Financial Risks Associated with International Trade

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Financial Risks

One of the major financial risks concerned with international business management is fluctuations in foreign exchange. As currency rate for each country may vary due to various economic factors around the globe it may affect organizations in international business. Another risk associated with the financial crisis is the side effect of political leadership changes occurring in the country.

Crisis due to Currency Fluctuations
If the value of the currency falls below a certain stage it can directly affect the international business. This effect will be crucial in the case of small business owners having export into international market. Insuring against such crisis is possible but the investment in insurance is also costly.

Risk associated with Foreign Exchange
The foreign exchange rate changes affect small business firms having international workers. And if the supplier is also from another country it will also need to be monitored for reducing the risk due to foreign exchange. As these fluctuations in currency are having positive and negative the expectations cannot be predicted.

Risk Associated with Political Change
Sometimes the change in political leadership can contribute to changes in foreign exchange. There are also chances of policies changing due to the leadership change. Additional tax implemented by the political system can also affect the international trade.

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