Risk Management Strategies in International Markets

Abstract

On an operational level, companies with processes of internationalization are confronted with credit risks, interest rate risks, and foreign exchange risks in trade and financial operations that they perform daily within their operating cycle, transforming sometimes great opportunities into financial catastrophes. As these risks strongly affect companies' normal activities in international markets through higher financial costs arising from receipts that don't occur, from unfavorable exchange differences or negative evolution's in the interest rates, different strategies to manage these risks will next be addressed. At first, the payment techniques and sources of financing in international trade that allow to mitigate the credit risk and to protect the company's treasury will be presented. Then, the techniques to hedge exchange risk and interest rate risk will be studied to highlight how they could improve the international businesses' margins.