Risk Management in Foreign Trade
Risk Management in Foreign Trade
Risk Management is the process of
carefully and thoroughly identifying and evaluating in advance the risks that may arise while
performing the work of institutions or enterprises, taking measures to
eliminate or minimize the risks.(TDK)
One of the main difficulties of SMEs -one of the largest stakeholders of production in Turkiye, apart from access to finance, is not having sufficient knowledge about foreign trade. TUIK data is a remarkable indication that SMEs prefer CAG/open account as payment term.
Let’s watch our step!
Many of SMEs in our country do not issue a written contract for their domestic business. When this attitude is applied in foreign trade transactions, many difficulties arise. In general, proforma invoice will not replace the contract, albeit arranged in a such a way to work similarly. However, in addition to the information in proforma and the contract; force majeure, legal provisions to be applied in case of conflict, confidentiality, etc. many points can be recorded by mutual agreement and used for the legal process.
While foreign trade provides opportunities in a wider range than the domestic market, it will also bring about many risks. It is therefor necessary to be aware of the basic risks such as Commercial, Political & Economic sanctions, Exchange rates, Transportation-damage and Documentation.
On the other hand, regulations for foreign trade in Turkiye impose various responsibilities on importers/exporters.
These risks can be
eliminated/minimized with “Risk-Oriented Foreign Trade Management”.
How?
carefully and comprehensively
arranged contract,
information about the buyer (Know
Your Customer),
insurance,
information about the payment
& delivery terms,
preference of advance
payment/letter of credit for export,
caution around paperwork,
investigation of the necessary documentation and tax obligations about the product for import facilities
Consult a Professional
Numerous banks provide free services in foreign trade. It is also possible to obtain this information through the Exporters’ Associations chnannels. Especially with Covid-19, relevant trainings have become both remotely accessible and free. Ensuring that at least one person from the company participates in these trainings would be a valuable step to be taken in the right direction.
Gazi SÜRÜCÜ
Trade Fin.& Compliance