Business is based on the principle of honesty and integrity, but we often encounter some troubles. For example, a customer wants to place an order of 1 million US dollars, but the political situation in his country is not very stable. The customer is willing to pay a 15% deposit. Should we do this order or not? This involves a question: if we are not confident about the political situation in some countries or regions and are worried that we will not be able to collect the final payment, how should we deal with it?
You can sort out the countries or regions with higher political risks and make a mind map.
(I) High-risk regions
1. Eastern and Southern Europe
The Greek debt crisis has become a major risk factor affecting the European economy. In June 2018, Greece received a 15 billion euro bailout from the European Union, but the core problem of its excessive debt has not been fundamentally solved. The economic development of Eastern and Southern Europe is highly related to the export situation. The foundation for sustained economic growth is not yet solid, and the overall economy is vulnerable to external factors.
2. Southeast Asia and South Asia
In recent years, the political situation in many Asian countries has changed. The change of government in some Southeast Asian and South Asian countries has led to a shift in diplomacy. These situations will cause certain political risks to the execution of project contracts.
3. Middle East
In recent times, the possibility of regional disputes causing friction and conflict has increased, and the relations between relevant countries have become more complicated. These risks have had a negative impact on the foreign trade of Chinese enterprises.
4. Africa
Most African countries have a single economic structure, and their ability to pay foreign currencies is easily affected by changes in the international environment. Therefore, when trading with African customers, we should pay special attention to political risks.
5. South America
Affected by the decline in global commodity prices, the appreciation of the US dollar, the return of international capital, and the foreign exchange receipts and payments of relevant South American countries, the exchange rates of many South American countries have fluctuated sharply recently, and foreign exchange controls may be intensified. Therefore, the political risks in South America deserve attention.
(II) Response Strategies
For orders from high-risk countries or regions, we must adhere to the principle of delivery upon receipt of payment. We can also settle with a letter of credit payable on sight (the issuing bank must be a well-known international bank). We do not accept letters of credit issued by commercial banks in high-risk countries or regions. Letters of credit issued by well-known banks can be used as collateral in the bank to reduce the risk of losing both money and goods.