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services. On the other hand, the seller may experience difficulty in producing or
shipping the goods per se.
7) Cultural Risk
Different countries have their unique language and culture. The inability to
appreciate/accept cultural differences and/or language barrier may result in
conflicts and non-completion of the sales contract.
8) Legal Risk
Legal risk is the potential for financial loss arising from uncertainty of legal
proceeding or change in legislation, such as a foreign exchange control policy. A
sales contract could be frustrated due to changes in laws and regulations.
9) Foreign Exchange Risk
A buyer or seller may deal with foreign currencies in their daily course of business.
This implies that they are exposed to fluctuations in foreign exchange market which
may result in paying more (by the buyer) or receiving less (from the buyer) in terms
of the local currency.
10) Interest Rate Risk
Interest rate risk is the risk borne by an interest-bearing asset, such as a floating
rate loan. An increase in interest rate will result in buyer or seller paying more interest
for their floating rate loan.
11) Political/Sovereign Risk
Political/sovereign risk refers to the complications that buyer or seller may expose
due to unfavourable political decisions or political changes that may vary the
expected outcome of an outstanding contract. Examples of political/sovereign risk
are changes in fiscal/monetary policy, war, riots, terrorism, trade embargoes, etc.
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