An Investigation into Export Risks and Solutions

The assignment provides an in-depth investigation into export risks and solutions, discussing major issues faced by export firms, including currency fluctuations and hedging techniques. The report also explores environmental factors such as internal and external impacts on entity's business operations. It includes a summary of the findings from a questionnaire, highlighting the effectiveness of hedging techniques in minimizing cash flow problems and foreign currency risk.

ASSIGNMENT FOR A CONSULTANT
FOR EXPORT COMPANY

EXECUTIVE SUMMARY
This report is all about analysing the existing performance of company as the consultants
are appointed in order to determine the financial performance of an entity. Focus of an entity lies
on evaluating the overall performance of Asiatic mart located in Singapore. Vision, mission and
all the strategic objectives framed by an entity are analysed in relation to external market
pressures. Various challenges faced by this entity will be identified and them analyse all the
challenges in relation to the current performance of an enterprise. Major role of an enterprise is
to grab higher market share by emphasises on the entire performance of this entity. Solutions to
all the issues or challenges faced by an entity will help in order to boost their current
performance by minimising all the external market threats. Efficiency of all the challenges are
assessed in relation to the export business of an entity as all the issues currently incurred in the
external business environment. Solutions to all the problems is essential as in this way the
existing problems faced by an entity will be managed properly. Focus of an organisation lies on
the current performance of the business firm which helps in generating higher revenue in a
particular financial year.

TABLE OF CONTENTS
1. INTRODUCTION ......................................................................................................................4
2. RESEARCH METHODS............................................................................................................4
3. ISSUES IDENTIFIED.................................................................................................................5
3.1 Foreign currency exchange risk...................................................................................6
3.2 Cash flow and financial problems...............................................................................7
4. PROBLEM ANALYSIS..............................................................................................................9
5. SOLUTION................................................................................................................................10
6. POTENTIAL RECOMMENDATIONS....................................................................................12
7. IMPACT OF SHAREHOLDER................................................................................................13
8. IMPLEMENTATION PLAN....................................................................................................13
9. CASE STUDY EXAMPLE.......................................................................................................13
10. DISADVANTAGE FAILURE TO IMPLEMENTATION.....................................................14
11. NEGATIVE CASE STUDY....................................................................................................15
11. CONCLUSION........................................................................................................................15
REFERENCES..............................................................................................................................16
APPENDIX....................................................................................................................................19

1. INTRODUCTION
Role of an entity has increases with the increasing market complexities as this created lot
of pressure on an entity in order to upgrade its trade practices. Asiatic mart Ltd has been selected
for the given project which is multinational organisation located in the Singapore. This entity
deals in offering export goods to other country as customer satisfaction is the primary concern
for this enterprise. Being a global entity their major role is to capture higher market share by
enhancing its current skills and the capabilities in order to handle higher complexities that may
imposed on their business in the near future (Peeters, van Meggelen and Schepers, 2015).
Greater emphasises of the employer is lies on the actual business conditions. Various
challenges that needs to be identified by the researcher in the current report includes all the
issues which are suppressing the current skills and the capabilities of the firm (Cavusgil and et.al,
2014). Main aim of the business concern is to export all its good or services from one place to
another for which they are required to develop good trade relationships among all the businesses.
Trade relationship is important in order to convey all important information from one end to
another for the betterment of the business. This entity deals in procuring and offering grocery
items that facilitates all the needs and expectations of all the users located in the external
environment (Shim, 2013).
Existing market will be analysed properly in relation to all the factors to be considered by
an entity as all the existing weaknesses lies in the external market are analysed properly that
would be helpful for them in order to generate higher share (Chvalkovská, Mejstřík and Urban,
2014). This approach helps in analysing the internal environment of an entity that increases the
overall market share in order to cater the desired market share of an entity.
2. RESEARCH METHODS
Scholar will take support of secondary data collection and primary data collection
sources. Both these are effective tools that can support in getting in-depth information about the
subject matter (Anokhin, Kuznetsov and Lachininskii, 2014). In this investigation researcher will
use descriptive research design, with the assistance of this individual will be able to develop
relationship between issues in export business and its impact on business performance. Apart

