Page 58 - EBOOK RISK MANAGEMENT

1) Buyer’s Insolvency/Credit Risk

The inability of a buyer to pay for products or services delivered on time is referred
to as buyer insolvency or credit risk. This is a risk for the seller if he or she sells or

provides a product or service without receiving complete payment or has received

late payment.

2) Buyer’s Acceptance Risk
Buyer’s acceptance risk refers to the buyer’s non-acceptance of goods delivered

or services rendered. Unaccepted goods or services may create difficulty for the
seller to dispose the goods to another buyer or encounter working capital problem.

3) Knowledge Inadequacy
A buyer or seller who wants to expand his firm into a new

product/service/industry/country may lack sufficient information on the risk of the

new product/service, the local market environment, or the fashion of the items. The
risk of a firm failing increases when there is a lack of knowledge.failure.

4) Seller’s Performance Risk
A seller may fail to carry out his obligations in a sales contract due to one or more

reasons, and such non-performance by the seller may have adverse consequential
impacts on the buyer’s business. It could be expensive for the buyer to take legal

actions against the seller in his country.

5) Documentation Risk

Documentation risk is the risk of non-conformance to specific documentation
requirements under a sales contract or documentary credit. Failure in fulfilling

documentation requirements may result in seller’s inability or delay in obtaining

payment for goods delivered or service rendered.

6) Economic Risk

Economic risk refers to unfavourable economic conditions in buyer or seller’s country
which may affect both parties in fulfilling their obligations. On the buyer side,

economic risk may result in buyer’s insolvency or inability to accept the goods or

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