For small exporters failure to get payment for one consignment is a big deal . It can lead even to the bankruptcy of the organization . Looking at that, there is a burning to need to put right kind of 'Export Risk Management' program in practice. Specially chances of bad debts has to properly analyzed . Most of the small exporters doesn't have proper risk management practices . Following key areas has to be looked after in order to implement proper risk management practices in export.
1. Understanding the Pre-shipment and Post-shipment framework from Bank /Institution.
2. Defining the mode of payment in export which would be benefiting-
a) Direct to customer
b) Through Merchant Exporters
c) Overseas Agent
3. Understanding the barriers which could lead to major problem areas for bad debt
a) Identifying new markets for your product
b) Identifying genuine buyers in new market
c) Understanding the quality norms
d) Financing pre-shipment post shipment activity
e) Cost of Export insurance program
f) Bureaucracy in export process
g) Payment risk in foreign markets
h) Volatile foreign exchange
4. Other items of risk
a) Insolvency of buyer
b) Insolvency of buyers bank
c) Deliberate attempt of buyer not to make payment
d) Foriegn currency risk
e) Political and war risk
f) Rejection due to various other reason ( quality issues,
documentation,perishibality of goods)
5. Possible ways of managing risk
b)Complaint to Indian Embassy
c)Complaint to Export Promotional Council
d)Complaint of authorities in buyer's country
e)Filed case under under ECGC/insurance cover.
f)Intiate legal action against the company.
g)Hire debt collection agency
6. Work on the reason like quality , delay in supply and commercial dispute
7. Using following services from other agencies
1. Market Research report from export promtion council
2. Service of overseas buyer assessment agency
3. Export insurance cover.
4. Forward cover for foriegn agencies
5. Factoring companies
6. Service to debt collecting agencies