from this for analysing the data investigator will use thematic analysis tool. With the help of this,
researcher will be able to present information in effective manner (Cavusgil and et.al, 2014).
Illustration 1: Export ratio
Source: (Will Export Resurgence Boost Singapore’s Growth This Year?, 2017)
3. ISSUES IDENTIFIED
Challenges are evaluated by an entity owner in order to improve their existing business
performance over a certain period. Challenges will inspire an individual in order to overcome all
their problems currently faced by an enterprise in the external business environment. Problems
are identified by them in order to enhance the existing skills and the capabilities in order to target
higher users in the external business environment (Makri, Theodosiou and Katsikea, 2016).
Asiatic market located in the Singapore deal in providing outsourcing of various goods and
services to all across the world. It also exports goods from Singapore to outside country for
which various aspects needs to be considered by them in order to create its unique position in the
external business environment. Internal as well as external factors are required to be analysed by
an entity to evaluate the current market position of an entity. Selecting of various strategic
management strategies will mostly depend on the entire performance of an organisation in the

external business environment (Farja, Gimmon and Greenberg, 2016). There are various
challenges identified by a consultant who are evaluating the current position are given as below:
3.1 Foreign currency exchange risk
 It is another challenge that is faced by the Asiatic mart. In the export business company
has to deal with foreign currency (Dai and et.al, 2014). Value of currency can be changed
any time, if at the time of exporting the goods it is high but after sending the material if
prices get down then it can be problematic situation for the cited firm. In this condition
company has to face huge loss and also it can impact on its operations as well.
 Each country has its own currency and its rate are decided. Fluctuation in exchange rates
can create additional risk for the Asiatic mart. It may be possible that it may face huge
loss due to down flow in the currency (Zhu, 2014).
 Singapore currency is dollar, if it exports the products in the UK then cited firm can face
huge risk. One of the major issue in this respect is that in the remittance of money for
payments firm has to wait for the payments. It takes time thus, sometimes become
expensive for the exporter. Wide gap between date of dispatch and receipt of payment
can create situation of bed debt for the company. In this duration if exchange rates get
changed then it would be loss for the firm because it has accepted the payment sin other
rates and now it will have to accept it on another rates (Rosnan, Saihani and Zakaria,
2015).
 Unexpected movement in exchange rates can create major settlement problems for the
Asiatic mart. In such condition cited firm will have to expect the payments as per the
present exchange rate (Janda, 2014). There are many firms those which are aiming to
export their products across the broader due to currency fluctuation risk entity think on
this respect twice. If the corporations have strong financial position and have loss bearing
capacity then they have to get entered into the export business.
Many of the exporters are exporting their goods in the foreign countries and they have to
deal with foreign currency. At the time of holding currencies it is very important for the
exporters that to hedge their currency exposure. Currency market is volatile and unpredictable.
That is why companies have to hedge their currency. Currency hedging strategy will be

