1. University of Sussex Business School, United Kingdom; Ingo2971@gmail.com

*             Correspondence: Ingo2971@gmail.com

Keywords: international trade; settlement risk; preventive measures

1. INTRODUCTION

The expansion of international trade has been helped along and sped up as a result of globalisation of the economy. Because of the rapid development of international trade, the pace of mutual promotion and economic growth in countries all over the world has quickened [1]. The development of trade settlement has been a driving force behind the expansion of trade activities. Trade settlement is an integral part of all aspects of commercial activity and cannot be neglected. There is a huge amount of variety in the types of communities that have been established in each country. In addition, the settlement of international trade involves the participation of a large number of countries, and because the rates of currency exchange between countries vary, there are inherent risks associated with the settlement [2]. When conducting transactions, international trading companies have a responsibility to avoid transaction risks from a variety of perspectives, continuously strengthen the construction of the company’s internal control system, and learn more from local international trading companies that have been in business for a significant amount of time. Every business and every transaction has some degree of risk associated with it because benefits and dangers coexist. You need to have an understanding of the rationale behind taking more risks, and frequently high risks, in order to develop a greater number of businesses [4].

2- LITERATURE REVIEW

The level of development attained by international trade has steadily increased thanks to the progress made by societies and economies over time as well as the regular economic and commercial interactions that take place between nations. The conclusion of commercial transactions is a vital component in the process of fostering the continual growth of international trade [5]. The entities involved in trade need to be aware of the significance of trade settlement and devise a reliable system for trade settlement in order to improve the process of trade settlement. The various methods of settling commercial transactions each have their own set of benefits and drawbacks [6]. In order to ensure the level of settlement, it is necessary to conduct an analysis of the benefits and drawbacks associated with the various methods of trade settlement, select the method of settlement that is most appropriate for your circumstances, and become an expert in the settlement processing methods that will facilitate subsequent settlement [7]. Work. Both developed countries and developing countries participate actively in international trade and play an active role in the promotion of the growth of international trade [8]. The majority of businesses engaged in international trade rely on water transport to move their goods, particularly bulky items. Water transport is very popular with both the importing and exporting parties in international trade [9] because of the low cost of water transportation. On the other hand, because travelling by water takes such a long time, it takes one week to get from the northern part of China to the port of Australia, and it takes at least one month and possibly even a few months to get from the northern port of China to Africa. As a consequence of this, during the process of transporting goods, ships are likely to encounter unstable conditions such as rough operations, pirates robbing, poor weather, etc., which can result in certain losses of goods while they are being transported [10]. The role of the bank as an intermediary in commercial transactions is played by the letter of credit settlement method. The bank guarantees that the importer will pay the exporter the payment for the goods within a certain period of time, in accordance with the importer’s requirements and in accordance with certain bank terms [11]. To put it another way, it is an agreement in which one party ensures that the payment is made on time, and one party guarantees timely delivery and collection of payment. This agreement has the potential to reduce the level of mistrust between the two parties to some extent and to guarantee the fundamental rights and interests of both parties [12]. The settlement method known as letters of credit come with a number of benefits; however, one cannot ignore the potential dangers involved. The letter of credit settlement is a three-party settlement, which means that the applicant runs the risk of financially deceiving the other parties, forging the letter of credit, adding soft terms, forging documents, or committing fraud [13]. First, using remittances as a method of settlement has the potential to lengthen the amount of time required for financial transactions, which both the payer and the importer will be responsible for bearing [14]. Second, in the case of remittances, the payee and the exporter are both responsible for bearing the risks that are associated with the transaction method if it is cash on delivery, for example [15]. Third, if the importer and exporter conduct their business dealings in the form of bills of exchange, there is a possibility that the bills of exchange will be fraudulent. This places a significant burden on the exporter [16]. Consider, for example, that the exchange is carried out by means of a telegraphic transfer or a letter transfer. Because of this, there is a possibility that the importer will ask to withdraw the remittance after transferring the telegraphic transfer or letter transfer to the exporter. This will have a significant effect on the final settlement. Significant danger [17].  When compared with remittance and remittance settlement, collection settlement is utilised in international trade significantly more frequently, particularly the settlement method of documentary collection. Exporters have the ability to control the release of goods through the use of documents [18]. In the event that the payment is not processed, the importer will be unable to acquire a copy of the delivery receipt. This method of settlement is equitable to both parties involved in the transaction. However, there are also some risks involved in the collection settlement [19]. Because international trade takes place between national enterprises and enterprises of other countries, the scale of the cooperative bilateral enterprises, the market conditions, the economic conditions, and the commodity prices of the importing and exporting countries are not equal [20]. This means that it will be easy for the importer to find it difficult to pay for the goods on time or to refuse payment. Due to the fact that the economic climate varies from country to country, international trade is also impacted by the economic environment [21]. After having received the goods [22], the exporter will re-offer the price in accordance with the current market price in accordance with the current economic situation, and the exporter will pay for the goods in accordance with the current price. If the goods are delayed because of this reason, it will have an impact on the operations of the subsequent businesses that export [23].

