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Country risk - refers to risks of changes in the business environment that would have an adverse affect on your company's

operations, profits or assets value in a particular country. It includes risks of political stability, legal systems, economic conditions, cultural environment, and expropriation, restriction of operations or on remittance of profits.

Export Risk Management Plan Risk management is a process of thinking analytically about all potential undesirable outcomes before they happen and setting up measures that will avoid them. There are six basic elements of the risk management process: Establishing the context Identifying the risks Assessing probability and possible consequences of risks Developing strategies to mitigate these risks Monitoring and reviewing the outcomes Communicating and consulting with the parties involved A risk management plan helps an exporter to broaden the risk profile for foreign market. For a small export business, an exporter must keep his risk management analysis clear and simple. Export Risk Mitigation Export risk mitigations are the various strategies that can be adopted by an exporter to avoid the risks associated with the export of goods.

Direct Credit: Export Credit Agencies support exports through the provision of direct credits to either the importer or the exporter. o Importer: a buyer credit is provided to the importer to purchase goods. o Exporter: makes a deferred payment sale; insurance is used to protect the seller or bank. Guarantees o Bid bond (tender guarantee): protects against exporters unrealistic bid or failure to execute the contract after winning the bid. o Performance bond: guarantees exporters performance after a contract is signed. o Advance payment guarantee (letter of indemnity): in the case where an importer advances funds, guarantees a refund if exporter does not perform. o Standby letter of credit: issuing bank promises to pay exporter on behalf of importer. Insurance o Transportation insurance: Covers goods during transport; degree of coverage varies. o Credit Insurance: Protects against buyer insolvency or protracted defaults and/or political risks. o Seller non-compliance (credit insurance): Covers advance payment risk.

Foreign exchange risk insurance: Provides a hedge against foreign exchange risk. Hedging Instruments used to Hedge Price Risk o Stabilization programs and funds. o Timing of purchase/sale. o Fixed price long-term contracts. o Forward contracts. o Swaps

Managing interest rate risk Running a business inevitably requires a certain level of debt, and the loan repayments to service this debt are likely to be a significant part of your cost structure. Adverse movements in interest rates can have a serious impact on your bottom line. To offset this risk, you can fix or cap your rate so your repayments become more stable each month, look at a interest rate collar so your variable rate stays within a known range, or employ a combination of these options. Solutions for borrowers Bill facility This loan offers a range of repayment options to help you take care of short- and long-term financial needs. In addition, by attaching interest rate risk management solutions to the facility, you can protect your business from adverse interest rate movements and take advantage of positive fluctuations over an agreed period. Managing currency risk Currency risk arises because the value of the Australian dollar fluctuates due to supply and demand. Any business that purchases stock or equipment overseas is affected. Currency risk management will help protect your business from the negative impact of currency fluctuations while allowing you to benefit from any favourable exchange rate movements. The primary goal of currency risk management is to protect your business from the negative impact of exchange rate fluctuations, at the lowest possible cost. Because exchange rate volatility also provides opportunity for gains, a secondary goal is to strike a balance between risk and return. Solutions for managing currency risk Our comprehensive range of currency risk management solutions include the following: Forward foreign exchange Forward foreign exchange is a risk management tool that can help protect your business from adverse exchange rate movements. You lock in an exchange rate now for a specific time in the future, which enables you to plan for and budget your business expenses with more certainty. Flexible forwards Flexible forwards provide protection against adverse exchange rate movements while giving you the opportunity to benefit from favourable exchange rate movements. Currency options A currency option provides the buyer of the option with the right (but not the obligation) to buy or sell one currency amount at a specified exchange rate on a specified date. Managing commodity risk