beneficial in reducing foreign currency issues. Cited firm should adopt cash flow hedge and fair
value method in order to reduce this risk (Cavusgil and et.al, 2014).
3.2 Cash flow and financial problems
 Finance is one of the important aspect of any business. For instance if the firms are
having sufficient monetary resources then they will be able to run their business
internationally smoothly. In the absence of financial resources companies can not operate
their business well in the other country (Dinh and Hilmarsson, 2014).
 Cash flow is the major problem in export industry. Asiatic mart exports goods and
services to other nations and expect to get payment on time. But due to long distance
transaction many times it fails to receive payment on time. It is because changes in
exchange rates creates problem for the importer's bank and they become unable to make
payment for their transactions.
 Asiatic mart spends money continuously in order to deliver goods timely to importer but
in return cash inflow takes time. That is the major problem in the cited firm due to this
monetary issues get arisen in the organization. When Asiatic mart trade outside
Singapore then it assumes that it may face economic risk any time. One of the major
problem in the export business is that gap between delivery and payments are too high.
 If importer refuses to pay agreed amount on time then it will affect the cash flow of the
entity and due to this financial problems will occur in the business. When entity deliver
its products outside the Singapore then it will have to pay taxes on it, apart from this
received payment will be on other currency and it will require converting in Sing pour
dollar. That would be costly for the entity if it is operating its export business at small
scale (Janda, Michalikova and Skuhrovec, 2013). It is good for those corporations which
are exporting the goods at large scale because there are chances of getting high profit and
they can recover their cost of taxes and other expenses (Cavusgil and et.al, 2014).
 Transportation cost, export taxes, duties etc. are necessary expenditures which need to be
done by the Asiatic mart before delivering its products to any other countries. In the
export business spendings are high that may create problem in the cash flow management
of the entity (Kanda and et.al, 2016). On other hand if the importer do not pay the amount

on time or refuse to pay then cited firm will have to face financial problems to great
extent. In the export business, credit agreement make between importer and exporter.
Letter of credit is the term in which bank agrees that after receiving goods bank of
importer will pay amount to the exporter. But if there is mistake in the product or any of
the term of export is breach then bank has power to cancel the contract. In such situation
exporter will not get payment on time (Lotfi and Naami, 2015). It will give huge financial
loss to the organization and it may be possible that company feel unable to make further
investments (Nguyen, Nguyen and Bosch, 2015).
Illustration 2: problems faced by exporter
Source:(5 Risks in Exporting Manufactured Goods and How to Avoid Them, 2011)
It is necessary for the organization to manage cash flow effectively otherwise it may
create economic problems in the corporation. All firms face some financial challenges, if they
handle it properly then they may sustain in the market for longer duration. Asiatic mart cash
flow management is not good because company is unable to get funds on time. As it is working
in the export field so many times due to currency fluctuation cited firm is unable to get payment
on time (Ngo and et.al, 2016). Bank formalities, shipping time takes too much time and that is
why it does not get cash on time. That creates problem for the cited firm and it becomes unable
to conduct its operation smoothly. It can be commented that Asiatic mart is facing cash flow
problem because may of its importers are not paying the entity payment on time. Due to this
there is imbalance in cash flow (Ali and Perumal, 2016).
Asiatic mart has to accept payment in foreign currency. If value of currency get down
then cited firm has to face huge loss in this condition. Even in such type of situation it becomes
unable to say anything to importer. Many times cited firm has faced the issues where value of

importer's country currency got down and company has received less payment when it
exchanged the currency in Singapore currency. That has given loss to the organization. Asiatic
mart has to invest large amount in its export business, because cited firm has to pay to shipping
agencies, banks and have to pay tax as well (Wiggenhorn, Gleason and Sukhwani, 2014). If it
fails to get return on it then it would face financial risk that may cause loss to the organization.
4. PROBLEM ANALYSIS
 It has been analysed that foreign currency issues is the major problem that is related with
the export business. That can cause due to changes in interest rates and fluctuation in the
currency values. Asiatic mart has to deal with this issue properly because due to this its
over all financial status can be affected.
 Financial problems are the major risk associated with the business of exporters. It is
analysed that Asiatic mart trade outside Singapore it can face economic risk any time.
Due to the gap between delivery and payments are too high that causes issues in running
the operations smoothly (Ayob, Ramlee and Rahman, 2015). There are chances that
importer refuses to pay agreed amount on time due to this affect the cash flow of the
entity can get affected and financial problems can also take place in the business. Entity
deliver its products outside the Singapore then it has to pay taxes on it, apart from this
received payment will be on other currency and it will require converting in Sing pour
dollar. Fluctuation in the currency values impact on the business to great extent (Cavusgil
and et.al, 2014).
 It has been analysed that foreign currency issue is the major problem that is faced by
most of the exports. Changes in interest rates and currency rates create problem for
export industry because due to this they do not get agreed amount. Once they sent their
good to importer and exchange rates get changed then in such situation export firms do
not get their full payment. That is the major issue faced by them. Most of the time that
creates cash flow problem in the organization. It has been analysed that hedging is the
great strategy that can support in resolving both these issues. With the help of this tool
companies can manage their risk and can sustain in the market for longer duration
(Cavusgil and et.al, 2014).
 For identifying issues in export business researcher has taken support of primary and
secondary sources. In order to gather detail about cash flow issues and foreign currency

