It is important for the exporter to keep the prices down keeping in mind all export benefits and expenses. However, there is no fixed formula for successful export pricing and is differ from exporter to exporter depending upon whether the exporter is a merchant exporter or a manufacturer exporter or exporting through a canalising agency.

Credit Risk

Sometimes because of large distance, any false buyer can increase the risk of non-payment, late payment or even straightforward fraud. So, it is necessary for an exporter to determine the creditworthiness of the foreign buyer.An exporter can seek the help of commercial firms that can provide assistance in credit-checking of foreign companies.

Poor Quality Risk

Exported goods can be rejected by an importer on the basis of poor quality. So it is always recommended to properly check the goods to be exported. Sometimes buyer or importer raises the quality issue just to put pressure on an exporter in order to try and negotiate a lower price. So, it is better to allow an inspection procedure by an independent inspection company before shipment. Such an inspection protects both the importer and the exporter. Inspection is normally done at the request of importer and the costs for the inspection are borne by the importer or it may be negotiated that they be included in the contract price.

Alternatively, it may be a good idea to ship one or two samples of the goods being produced to the importer by an international courier company. The final product produced to the same standards is always difficult to reduce.

Transportation Risks

With the movement of goods from one continent to another, or even within the same continent, goods face many hazards. There is the risk of theft, damage and possibly the goods not even arriving at all.

Logistic Risk

The exporter must understand all aspects of international logistics, in particular the contract of carriage. This contract is drawn up between a shipper and a carrier (transport operator). For this an exporter may refer to Incoterms 2000, ICC publication.

Legal Risks

International laws and regulations change frequently. Therefore, it is important for an exporter to drafts a contract in conjunction with a legal firm, thereby ensuring that the exporter's interests are taken care of.

Political Risk

Political risk arises due to the changes in the government policies or instability in the government sector. So it is important for an exporter to be constantly aware of the policies of foreign governments so that they can change their marketing tactics accordingly and take the necessary steps to prevent loss of business and investment.

Unforeseen Risks

Unforeseen risk such as terrorist attack or a natural disaster like an earthquake may cause damage to exported products. It is therefore important that an exporter ensures a force majeure clause in the export contract.

Exchange Rate Risks

Exchange rate risk is occurs due to the uncertainty in the future value of a currency. Exchange risk can be avoided by adopting Hedging scheme.

Planning for Export Risk Mitigation

Export risk mitigations are the various strategies that can be adopted by an exporter to avoid the risks associated with the export of goods.
  ♦  Direct Credit: Export Credit Agencies support exports through the provision of direct credits to either the importer or the exporter.

• Importer: A buyer credit is provided to the importer to purchase goods.
• Exporter: Makes a deferred payment sale; insurance is used to protect the seller or bank
  

  ♦ Guarantees

• Bid bond (tender guarantee):   Protects against exporter’s unrealistic bid or failure to execute the contract after winning the bid.
• bond:  guarantees exporter’s performance after a contract is signed.
• Advance payment guarantee (letter of indemnity): in the case where an importer advances funds, guarantees a refund if exporter does not perform.
• Standby letter of credit:issuing bank promises to pay exporter on behalf of importer.

  ♦  Insurance

• Transportation insurance:  Covers goods during transport; degree of coverage varies.
• Credit Insurance:  Protects against buyer insolvency or protracted defaults and/or political risks.
• Seller non-compliance (credit insurance): Covers advance payment risk.
• Foreign exchange risk insurance:Provides a hedge against foreign exchange risk.

  ♦  Hedging

• Stabilization programs and funds.
• Timing of purchase/sale.
• Fixed price long-term contracts.
• Forward contracts.
• Swaps