Page 181 - RISK Management IC 86

The Insurance Times

General economic conditions at home or abroad
may react adversely on the sales. An export deal
may be lost due to some political moves, such
as changes in exchange controls, tariffs, or
import quotes. Although firms may seek to
minimize such risks by extensive market research
before launch, many products, especially the new
ones tend to fail.

(iii) Financial Risks - Credit plays an important role in
the financing of most businesses, and a firm may
find itself in difficulties owing to factors affecting
either the credit received or credit extended.

An increase in the cost of borrowing caused by a
rise in market interest rates cut profit but more
important is the availability of credit, bank finance
or even overdraft facility. A heavy dependency upon
the loan capital relative to equity capital increases
the risks for creditors and shareholders alike. The
failure of debtors to settle their debts can be another
source of financial loss.

This happens mostly on overseas trade where the

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