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Chapter 11

Types of financial risk

2.1 Credit risk

Credit risk is the risk of non-payment or  Strong credit control procedures
late payment by debtors. Credit risk will
always exist in businesses that make  Insuring against the risk
credit sales and therefore it needs to be
managed.  Debt factoring without recourse

2.2 Political risk

The financial political risk is the risk  Entering into foreign joint ventures
arising from actions taken by a
government that affect financial aspects  Obtaining agreements and
of the business. contracts with overseas
government

 Using local financing

 Plans for ownership/part-ownership
by foreign country’s investors

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