The financial risks of doing business abroad generally fall into one of three categories:
- Commercial risks:
You are not paid by your foreign buyers due to lack of money or a dispute related to the contract or transaction. Through insurance programs such as those offered by the Export-Import Bank of the United States, you can protect yourself against such risks.
- Political and economic risks:
Foreign governments have, from time to time, restricted or prohibited commercial payments due to economic downturn or political instability. Some companies elect to obtain insurance from the Export-Import Bank and a few private vendors to cover these kinds of risks.
- Currency risks:
This refers to the risk encountered if the exchange rate between the local currency and the U.S. dollar changes. To protect themselves from having to monitor international currency movements, many U.S. exporters keep their contracts and payment terms in U.S. dollars.
The IBA provides information on programs that exist to mitigate international financial risks, as well as counseling to companies venturing into international markets. Please contact the IBA for help with your international financing questions.
