Once basic requirements for Chemical Trading has been established, it is better to be aware of various chemical trading risks which can broadly be categorized into Market related and company specific risks.
Market Related Risks
Changes in laws and regulations, Eg. Customs regulations, export regulations and other laws and regulations in countries where the company operates affects its operations negatively.
Global economic conditions
A protracted recession with a reduced drive for new developments among customers could lead to a reduction in demand for the company’s products. That can result in orders not being received, being cancelled or being postponed.
Company Specific Risks
As a result of increased demand for the products, there may be a phase of growth which would place high demands on company’s management and operating and financial infrastructure.
Penetration of New Product
At a stage when basic product list is performing well in the market and when you decide to introduce new products to broaden your market range, then risk of competitors in that domain will directly affect your success.
Future growth depends on the knowledge, experience and creativity of existing employees as well as the company’s ability to recruit and retain key personnel. Failing to recruit and retain qualified personnel could lead to failures in business strategy.
Foreign exchange risk, Price risk, Interest rate risk, Credit risk and financing and liquidity risk are some attributes of financial risk.
Financing risk is defined as the risk of the refinancing of maturing loans being made difficult or becoming costly. A liquidity risk is defined as the risk of not being able to fulfill payment obligations when they fall due. Protective action against potential refinancing risks by a balance maturity profile for financial indebtedness as well as through diversification in various financial markets.
Foreign exchange risk
Foreign exchange risks exist in the form of both transaction risks and translation risks. Transaction risks occur in conjunction with purchases and sales of products and services in currencies other than the respective company’s local currency.
Once you are aware of the risks in chemical trading ahead, then proper backup steps can be accounted for a smoother run. For more information regarding chemical trading, download free ebook below.