Business – 6.1 External influences – International | e-Consult
6.1 External influences – International (1 questions)
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Model Answer:
- Political/Regulatory Risk:
- Risk: Changes in trade policies, tariffs, or political instability can disrupt operations.
- Mitigation 1: Use export credit insurance or political risk insurance to protect against losses.
- Mitigation 2: Diversify markets so reliance on any single country is reduced.
- Exchange‑Rate Risk:
- Risk: Fluctuations in currency values can erode profit margins.
- Mitigation 1: Hedge exposure through forward contracts, options, or swaps.
- Mitigation 2: Invoice in the home currency or use multi‑currency pricing to share risk with customers.
- Supply‑Chain/Logistical Risk:
- Risk: Longer, more complex supply chains increase the chance of delays, damage, or increased costs.
- Mitigation 1: Develop strong relationships with reliable overseas partners and maintain safety stock.
- Mitigation 2: Implement robust tracking systems and contingency plans for alternative routes.
By recognising these risks and applying appropriate mitigation measures, managers can make more informed decisions about entering and sustaining international trading links.