Thuyết trình trade risks in international payment

TRADE RISKS IN INTERNATIONAL PAYMENTS Product, production and transport risks A Financial risks F B Commercial risks TRADE RISKS Currency risks Political risks E C D Adverse business risks A Product, production and transport risks: Product risks & manufacturing risks: a Product risks: Product risk are risks that the seller automatically has to acccept as an integral part of their commitment - Matter of the product itself - Matters of this nature may well => + disputes between the parties after the contract has been signed + increased cost for the delivery A Product, production and transport risks: Product risks & manufacturing risks: a Product risks:  These risks become even more complicated when it comes to whole projects or larger and more complex contracts  These are often completed over longer periods and involve many A more possible combinations of interrelated commitments between the commercial parties A Product, production and transport risks: Product risks & manufacturing risks: b Manufacturing risks: - The concept of product risk could also include some elements of the manufacturing process itself, even if in priciple that subject falls beyond the scope of this handbook A Product, production and transport risks: Product risks & manufacturing risks: b Manufacturing risks: - Risks of this nature occur as the product planning phase but many often be difficult to cover from that time owing to the special nature of these products A Product, production and transport risks: Transport risks and cargo insurance • Responsible of transporter:  Transporting cargos to the import’s port in time; cargos have to be unbroken  This responsibility is limited by the international/local regulations A Product, production and transport risks: Transport risks and cargo insurance  The owner of cargo usually think that if cargo is broken or loss, it’s responsibility of trasporters So sometimes they send cargo without buying insurance for their cargos Clauses in sale contract will indicate that who bears the responsible for broken cargos A Product, production and transport risks: Transport risks and cargo insurance  The cover under a cargo or marine cargo policy is almost defined by standard policy wordings issued by the Institute of London Underwriters These are called Institute Cargo Clauses (ICC) A Product, production and transport risks: Transport risks and cargo insurance  Institute Cargo Clauses (ICC) Clause types A, B and C - The widest cover is provided under ICC A (Institute cargo clause [Air] for transport by air) - ICC B are more restrictive - The most narrow cover under ICC C D ADVERSE BUSINESS RISKS Definition: Adverse business risks include all business practices of a negative nature, which are not many common also andemic in some part of the world This could have serious consequences for the individual transaction, but also for the general business and financial standing of the seller ,as well as their moral reputation D ADVERSE BUSINESS RISKS In many countries, particularly in connection with larger contracts or projects: bribery, money laundering and a variety of facilitation payments + In UK government, if bribery is generally a technique to press the seller for undue rewards,money laudering often has the opposite purpose, which is to invite the seller to a deal that may on the face of it seem very advantageous + Crimnal and terrorist organizations generate large sums of cash,which they need to channel into the banking ,corporate and trade financial systems,and both banks and traders can innocently fall victim of such activitiy if not exercising due diligence D ADVERSE BUSINESS RISKS Influences: Bribery ,money laundering and any other form of corrupt behavior is bad for business + It is also extremely harmful for the countries themselves ,owing to the damage it causes to the often fragile social fabric + It destroy yhe economy and is strongly counterproductive for trade and all forms of foreign investments into the coutry + In the long run, such practices also prevent social and economic stability and developments, and it has an especially impact on the most disadvantaged parts of the population D ADVERSE BUSINESS RISKS Solution is the need for a strong policy + The world bank and the OECD have put a great deal of resources into cobating corruption worldwide, and in most coutries corruption is now illegal even when committed overseas + Every company involved in overseas trade or investment should have a clear anti- corruption policy that is implemented and clearly understood by all its employees E Currency Risk Definition: Currency risk is a form of risk that originates from changes in the relative valuation of currencies, which can influence the overall returns on an investment For example : Suppose that a U.S.-based investor purchases a German stock for 100 euros While holding this bond, the euro exchange rate falls from 1.5 to 1.3 euros per U.S dollar If the investor sells the bonds for 100 euros, he or she will realize a 13% loss upon conversion of the profits from euros to U.S dollars However, if that investor hedged his or her position by simultaneously short-selling the euro, then the profit from the euro's decline would offset the 13% loss upon conversion How to manage Currency Risk : One simple, flexible, and liquid alternative to hedge against currency risk are currency-focused exchange-traded funds (ETFs) The two most popular providers are CurrencyShares and WisdomTree, which both offer a wide variety of ETFs covering a number of different currencies around the world Click to edit Master text styles Second level Third level Fourth level Fifth level Click to edit Master text styles Second level Third level Fourth level Fifth level 2.1 Determining if a Hedge is Necessary: A few common questions to ask before hedging:  Does the cost of the hedge represent a disproportionate amount of the total investment? In other words, does the cost outweigh the currency's downside risk? How long are you holding the foreign security? Over the short-term, currencies tend to fluctuate relatively little, which means the cost of the hedge may not be worth the marginal benefit Do you think there's a significant risk of the currency declining? During stable economic times, currencies tend to trade with relatively low volatility, making hedges somewhat unnecessary   2.2 Creating a Hedge against Currency Risk: If a hedge seems reasonable, the next step is finding the appropriate ETF to use Here are some common currency ETFs:  CurrencyShares Canadian Dollar Trust (NYSE: FXC)  CurrencyShares Australian Dollar Trust (NYSE: FXA)  WisdomTree Dreyfus Chinese Yuan Fund (NYSE: CYB)  WisdomTree Dreyfus Brazilian Real Fund (NYSE: BZF) Here are the steps to hedge against currency risk with an ETF:  Identify the ETF  Determine the Direction  Calculate the Amount  Manage the Trade F • overview: all activities such as purchase, production, shipment place a financial burden on transaction Financial Risks • trend:  to increase with longer and consequently more costly transport distances  increased in line with the prolonged commercial risk and potical risk • some financial risks:  In production:  After production and delivery F  Risk assessement: F • Problem: the cost will be more expensive and the buyer’s own bank will be reduce their available credit limits • Seller try to cover the remaining risks in some other way or find a compromise by offering compensation to buyer Thanks for watching ... risks A Financial risks F B Commercial risks TRADE RISKS Currency risks Political risks E C D Adverse business risks A Product, production and transport risks: Product risks & manufacturing risks: ... Transport risks and cargo insurance A Product, production and transport risks: Transport risks and cargo insurance • Cargo insurance according to Incoterms CIP and CIF Like Incoterms 2000, in Incoterm... difficulty in producing or shipping the goods D ADVERSE BUSINESS RISKS Definition: Adverse business risks include all business practices of a negative nature, which are not many common also andemic in