Mahalaxmi Enterprises No 5617, 66, 57th 'A' Cross 6th Main, Iv Block, Rajajinagar Bengaluru 560010 Karnataka. India.

Phone: 23357433, 23201967 Email: me@vsnl.com

International Trade Finance

An analysis of a typical credit portfolio at any bank will reveal that in general over 50% of all companies are involved in cross-border trade to one degree or another. Buying and selling goods and services outside of the domestic market place presents corporate entities, and the banks and financial institutions that provide support to these businesses, with a unique set of risk considerations and challenges in addition to the buyer defaulting. The ultimate objective of any trading company is to get paid. It is the very reason that buyers and sellers conduct business together. Equally the prime objective of a bank and financial institution is to ensure that any finance that they provide to their clients in support of international trade is repaid in full and on time and that the transaction is profitable. Irrespective of the potentially opposing needs and risk profiles of a bank and its client in a crossborder transaction, international trade finance mechanisms and procedures can provide risk mitigation techniques and additional comfort and security to all parties. Needs of corporate entities trading internationally:

Security of payment - get paid on time and every time! Access to finance and additional or alternative funding options Value for money and cost effectiveness The ability to drive out operational efficiencies Improved profitability Identification and mitigation of risks Sharpening credit quality and control

Needs of banks/financial institutions providing trade finance:

Transactional control and 'constructive' title to goods

Provision of facilities that are closely matched to the customer's actual funding requirements Avoidance of funds being diverted into supporting general working capital or financing losses Repayment of facilities directly linked to the sale of underlying goods on an individual invoice by invoice basis i.e. self-liquidating Early warning of potential customer liquidity problems Improved credit quality through an enhanced ability to monitor risk Enhancement of the 'risk/reward' equation Increased revenue streams and reduced losses Remain competitive in the trade finance arena Complying with developing legal and regulatory requirements Reporting to senior management to enable a clear understanding of risk

The Risk Reward Ltd proposition At Risk Reward Ltd we have a team of international trade experts who are available to add value to and assist banks and their clients with their international trade related scenarios and strategies by:

Providing advice to corporates of all sizes, banks/financial institutions and professional bodies on the subject of cross-border trading and related practices with the objective of providing risk mitigation solutions, financing options and cost saving/revenue generation opportunities Designing and delivering tailored in-house and public international trade related courses and workshops Training and developing front, middle and back office employees of corporates, banks/financial institutions and professional bodies in the field of international trade practices and procedures. Advising firms on the impact of new and developing rules and regulations Modelling or calibrating models involved with international trade, ensuring that senior management receive the information they require to effectively manage and control the area.

International Finance Risk

International financial markets face a variety of risks and they are collectively known as international finance risks. The premier financial institutions of the world apply various principles and practical applications to deal with the risks of international finance. Financial risks usually are those kind of risks which are related to finance or money. The financial risks related to investments include capital risk, currency risk, as well as liquidity risk. The debt related risks include interest rate risk and credit risk. The international insurance industry also faces a number of risks. The various risks that influence international financial markets usually include the following:

Political risk Financial risk Economic risk Country risk Market risk Exchange rate risk Operational risk Legal risk Hedging risk Systemic risk

These types of risk can influence the decision making procedures involved in portfolio investment, foreign direct investment (FDI), and bank credit. Financial risk management plays a pivotal role in the management of international finance risks. International finance risk management offers risk assessment services which are beneficial for the following:

Foreign direct investment Multinationals

Rating agencies Investment managers, such as mutual funds, etc. Insurance companies Banks Bank loans Portfolio investment

The international financial market has experienced a significant shift in the 1980s and 1990s. The international financial transactions have become more complicated and rapid and as a result of this, the international financial markets are facing greater uncertainties. Currently, the financial services industry has become much more aggressive and the international market participants are getting the exposure to increased financial risks than earlier. The reasons behind this are:

The globalization of financial markets The unpredictability or volatility of the international financial markets The complex structure of the new types of investments The increase in the global supply of loanable funds The intense international market competition, which is increasing day by day

Hence, it is absolutely necessary that the financial risks are properly measured and preventive actions for efficient management of international financial risks are applied. For maintaining the stability of both international financial market and domestic financial market, the performance of efficient risk management by banks and financial institutions is crucial. Supply of accurate and reliable information on international financial markets is important for the market participants because with help of dependable information, they are able to make knowledgeable investment decisions.