3- RISK MANAGEMENT AND PREVENTIVE MEASURES

3.1 Transportation Risks Prevention

In the course of conducting business on an international scale, the length of the transportation time will be too great, and there will be an excessive number of links in the middle. This will result in a variety of risks in the transportation procedure. Nevertheless, by purchasing insurance, the risk can be transferred to another party. For instance, the risk of war, the risk of water damage, the risk of all risks, etc. [24], you can also choose the type of insurance that is most appropriate in accordance with the particular circumstance. If the goods are damaged within the parameters of the insurance policy after the insurance has been finalised, the insurance company is obligated to follow the terms of the insurance contract [25]. Pay compensation to the enterprise so that the transportation risk of the enterprise can be reduced to some extent. This will allow the enterprise to get corresponding compensation during the process of international trade and will escort the international trade business [26].

3.2 Financial Risk Prevention

The most common form of payment in international business transactions is the letter of credit. The following activities need to be carried out to a high standard in order to reduce the associated dangers: investigate the qualification and credit status of cooperative customers; the goal is to avoid risks at their source; credit investigation needs to involve business conditions such as scale, performance, and so on; investigate the situation of the issuing bank [27]. Before the actual transaction takes place, a comprehensive check of the issuing bank’s credit history is performed in order to guarantee the transaction’s success. During the course of the specific investigation, the exporter will have the opportunity to gain an understanding of the economic climate of the location of the importer [28]. The contract serves as the foundation to ensure that the transaction goes off without a hitch. There is legal protection, so the obligations and responsibilities undertaken by each other should be written into the contract to prevent disputes and verify the authenticity of the letter of credit. Once any problems are found during the verification process, they must be immediately fed back and dealt with in order to avoid affecting subsequent transactions [29]. There is legal protection, so the obligations and responsibilities undertaken by each other should be written into the contract.

3.3 Remittance Risk Prevention

For the credit sales risk and the freight forwarding payment risk, when the exporter loses control over the goods after releasing the goods, it may run into the situation in which the importer pays late or even fails to pay [30]. This results in the loss of both payments and negatively affects the subsequent development of the enterprise. As a result, as part of the settlement, it ought to think about opening a letter of credit in conjunction with various other methods to reduce the possibility of remittance risk [31]. When it comes to the third method, which is known as advance payment, the importer is the one who bears the majority of the risk. Prior to making the advance payment, the importer is required to give careful consideration to a number of conditions [32], including the costs of transportation and the overall value of the goods. The exporter should not only take into account the fundamental interests of the enterprise, but they should also protect their own interests and determine a prepayment amount that is reasonable [33].

3.4 Collection and Settlement Risks Prevention

It is necessary to pay attention to risk prevention work, detailed prevention measures, and prevention methods [34] during the collection and settlement processes. This is a requirement. First things first, conduct research and get a good understanding of the credit standing of partners, as well as the business scope of partners. Do not take it lightly, and do not pay attention to credit and qualification reviews [35], even if you have been working with partners for a relatively long time. Second, the work of collection and settlement is impacted by the laws and regulations governing international trade. Before engaging in activities related to collection and settlement [36], it is necessary to gain an understanding of the laws and regulations governing international trade. In particular, it is important to pay attention to the trade laws and regulations of the countries where both parties to the transaction are located in order to avoid settlement risks. The third step is to select a collecting bank that can fulfil all of your needs effectively. The amount of credit that the collecting bank has can have a significant impact on the safety of the collection work [37]. As a result, it is essential to conduct preliminary research on the bank’s credit standing and opt for a financial institution that has an excellent credit rating. The fourth is to ensure that the contract is signed in an accurate and complete manner [38]. If the purchaser does not pay for the items that they have purchased, the seller’s interests will suffer as a result. Because the buyer’s actions can be more effectively regulated after they have signed the contract, it is imperative that we pay close attention to the signing of the contract. That entails giving careful consideration to the contract, making adjustments to the terms, and avoiding having any impact on the interests of the seller [39].

4- CONCLUSION

The expansion of economic globalisation and integration has stimulated the rapid development of international trade activities, and throughout the entirety of trade activities, trade settlement methods have played an active role in stimulating the development of trade activities as an important means of doing so. This has been made possible by the globalisation and integration of the economy. The integration of economies around the world and the globalisation of trade are both processes that are gaining momentum, and as a result, the trading relationships between nations are becoming increasingly intertwined. The growth of the national economy is significantly impacted by the activity of international commercial trade. Altering the mode, in turn, encourages the growth of international commerce and commerce in general. Different languages create barriers to communication, which results in an inability to communicate effectively about the relevant settlement process during the process of settling trade disputes. This is a problem because different languages are used. The resolution of international trade disputes is fraught with peril on account of the myriad of external factors. It is necessary to establish correct development concepts, innovate risk prevention methods, and avoid many risks in international trade settlement in all directions and through multiple channels in order to promote international trade. Doing so is necessary in order to promote long-term economic development in international trade. This will be accomplished by promoting international trade. It is of the utmost importance to fortify the risk management and prevention measures of international trade settlement.

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