Managing Exports Risk In The Food Industry
By originalsIf the Chinese Yuan weakens relative to India Rupee (INR), import of Chinese toys in India becomes relatively cheaper and therefore adversely affects the sales of Indian toy manufacturer.
Many businesses are going global! The expansion of any enterprise has not entirely flourished without indulging in the export function. There could be many reasons for exporting your products, ranging from better prices & more significant margins to market niche & business share. Whatever your reasons are for the export business, you need to be prepared for the jittery wind along the way. It has high risks of transportation, demographics, cultures, stereotypes, laws, and lack of time management for every industry. It is imperative to manage those risks to grow your business through exports.
As far as the food industry is concerned, many developing nations largely depend on their food exports. With high dependence comes excellent preparation! They need to ensure food safety and quality, meaning their items should reach their buyers in the global economy as per their standards. Keeping the global supply chain intact and every country playing its part by maintaining food control measures can manage it. If it is a balanced fit between industries and the Government, then the risk factor is minimized.
Budgeting is an export-risk factor. It depends on foreign currencies that keep fluctuating. A company’s budget could see an incline or decline based on the rapid variation of forex rates. However, in reality, the currency fluctuations even impacts companies with no dealing in international markets. For instance, a domestic toy manufacturer, who is competing with traders importing toys from China, is also exposed to fluctuations in the prices of Chinese Yuan (CNY). If the Chinese Yuan weakens relative to India Rupee (INR), import of Chinese toys in India becomes relatively cheaper and therefore adversely affects the sales of Indian toy manufacturer.
The other types of risks involved with exports can be either related to payment, transportation, customs procedures, or insurance …
However, in reality, the currency fluctuations even impacts companies with no dealing in international markets. For instance, a domestic toy manufacturer, who is competing with traders importing toys from China, is also exposed to fluctuations in the prices of Chinese Yuan (CNY). If the Chinese Yuan weakens relative to India Rupee (INR), import of Chinese toys in India becomes relatively cheaper and therefore adversely affects the sales of Indian toy manufacturer.
If you export the product without clearing the debt first, there is the risk of non-payment. Especially when you are dealing with new clients with no prior credibility, it is best to receive cash in your account before supplying. In the case of a regular client, you may afford to take such small-scale risks based on previous experiences.
“What if your client refuses to pay you the amount before receiving the product?”
Credit sales constitute a significant risk involved in the export industry. If you shipped a container of grains, for instance, on a 20 days’ credit, and the party refuses to lift stock from the shipment yard due to any given circumstances. This interruption will delay the payments and disrupt your cycle of debts. There could also be a scenario where your client claims the delivered product is unsatisfactory; hence, the fee is not cleared in time. We can not emotionally or morally influence the buyer in export business, whether it is only the food industry or as a whole. However, if it was a local customer, we could set up a real meeting in an instance and resolve the issue.
What if your client refuses to pay you the amount before receiving the product? Many people in the trading business and particularly in the food industry use a Letter of Credit. This document is a financial instrument that is secure for both sides without any risk. The payment mechanism in the export business usually revolves around the Letter of Credit. We can manage this export risk efficiently by using this instrument.
There are many risk factors, but if one learns how to overcome them or manage them, rest is only a heavenly story. Generally, all industries face risks, and the food industry is no different. The only thing that matters the most is the management of those risks. You could manage them by avoiding credit, introducing a stable exchange policy, ensuring safer financial instruments, and maintaining the highest level of quality.
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Ali Iftikhar
Ali Iftikhar is a Blogger from Pakistan and a Sales Manager with the experience spanning over a decade.
Impact of COVID-19 on the international trade of food industry
Impact of COVID-19 on The International Trade of Food Industry
Overall, trade is estimated to take a blow of 13-32% as an aftereffect of the world pandemic. Since every business was put in nosedive by the health catastrophe, it will have adverse effects on commerce.
What a year to be living in this world! Our generation or the former never observed a pandemic of this intensity. We are gliding through it and hopefully will survive it. The experts are saying International trade will face the most significant impact of modern history due to COVID-19.
Overall, trade is estimated to take a blow of 13-32% as an aftereffect of the world pandemic. Since every business was put in nosedive by the health catastrophe, it will have adverse effects on commerce. It is essential to keep in mind the fact that, Global economy be not in its best shape before the lockdowns began. People are comparing the current crisis with the worldwide financial crisis of 2008-09, and many are worried that the present situation might be even weaker.
The food industry is near destruction because many countries have banned specific food items to export because of COVID19. These restrictions deem not to be lifted until the world finds a cure for the virus. Therefore, the near future of the food industry is unstable. Russia, for instance, has proposed to forfeit grain exports. Although the officials are claiming there is no food shortage as of now, there is fuss in-the-air. If this uncertainty prevails and Governments start to panic, it could result in more export stoppages of food trade. It could cause another global crisis amid an ongoing pandemic. If countries stop food exports completely, the international food markets will be scarce.
The span of this pandemic had spread in 190 countries. A crisis of this multitude can result in abrupt manners for the traders around the globe, and no one can judge what precisely the loss is going to be. The disastrous day has already dawned on the global oil industry, what more is to come? Is international trade going to hit its rock bottom? The blow to international trade disrupts the airline industry, Freight businesses, productions in China, and other areas.
World Governments had put all countries in lockdown to avoid the spread of disease. This self-quarantine has resulted in the closure of the hotel and restaurant industry as well as food production, shipment. The related industries, like beverages and beer production businesses, have been affected. Even if restaurants open in the name of home-delivery or take-away, the burgeoning rise of social-distancing awareness has kept the customers from hanging out. Panic buying had its fair share of negative impact in the bargain. Impulsive buying disturbed the food supply chain. In some areas, sellers and vendors increased their prices far above the reach of people. These specific dangers have put the Food Industry on the step back.
“This self-quarantine has resulted in the closure of the hotel and restaurant industry as well as food production, shipment. The related industries, like beverages and beer production businesses, have been affected.”
The population of the world hinges on the International Trade and Food Industries for the supplies and day-to- day livelihood. Business people and Trade industries must support their Governments and come up with a plan to avoid the situation. They must ensure there are no shortages around the world, as no country can deal with the crisis on its own. All the nations around the world need to work together as a team.
Source : Remarks by DG Azevêdo
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Ali Iftikhar
Ali Iftikhar is a Blogger from Pakistan and a Sales Manager with the experience spanning over a decade.
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