Trade finance-Banking/Implementation

 Different types of Risks involved in trade As I said in previous post in international trade there will be lot of risk involved Country risk: Post contract between buyer and seller there might be changes in the policies of countries which then impact trade like change in import duty or export duty of the country Political risk : there might change in political views of one country on other which in turn trouble trade To avoid above risks in LC we have a method called confirmation wherein once a bank from different country confirms on the LC they are bound to pay for LC even applicant and Issuing banks get defaulted Currency risk: Mostly common risk in international trade as trade happen between two different countries with easily convertible currency there might be change in FOREX rates post our trade contract is done which gives losses to buyer or seller To avoid currency risk basically we will use forward contracts to block the exchange rate Transport risk: there a...

In Trade finance where there is involvement of buyers and sellers from different regions payments to be done secure manner Where there are new buyers or sellers without having prior relationship they tend to use banks as intermediaries for their day to day transactions As banker/individual/consultant its very important to know different types of payments used mostly in trade finance Here we will going through 4 primarily used payment methods 1.Open Account : In this type of payment buyer pays to seller post receiving of goods   Example : MR A have asked customization of RR car those and RR have Customized car as per his commitment so in this example RR company have to sell car To MR A This type of payment is more advantageous to Buyer where can validate the quality and quantity of goods and then he can settle to seller Here seller have multiple disadvantages once goods has been shipped there is a probability of buyer not paying to seller or default of buyer as well ...

 There are many countries which doesn't have abundant resources For example some countries have more oil Resources and  some have natural minerals which in turn brings lot of exchange of goods and services in between countries and same will be applicable within country as well When there is trade happening in between different countries most of the countries cannot send there money transfer in there local currency  All most all the countries will trade in Freely marketable currencies like USD,EUR,GBP in international market To exchange these goods and services with monetary value there should be involvement of some financial institutions to transfer funds from one country to other Here comes Financial institutions like Banks will get involved by buyers or sellers to sell or buy goods or services in exchange of monetary value  So Banks facilitate Importers and exporters by providing Financing or guarantees for there products Why Trade finance Trade Finance allows comp...