Commercial and political risks

Commercial risks refer to potential losses arising from the trading partners or the market. It is important secure that the trading partners are reliable. In addition, it is important to take into account the trading partner's possible insolvency or unwillingness to pay. The choice of payment method is of utmost importance. Choosing Trade Finance products and using the general Incoterms 2010 (pdf, 548 KB)Opens new window delivery clauses will diminish or eliminate many risks related to trading. For example, when a tailored product is manufactured and paid, we recommend you choose advance payment or documentary credit as the method of payment. 

Examples of how commercial risks can become reality: 

  • Your trading partner cannot deliver or pay the products/services as agreed. 
  • Your trading partner does not want to act in accordance with the agreement. 
  • You have differences in interpreting the trade agreement. 

Political risks 

It is important for a company to follow the political and economic circumstances and events in its area of operations. In order words, it has to monitor the country risk. There are many different situations that can involve country risks. A country's political circumstances may affect the import and export regulations and consequently currency transfers. Economic circumstances may affect a country's ability to manage its liabilities. 

Examples of circumstances where a country risk can become reality:

  • Sudden changes in monetary and currency policies or export and import regulations. 
  • Wars and changes in political and economic alliances. 

Risk of damage related to goods 

Risks of damage arise from unexpected external factors. For example, goods may disappear or become damaged during delivery and the insurance policy does not cover this or there is no insurance. 

Risks of damage related to goods can be managed by the right choice of payment method, insurance and delivery terms and conditions. 

The collection of delivery terms, Incoterms 2010PDF, drawn up by the International Chamber of Commerce (ICC) are commonly used in international trade agreements. 

Agree with your trading partner on the following matters related to delivery terms: 

  • who arranges the delivery - the buyer or the seller 
  • who takes out insurance - the buyer or the seller 
  • when are the goods regarded as delivered
Products in focus All products Products in focus

Export documentary credit

Energise your exports

Boost your cash management and reduce risks. Export documentary credits are a commonly used method of payment in international trade.

Standby documentary credit

You can manage the risks related to foreign trading with a standby documentary credit

A standby documentary credit corresponds to a bank guarantee in the form of a documentary credit. A standby documentary credit is a solution for both importers and exporters.

Import documentary credit

Manage the flow of goods with a documentary credit

A documentary credit is an excellent method of payment when the seller requires collateral before manufacturing begins or needs financing for the production.

All products

Export documentary credit

Energise your exports

Boost your cash management and reduce risks. Export documentary credits are a commonly used method of payment in international trade.

Standby documentary credit

You can manage the risks related to foreign trading with a standby documentary credit

A standby documentary credit corresponds to a bank guarantee in the form of a documentary credit. A standby documentary credit is a solution for both importers and exporters.

Import documentary credit

Manage the flow of goods with a documentary credit

A documentary credit is an excellent method of payment when the seller requires collateral before manufacturing begins or needs financing for the production.

Export collection

A method of payment where bank forwards documents.

Use collection when you want your customer to pay the collection amount or accept a draft with a term of payment before delivering the goods.

Import collection

Import collection is a good alternative to an advance payment

You can pay the collection after the goods have been shipped.

Export finance

Offer your customer a buyer credit.

We can finance the term of payment your company has granted to a foreign buyer either by buying your company's endorsable export receivables or by making a financing agreement directly with the buyer.

Neuvoja ulkomaankaupan tueksi

Cargo ship 

Commercial and political risks

Choosing Trade Finance products and using the general International Commercial terms (Incoterms) decreases or eliminates many of the risks related to international trading.

Man looking through magnifying glass 

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