Payment

Methods
for International Trade
UF1 – SIMPLE PAYMENT METHODS

Teachers: Josemi Castelló & Raquel Lendines

UF 1 - PART 3
 RISKS

1. COMMERCIAL RISK 1. To Identify the risk

2. CONTRY RISK 2. To manage the risk (risk

management)

3. LEGAL RISK 3. To cover the risk (risk

coverage)
4. EXCHANGE RISK
 1. COMMERCIAL RISK
INDENTIFY Risk of insolvency of the payer. Voluntary or involuntary.

RISK - To get information when starting a business relationship

MANAGEMENT 1. Commercial reports on Financial Statements on our customer
2. Payment defaults files. ( Spain: RAI, ASNEF….)
3. Other companies reports on our customers
4. Public Organizations as (Chambers of Commerce , ICEX, etc…)
5. Additional informations on our customers by Banks, Issurance
companies, etc…
RISK COVERAGE - Payment in advance
- Documentari Payment methods as Letter of Credit
- Bank Guarantees
- Factoring (without recourse)
- Insurance companies ( i.e CESCE (public) – CREDITO Y CAUCIÓN
(Private )
 2. COUNTRY RISK
INDENTIFY FUNDS CANNOT BE TRANSFERRED ABROAD DUE TO POLITICAL
SITUATIONS IN A COUNTRY. (War, country insolvency, )
Even when Payer can and want to pay.
RISK - Evaluating Country risk is essential:
MANAGEMENT 1. Inssurance companies reports ( CESCE, COFACE…)
2. Public Organizations ( COPCA, ICEX…)
3. Bank reports and info
4. International Monetary Fund (FMI) reports, World Bank (Banc
Mundial) reports.
5. International Professional magazines and publications
6. Rating Agencies (Standard & Poor’s, etc)
RISK COVERAGE - Payment in advance
- Documentary Payment methods as Letter of Credit via another
country.
- Bank Guarantees
- Forfaiting Without recourse
- Insurance companies ( i.e CESCE (public) – CREDITO Y CAUCIÓN
(Private )
 2. EXCHANGE RISK
INDENTIFY Transactions with a Currency different to ours are exposed to a the risk of
changes in its value rating if we pay or collect IN THE FUTURE in a
different currency to ours.
RISK COVERAGE - INTERNAL OPTIONS:
- - To collect in our own currency
- - Balance transactions paying and collecting in the samen foreign
currency
- - To share Exchange Risk with buyer/seller
- - Prices negociation : Via contract, the final Price to pay can change
at the same time of variations of Currencies Exchange.

- EXTERNAL OPTIONS
- - Exchange Insurance (Banks, Insurance companies…)
- - Currency Options (*)
 (*) Currency Options

What Is a Currency Option?

A currency option is a contract that gives the buyer the right, but not the
obligation, to buy or sell a certain currency at a specified exchange rate on or
before a specified date
 4. LEGAL RISK
INDENTIFY When a Default could happen, we need to minimize this risk.
Submitting transactions via Contract to international laws or even our
local laws.

- International Chamber of Commerce

- UE Laws
- Local Laws
Payment
Methods
for International Trade
UF1 – SIMPLE PAYMENT METHODS
(part 3)

Teachers: Josemi Castelló & Raquel Lendines