Free Online Course in International Business
Knowledge of Political and Economic Risks Causing Late
and/or Non-payment from Overseas Market:
Cancellation/Failure to Grant US
Export License, Civil Unrest, Foreign Currency Delays/Shortages
The purpose of this activity is to promote discussion and
understanding of the differences and similarities of risks of slow or
non-payment from domestic and international trade situations.
As a class or in smaller student groups, present ways you
would respond to the following situations covering the risk and the possible
mitigation of that risk.
Your customer has failed to obtain an import license.
Evaluate:
·
the disposition of the goods and related costs
·
international risk of payment or recovery of the
goods
·
the ability to acquire the license after the fact
Your customer is located in a land-locked country.
The closest port is in a country that is at war.
Evaluate:
·
alternative distribution channels and logistics
·
the use of insurance if the goods might be
confiscated, embargoed, or destroyed by activities associated with a war
·
the financial impact of delays in delivery caused
by the war or by alternative routes
Your customer is located in a country that has an unstable
government. Evaluate:
·
the impact of foreign currency fluctuations and
the use of hedging mechanisms to overcome them
·
an alternative form of payment to be employed
such as bartering
·
the risk of nationalization by the government of
private industries
Your customer is located in a country that has
hyper-inflation and anyone who has liquid assets and the ability to move those
assets out of the country is doing so.
Evaluate:
·
the impact on the value of the currency in the
open markets
·
the impact on the foreign currency reserves of
the country
·
the impact of the central bank restricting
payments outside their country under these circumstances
Your customer sends you a financial statement prepared by a
local accounting firm. Evaluate:
·
the translation risk of the foreign assets and
the impact of a major currency fluctuation against those assets
·
whether generally-accepted accounting practices
apply internationally as well as domestically
·
the ability to get credit information on the
company and from what sources
Your sales department has communicated with a new customer
by fax and e-mail. The customer
needs your company to start work on building a unique piece of machinery.
The down payment and the purchase order will follow shortly.
Evaluate:
·
the payment vehicles that could or should be
employed before the manufacturing process begins
·
the need for an underlying contract to bind the
parties in the transaction
·
the potential for miscommunication on the
required needs or functionality of the machinery being ordered
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