problems researcher has taken support of questionnaire technique. Individual has sent
questions to manager of Asiatic Mart Ltd. Managers are the suitable persons those who
have great knowledge about operations of the organization. Thus, researcher has involved
those in order to identify issues face the cited firm. They have give in-depth detail about
company's working and issues. Furthermore, scholar has also taken support of secondary
sources.
 Some data have been gathered from books, journals, internet articles etc (Cavusgil and
et.al, 2014). All these sources have supported in addressing issues faced by export
companies. For analysing actual performance of Asiatic mart Ltd, researcher is to
conduct survey through asking questions to 15 managers of the organisation belong to
different departments.
5. SOLUTION
Suggestions for minimizing cash flow problems
Most of the cash flow arise due to delay in receiving the payment from importers.
 For minimizing economic problems Asiatic mart should make effective trade agreements
and should clear terms and conditions. It should make half payment before delivery and
rest amount needs to be received after receiving goods to importer. For example if import
person does not pay on time then Asiatic mart can face cash flow issue and due to this
financial performance of entity can get affected. By if it takes half amount before
delivery and remaining half after delivery then this trade agreement will be most suitable
for the entity. By this way cash flow risk can be minimized to great extent (Cavusgil and
et.al, 2014).
 It should look upon the export duties, custom duties, and other expenditures so that it can
manage its activities accordingly. One of the major solution of minimizing financial risk is to take insurance over prior to
sending goods to customers. For example if export's products get damage in the
transportation and importer do not pay for damaged goods. In such condition if there is
insurance over then cited firm will be able to bear the economic risk. Insurance company
will pay for the damaged goods that will help the entity in reducing financial risk of the
organization (Peeters, van Meggelen and Schepers, 2015).
Suggestion for reducing foreign currency issues

Foreign currency exchange risk is the major risk that can harm overall economic position
of the organization.
 For minimizing this issue from the business Asiatic mart should take policy such as
export insurance policy. This insurance cover will support the cited firm in facing such
type of issue and it will help in getting payment of goods and services that has been
exported by the organization from Singapore to other country. For instance goods can get
damage while transporting to other nation. In such condition it will be loss to the exporter
which is Asiatic mart thus, by taking insurance policy cited can reduce that issue.
Insurance company will pay whole amount for damaged goods. By this way such type f
issues can be minimized (Peeters, van Meggelen and Schepers, 2015).
 Guarantee of bank loan is another suggestion that can assist in reducing credit risk of the
cited firm.
 Company should take letter of credit document from the importer's bank so that once
goods get delivered exporter receive its payment on time without any complications. For
example if importer does not pay amount for the received goods on time then company
can face loss. But if Asiatic mart take letter of credit then importer's bank will be liable
for the same and bank will make payment to exporter surly. By this way changes in
currency issues can be minimized.
Fluctuation in the currency value occurs due to changes in economic and political
background of the entity. These changes can be protected by taking policies, by this way cited
firm will be able to get pre decided money for its goods and services. Asiatic mart should source
an invoice finance specialist who can guide the company well regarding changes in currency ups
and down. It will help in minimizing this issue to great extent (Peeters, van Meggelen and
Schepers, 2015).
Another solution for these foreign currency and cash flow problems are that to make an
agreement or open a common account in which both importer and exporter deposit some amount.
If importer do not pay amount after receiving goods then exporter will get rights to take amount
from this account. This will help the exporters in minimizing its cash flow issues. By this way
company will be able to enhance its business performance to great extent.

