Commercial risk

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International trade

Commercial risk in international trade arises from a foreign business partner’s insolvency or unwillingness to pay its debt or to perform according to the contract.

For example the insolvency or unwillingness of a bank, customer, supplier or guarantor.

Letters of credit and documentary collections can provide some measure of protection against commercial risks of this kind.

Commercial activities

More generally, commercial risks are risks arising directly from, or in the context of, the commercial activities of the business.

Commercial risks are the business risks in which the organisation considers it has a core competency, and which the organisation therefore chooses to accept and manage in the expectation of superior average returns over time.

See also