Study On International Settlement Risk Management

With the driving force of economic globalization, China's import and export trade has been witnessed rapid growth. By 2007 the country's import and export trade volume had boasted a total amount exceeding 2 trillion US dollars. However, along with the increase in volume of trade, there arose the problems of huge amount of overseas accounts receivable and high bad debt rate on the part of home enterprises, bringing to domestic export business serious management and financial risks. Among all the contributing factors, problem with international settlement deserves our close attention. This paper focuses on risks generated in international settlement risks. Based on theories of risk management and by relating to principles concerning finance, economics and credit management, the author tries to define and categorize international settlement risks, analyze factors of international settlement risks, and probe into the underlying causes of international settlement risks from both macro and micro perspectives. International settlement risk management forms the core of the paper, to which the author has given serious thoughts and has put forward independent views. Case studies have been carried out in the paper to analyze gains and losses in international settlement risk management so as to demonstrate the importance of international settlement risk management.By redefining and re-categorizing international settlement risks, the author tries to establish the basic framework of international settlement risk management and explain in detail management concerning national risk, foreign currency risk, credit risk, and technical risk. With special attention given to the serious situation of current global financial turmoil and real economic downturn, the paper offers suggestions on practical risk prevention concerning safe foreign currency receipt in foreign trade, hoping to contribute to the healthy development of China's foreign trade business in general and to the smooth business transaction of international settlement by foreign trade enterprises in particular.