Commercial risk is any event that prevents the buyer from paying or prevents the seller from delivering the product or service. Commercial risks exist in both domestic and international sales.
• Bankruptcy or insolvency by the buyer
• Protracted default
• Problems with payment arrangements
• Problems with the merchandise
• Contract disputes
• Additional costs for financing, insurance, and shipping
Any commercial transaction carries a certain risk. However, political risks are a concern only in international sales and vary by country/region.
An international payment risk is any event or unforeseen factor not necessarily within control of the buyer and/or exporter caused by cross border issues.
• Government or political intervention
• Problems with currency exchange
• Problems with the movement of merchandise
• Acts of God
Export credit insurance can provide risk mitigation against both commercial and political risks.