6. POTENTIAL RECOMMENDATIONS
 Cash flow, financial problems and foreign currency issues are the most common and
biggest risk that exporter has to face in the export business. These are unavoidable risks
and minimize this risk Asiatic mart should use hedging technique. In this cited firm
should invest in hedge overseas assets. These hedged funds have high expense ratio.
 To resolve cash flow and currency problems cited firm should use currency forwards
method. This forward contract can protect buyer from fluctuation in the exchange rates.
By this way entity will be able to get its payment on time. That will support in
minimizing its cash flow and foreign currency problems (Peeters, van Meggelen and
Schepers, 2015).
 Cash flow can create problem in the organization because by this way overall operations
get affected. Hedging technique is the great strategy that supports in minimizing the
foreign currency risk. Apart from this, it is the tool that can avoid cash flow problems in
the organization (Lotfi and Naami, 2015).. In this both importer and exporter has to
follow international financial reporting standards and GAAP principles. Hedge can be
defined as financial instrument that supports exports in minimizing their foreign
currency risks.
 Two main hedges are such as forward contract's ad options. Both these are effective tools
that can be beneficial for the Asiatic mart. With the help of forward contract exporter
become able to lock in the exchange rate and in future individual will get payment as per
the decided amount. Thus, if in future exchange rates get fluctuated then exporter will not
have to face loss.
Option is another part of hedge in which exporter set exchange rate at which cited firm
want to exchange currency. If current exchange rate is favourable for the entity then Asiatic Mart
will not choose this option. With the help of forward hedge contract individual will be able to get
pre decided money on time. By this way cash flow problems and currency issues will be resolved
significantly (Peeters, van Meggelen and Schepers, 2015).
7. IMPACT OF SHAREHOLDER
Every business is totally depends on shareholder's position. In Asiatic mart, it include three
shareholders which make great impact in business operations. It include customers, employees
and shipping agencies which affect the business activity. Shareholder's make great impact

business profits and short-term objectives. As per the result, company 23% share are taken by the
share holder so that they have a complete right to check the company's actual performance
(Peeters, van Meggelen and Schepers, 2015).
8. IMPLEMENTATION PLAN
 It is considered as one of the important part of business. Before making any contract with
the importers Asiatic mart should make effective implementation plan. That includes
current value of goods and current exchange rates so that no further confusion takes
place.
 In the next phase it should take letter of credit from the importer's bank that will
minimize the future risk of the organization (Lotfi and Naami, 2015). In the next phase
cited firm need to take insurance cover so that if any risk arise then it can take benefit of
insurance amount and can manage its risk. There need to be make proper agreement with
the importers that individual will pay amount after getting delivery as per the decided
amount. If any complication arise in payment then importer's bank will be liable for the
same.
 This implementation plan will help the Asiatic mart in minimizing its risk and improving
the financial position of the organization.
 It is essential for the exporter that to look upon the financial condition of importer and
collect all necessary documents from importer;'s bank. That will support in minimizing
risk of the organization to great extent. Asiatic mart is required to divide all activities
properly and allocate resources accordingly. By this way management will be able to
manager cash flow in the organization as wel (Peeters, van Meggelen and Schepers,
2015).
9. CASE STUDY EXAMPLE
If Asiatic mart company does not deal with these problems effectively then it may face the huge
trouble and its financial position may get damaged to great extent. For example at the time of
Brexit many of the EU exporters have faced trouble. At that time many of the British exporters
have faced cost £4.5bn. In the year of 2008 due to economic crises demand of exports got
reduced in the UK. That not only affected the business but also have impact on the entire
economy. Russia has banned fruit and veritable from the Turkish country. It has been found that

