this principle is far from easy because of technological problems during goods or money delivery and the assurance of parties following regulations There are major methods in international payment such as remittance, collection, documentary credit, etc It depends on each type of customers that the bank has their own ways in serving During the process of international payment transaction, risks can belong to each party by the factors of the exporter or importer position, short-time or long-time business relation, the reputation and business scope, payment currency, political status of the country in international payment, etc The suitable methods are chosen based on each factor to achieve better results and safety in transaction performance In this situation, the analysis of risks in international payment is essential This is not a newly-mentioned issue, but in the competitive context, it is still necessary to have identification and evaluation to find solutions to more effective risk management The thesis “International payment risk management in Vietnam Joint Stock Commercial Bank for Industry and Trade – Hoang Mai Branch” is written for that purpose, giving overall picture about risks and solutions as well as recommendations to improve international payment activities in Vietinbank – Hoang Mai Branch 39 Therefore, the bank can overcome limitations as well as expand its network by establishing close relation with both worldwide or national corporations and banks Based on research and reports, common risks in international payment in Vietinbank – Hoang Mai Branch have been found and mentioned in this study They are risks of political and legal changes, foreign exchange, morality, credit and operation They are also the risks that many Vietnamese commercial banks have to face during international payment process Although it is hard to avoid these risks, some solutions can be made to deal with this problem For example, the branch should give more concentration on customer monitoring, staff training, foreign exchange policy, technological development, etc Beside these helpful solutions, the thesis propose some recommendations for the Government and corresponding ministries, the SBV and Vietinbank – Hoang Mai Branch itself such as in banking management regulations, convenient economic environment maintenance, legal document improvement, etc From these findings, Vietinbank – Hoang Mai Branch can realize its strengths and weaknesses in international payment activity so that it can conquer the risks to enhance this business 40 REFERENCES Dinh Xuan Trinh, Dang Thi Nhan (2011), International Payment, Science and Technics Publishing House, Hanoi Hinkelman, Edward G (2002), A Short Course in International Payments 2nd Ed, World Trade Press Jeremy Weltman (2012), Banking woes are burdening Vietnam Retrieved from http://www.euromoney.com/Article/3066752/Banking-woes-are-burdeningVietnam.html Nguyen Van Tien (2010), International Payment and Commercial Finance, Statistical Publishing House, Hanoi Risk In Wikipedia, the free encyclopedia Retrieved May 14th 2013, from http://en.wikipedia.org/wiki/Risk