Managing Importing Risk

Dealing with suppliers in other countries adds a layer of complexity to trading. It’s wise to be aware of potential risks and fraud, and to understand the strategies that can help protect your business against them.

Currency risk

What is the risk?
That the local currency amount payable on settlement will be higher than the amount calculated when entering the contract, due to an adverse movement in the market price of the currency.

How does it arise?
Exchange rates between most currencies regularly fluctuate, and there is a time lag between entering into a contract and making the payment.

How can it be mitigated?
Importers can identify and manage this risk with a range of currency risk management solutions.

Risk of non-delivery or non-performance

What is the risk?
That your supplier will not perform according to the sales contract, by delivering the wrong or inferior goods, or not delivering on time.

How does it arise?
Your supplier may not be willing or able to perform as contracted.

How can it be mitigated?
Consider requesting inspection of the goods prior to shipment by an independent inspection agency.

Credit risk

What is the risk?
If you have made payment before shipment and your supplier lacks the financial means to effect shipment.

How does it arise?
Your supplier, or other parties in the payment chain, may become insolvent.

How can it be mitigated?
Consider using conditional methods of payment such as Documentary Credit or Import Collection.

Transfer risk

What is the risk?
That a change in government regulations will prevent or restrict your ability to make payments or exchange foreign currency.

How does it arise?
Many countries regulate transfer of money and conversion of foreign currency receipts. Unexpected regulatory changes may occur between entering and settling a contract.

How can it be mitigated?
Specialist knowledge of the market with which you trade can help to reduce this risk. Consult the Australian Trade Commission, Austrade.

Country risk

What is the risk?
That a change in government regulations will prevent or restrict your ability to receive goods.

How does it arise?
Many countries regulate the import and export of goods. Unexpected regulatory changes, such as cancelling of permits or licences, may occur between entering and settling a contract.

How can it be mitigated?
Specialist knowledge of the markets with which you trade can help to reduce this risk. Consult the Australian Trade Commission, Austrade and the Australian Customs Service.

Transport risk

What is the risk?
That goods will be stolen, lost or damaged in transit.

How does it arise?
Goods may be open to these risks when travelling between the supplier and you.

How can it be mitigated?
Consult commercial marine insurance agencies if you wish to insure against transport risk.

Risk of fraud

What is the risk?
That your trading partner is not bona fide.

How does it arise?
There is always the possibility that an unscrupulous person will seek to take advantage of you, and the complexity of international trade can make it difficult to detect fraud before it occurs.

How can it be mitigated?
Transact only with reputable parties that have a proven record with the goods in question, including third parties. Beware of offers that seem too good to be true, because they often are.

Important information about advice
As this advice has been prepared without considering your objectives, financial situation or needs, you should, before acting on the advice, consider its appropriateness to your circumstances. View our Financial Services Guide (PDF 56kb).