this restriction has impact on the Turkish economy (Lotfi and Naami, 2015)..
One of the main case held in the gems and jewellery industry. This sector has faced issue of
lack of availability of finance. Interest rates of short term bank credits such as letter of credit,
cash credit got changed by 15%. Due to this, it has become challenge for jewellers to export
gold and other materials. High lending, high rate of interest, lack of dollar credit has created
trouble for the exporters. In this time duration most of the gems and jewellery exporters have
shut down their business because they were facing loss (Peeters, van Meggelen and Schepers,
2015).
Asiatic mart company in the year 2008 has faced the issue when government of nation has
changed the foreign currency exchange rates. In the same year there have been changes in tax
regulations well. That has created problem for the cited firm because due to modifications in
exchange rates it failed to get agreed amount at the time of payment from importers. That has
given huge financial loss to the Asiatic mart company and due to this it has faced cash flow
problems as well. But cited firm has survived in this condition and after that it has decided to
make agreement with importer's bank in the form of letter of credit (Lotfi and Naami, 2015)..
That has helped the entity in minimizing its foreign currency issue and cash flow problem to
great extent.
10. DISADVANTAGE FAILURE TO IMPLEMENTATION
The major disadvantage for the Asiatic mart company is that it impacts on the brand
image of the entity. Because due to high risk it has to ensure first that whether it will get payment
on time or not. Some time's verification takes time and company become unable to deliver the
products on time. Apart from this another disadvantage of this system is that due to financial risk
cited firm does not deal with the importer in the future. But that will affect its financial problems
to great extent (Peeters, van Meggelen and Schepers, 2015).
11. NEGATIVE CASE STUDY
It has been found that 2005 was crucial for the Asiatic Mart because company has faced
huge issues due to economic changes. In that year value of currency got down and due to which
cited firm was not able to meet the demand of importers. That has created negative impact on the
working environment of the organization because due to which company has faced cash flow

problem. Chem-gas Pte Ltd has faced the LC problems. That is why in the year of 2007 company
have faced huge loss in export business.
11. CONCLUSION
From the above report it can be articulated that trade relationship is one of the essential
element of running the export business successfully. Asiatic mart offers grocery items that
facilitates to customers those who live in other countries. It has been found that company wants
to improve its export performance. For that it is necessary for the entity that to look upon the
challenges and to minimize them by taking appropriate actions. Financial risk, foreign currency
risk, custom problems are major issues that can be faced by the organization. For reducing such
problems cited firm should properly follow the rules and regulations and should monitor the
economic condition of import country effectively. By this way it will be able to enhance its
performance that will support in increasing profitability of the corporation to great extent.

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APPENDIX
Learning evaluation
While carrying out the investigator I have learned about working of export business. I got to
know major issues that are faced by export firms. In addition, I have improved my technical
skills and understanding about foreign currency exchange. This has helped in in completing
this report in effective manner. Apart from this, I have also learned about heading technique
that has helped in drawing solution related to these problems.
However, environmental factors including internal and external impact on entity's business
operations can be understood through following questions and their analyses:
Internal environment analysis
1. Does company take insurance policy before delivery of goods to other nation.
 Yes
 No
Yes 10
No 5
Interpretation: From the data it is analysed that maximum respondents said that company takes
insurance policy before sending goods to the importers. That helps entity in minimizing the risk
of transportation.
2. Company faced currency issues.
 Strongly agree

 Agree
 Neutral
 Disagree
Strongly agree 8
Agree 2
Neutral 3
Disagree 2
Interpretation: From the discussion it is found that maximum respondents are strongly agreed
with the point that company has faced currency issues many times. Cited firm does not make any
forward contract with the importers thus if currency rates get fluctuated then it creates problem
for the Asiatic mart Ltd because due to this it does not get agreed amount at the time of delivery
from importer.
EXTERNAL ENVIRONMENT ANALYSIS
3. Effectiveness of Hedging Technique
 Effective
 not effective
Effective 14
Not effective 1

Interpretation: From the above discussion it is found that 14 out of 15 respondents have said that
hedging technique is very effective because that helps in minimizing the cash flow problems and
foreign currency risk of exporters to great extent.