International trade settlement risk and risk management

International trade settlement refers to the foreign exchange receipt and payment business in transnational commodity trading activities, which generally has two manifestations: tangible and intangible.

The current international trade settlement, in addition to the trade risk of the trade itself or the industry’s own risk, but also vulnerable to the impact of the political economy; at the same time, due to the international trade process generally involves a third party and the bank responsible for international settlement, the complexity of the members involved and the process also exists to increase the risk; and due to the lack of a perfect, unified international trade settlement management system, the lack of Due to the lack of a sound, unified international trade settlement management system, the lack of certain constraints, also makes the international trade settlement risk increased.

The risk management of international trade settlement is a kind of activity to collect the corresponding information and data, analyze and forecast the above international settlement risks, control the potential risks and compensate and manage the emerging risks. Strengthening the management of national trade settlement risks can effectively reduce the risk of loss of foreign trade entities in trading activities, and provide protection for the smooth conduct of international trade activities and settlements.

Current problems in the risk management of international trade settlements

1. No adequate customer credit investigation

Due to the existence of a certain geographical distance between the two sides of the main body of international trade, export enterprises to understand the customer is difficult to fully understand, even if you want to investigate their creditworthiness, it takes a lot of cost and time; and the current fierce competition in the international market, in order to win customers, to fight for time, many companies also tend to ignore the credit investigation, only want to reach a deal as soon as possible; for previous cooperation with customers More is not to focus on its actual situation to investigate, it is difficult to effectively avoid potential risks.

2. The choice of settlement method is not appropriate

With the continuous development of international trade, international trade settlement methods have become more diversified. However, foreign trade enterprises lack sufficient rationality in the choice of settlement methods, some are too risky, and some are too conservative. The former is worried that the opportunity for cooperation is fleeting, preferring to choose cash on delivery or collection and other ways with very high risk; the latter is worried about the risks involved in the settlement only choose payment before delivery or letters of credit and other ways, and miss the opportunity. These two ways did not carry out comprehensive consideration, are prone to cause losses in foreign trade enterprises.

3. Lack of attention to the signing and performance of trade contracts

The reason why there is a high risk of settlement in international trade activities is that many foreign trade enterprises do not pay attention to the signing and fulfillment of trade contracts. They believe that there is no effective solution to problems in trade, and the contract is just a form. And in order to take the customer, even if the contract is signed, foreign trade enterprises will rarely add in the trade contract to their own protective measures and regulations. In this way, once the dispute in the settlement, the enterprise side will lose the initiative of settlement and become very passive.

4. International settlement risk prevention is not in place

In the current international trade, the settlement business still mainly relies on business personnel to call, more communication with customers, and can not be effective supervision and management; and many enterprises use forward and credit settlement, but not the credit amount control in a reasonable risk range, but also did not handle the corresponding insurance business; at the same time, many foreign trade enterprises themselves have not set up a special settlement risk assessment and management department.

Without sufficient risk prevention measures can not really reduce the settlement risk, to protect the enterprise trade security.

Measures to strengthen the risk management of international trade settlement

1. Enhance security awareness, do a good job of customer credit investigation

Foreign trade enterprises to improve their own trade security awareness, in between trade transactions, the financial situation of the object of the transaction and the level of creditworthiness to conduct a full investigation.

The implementation of the investigation, you can make full use of the role and credibility of foreign trade banks, entrusted to it as a third party to investigate; or the two sides to deliver a certain deposit to the bank, or entrust the bank to issue a letter of guarantee to ensure the authenticity of the creditworthiness of the two sides.

To domestic or foreign trade in the existence of bad records or provide information and the true state of the discrepancy, to be vigilant, after full consideration before making a decision.

2. Make comprehensive consideration and choose the best settlement method

For the seller of trade, the settlement method with the greatest risk is credit sales and forward collection, etc., and the settlement method with the least risk is advance payment and letter of credit, etc., and the settlement risk of the seller is the opposite. Foreign trade enterprises in the choice of settlement, neither to quickly sign and choose a high-risk settlement, nor to avoid risk and missed opportunities.

To carry out a comprehensive consideration of both sides, the combination of opportunities and risks, but also their own actual situation and needs, choose the most suitable for their own settlement.

3. Increase supervision and regulation of international trade practices

Want to further strengthen the risk management of international trade settlement, it is necessary to strengthen the supervision and management of international trade and trade settlement, the establishment and improvement of trade settlement regulatory system. In international trade, there is a breach of contract, fraud or non-fulfillment of contract regulations and other acts, to be cracked down on; according to national and trade norms requirements, the use of administrative or economic means to regulate the trade behavior of foreign trade enterprises, to ensure the security of international trade behavior, to create a good trade environment.

Foreign trade enterprises themselves should also establish risk management departments and systems, on the one hand, do a good job to improve their own capabilities and credit, but also to do a good job of monitoring the settlement of trade objects.

4. Improve the international trade settlement risk guarantee system

The establishment and improvement of international trade settlement risk guarantee system can minimize the risk in the international trade settlement. At present, the insurance for international trade risks can be divided into export credit insurance, exchange rate insurance and commodity transport insurance and other types. Foreign trade enterprises can buy the corresponding insurance according to their actual needs, so as to protect their economic rights and interests and reduce the possible losses.

Similarly, in the guarantee system, on the one hand, enterprises can use banks to enhance their creditworthiness and entrust banks to collect and guarantee; on the other hand, they can take out insurance for relevant trade settlements, etc., which can provide protection for the actual interests of trade parties in trade.

Conclusion

Foreign trade is an important means to stimulate domestic economic growth. Therefore, not only to encourage the development of international trade, but also to provide a good standardized environment for the development of international trade, to protect the rights and interests of trade subjects. Therefore, it is necessary to take certain measures to strengthen the risk management in international trade activities.

The ultimate purpose and link of any trade is the settlement, so the control of the settlement risk is the most important. Doing a good customer credit investigation, choosing the best settlement method, standardizing international trade practices, improving the international trade settlement risk guarantee system and other such a series of measures can help further reduce settlement risks and improve risk management, which can be used as a practical theoretical reference.