Free Online Course in International Business

Knowledge of Commercial Risks of Late and/or Nonpayment from Overseas Buyers

Knowledge Statement

Knowledge of Commercial Risks of Late and/or Nonpayment from Overseas Buyers.

Activity

Discuss the following issues:

·        What are the characteristics of risk evaluation?

·        What are differences in “in-country” (domestic) vs. international credit risk?

·        How does risk differ country by country? Compare and contrast different countries assigned to groups or individuals.

·        What global current events have changed (increased/decreased) the risk of doing business in a particular country?

Assessment

1.                     The tenets (principles) of risk assessment rely on

a.      the customer for the most information.

b.      gathering as many facts on the customer as possible.

c.       your sales department for key data.

d.      having financial statements for all customers.

2.                     Recognizing the “risk/reward” of international credit means

a.      reducing outstanding receivables as much as possible.

b.      having flexible credit policies for international customers.

c.       knowing and apply the components of the “costs” of credit.

d.      getting the customer to agree on the “shortest” terms possible.

3.                     The “Eight C's" of credit risk evaluation for the global seller provide

a.      the sales department with necessary information.

b.      assistance to a buyer in improving the relationship with a seller.

c.       a simple checklist for the customers to complete.

d.      research on the customer  and the international environment.

4.                     The “risks and rewards” element of international credit differs from domestic or “in-country” credit decisions because

a.      there is normally more profit available in international sales transactions.

b.      more factors impact both risk and reward in the international scene.

c.       there is normally more pressure from sales to sell internationally.

d.      financial statements on international customers are, by nature, more comprehensive than those of domestic customers.

(Correct answers: 1=b, 2=c, 3=d, 4=b.)