Fluctuations in commodity prices and currency movements can make it difficult to plan and budget for your business. Commodity risk management offers your business protection from the negative impact of fluctuating prices at the lowest possible cost. Our commodity risk management solutions help you manage the risks associated with fluctuating prices. The benefits of commodity risk management include: Plan and budget with greater accuracy Control costs Manage margins more effectively Create certainty around fluctuating commodity prices Take advantage of a strategic view of commodity prices Customise solutions developed for specific needs Remove the possibility of margin calls and brokerage associated with using futures Risk management solutions Swaps Commodity swaps offer growers and consumers a fixed or floating price per unit of measurement that covers the majority of their price risk, excluding basis risk. Swaps can be used to lock in a fixed price per unit of measurement. If you are receiving a fixed cash flow, you may want to swap this for a floating cash flow for strategic reasons. Swaps may have multiple settlement dates or one settlement date known as rate-set periods, where a settlement will take place between your business and the Bank. These rate-set dates may be quarterly, semi-annually or customised to your needs. In the case of wheat price risk management, the payment dates may reflect the AWB Basis Pool. Swaps cannot be extended for an additional term and are cash settled at maturity, irrespective of whether the Bank owes you a cash payment or whether you owe the Bank a cash payment. Options Commodity options offer growers and consumers the right, but not the obligation, to deal at a specified rate in the future. Call options A call option gives the buyer of the option the right (but not the obligation) to buy the underlying commodity at a future point in time (the expiry date) at a pre-defined price (the strike rate). Upon expiry, the holder (purchaser) of the option must decide whether to exercise the option if the price is favourable, or allow the option to lapse if it is better to deal in the cash/spot market. The seller of a call option receives a premium at the beginning of the transaction and has an obligation to effect settlement. It is only the option buyer who has the option to settle. The premium is the cost to the buyer for this option and is compensation to the seller. Put options A put option gives the buyer of the option the right (but not the obligation) to sell the underlying commodity at a future point in time (the expiry date) at a pre-defined price (the strike rate). Upon expiry, the holder (purchaser) of the option must decide whether to exercise the option if the price is favourable, or allow the option to lapse if it is better to deal in the cash/spot market. The seller of a put option receives a premium at the beginning of the transaction and has an obligation to effect settlement. It is only the option buyer who has the option to settle. The premium is the cost to the buyer for this option and is compensation to the seller. Option structures By combining put and call options, a variety of structures can be built to suit your needs and

reduce costs associated with the premium. Such structures are collars, put/call spreads and ratio options. Minimizing export business risks: 1. How to minimize political risk and country risks:

Always do extensive market research and try to about the politics, economy, culture and business environment of the country where your client is located. Besides language barriers and legal restrictions, your business may be get affected by suddenly introduced new regulations, political riots or natural disasters. If you are dealing in a foreign language, taking assistance of a professional language support is a good idea. In export business, a clear agreement is very important to get rid of confusion and to reduce risk. If you find that doing business with a company in a foreign land is very risky, don't get involved in long term business deals.

2. Minimizing Legal Risks: Often, we find that most of the international business laws are based on treatises. So, it is always a good idea to locate the relevant treatise while researching for any specific international business law. The Internet is a great source and you would certainly get a lot of information in hundreds of websites. While studying the laws, make sure whether there is any possibility that a conflict would arise between the international and the domestic law. 3. Minimizing Credit Related Risks:

Always use a reliable payment method for transaction Always try to know exactly what costs you and your client are each responsible for. Shipping or air freight, import duties, taxes, onward delivery to your premiseconsider all these things before signing the contract Foreign currency exchange rate could change, and therefore, it is important to keep yourself ready for some extra expenses

4. Assessing the Creditworthiness of Your Customer:

Don't get excited. Use your common sense to understand the offer; does he want to buy your product without asking about the price or quality? Has he accepted the deal without bargaining? Is he very quick to know your account number? Analysis all these things and only after that take the next step. Do not provide financial account information of your company unless there is a good reason to do so. Get all the terms and conditions, modes of payment, sales conditions, quality inspection, etc. in writing.

Always choose Letter of Credit (L/C) or Escrow as payment methods. Check the L/C number, opening date & place, name & address of the issuing bank, valid date, shipping date, etc. Request for a nominal payment for samples