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An Appraisal of Export Risk Introduction Commerce is inherently risky and exporting is no exception It involves several risks that must be analyzed and reduced as much as possible Avoiding and control risks in global trade is an everyday occurrence but absolutely vital There are series of export business risks political risk financial risk commercial risk foreign exchange risk shipping risk economic risk and intrinsic risk Nelson 1999 The report outlined main export risks and highlight some processes can be adopted to minimise those extrinsic risks The processes are evaluated at last The main intrinsic risk associated with company Many exporters fail because of intrinsic reason The company might underestimate foreign regulations and incur unexpected cost Exporter may fail because of several reasons 1Manage risk New skills are required which emerge from export practice including methods of financing and how to cope with cash management salespersons ability and issues as the collection of receivables repatriation of funds and foreign exchange and interest rate exposure and forex risk Branch 2000 Lack of export skills can lead to failure The management of financial personnel is very important in export process 2Product risk The company might not understand foreign customer preferences and fail to offer a competitively attractive product Kotler 2000 A product launch in an overseas market is more costly and complex in comparison with a domestic launch The product specification must comply with all the overseas market legislation and the legal environment of the market in which it is to be sold Good research and visits to the intended market can serve to reduce such risk Branch 2000 3Pricing risk When exporter chooses to adopt below production cost pricing as the selling price abroad there are quite big risk as it is designed to substantially increase volume If the increased volume generated does not absorb the fixed and general overhead costs the product will be unprofitable and losses will result When exporter chooses multi-national
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