Question

Discuss at least five risks and perils that are present in global transportation, and how exporters and importers can manage these risks. Substantiate your answer with referenced examples.

Answer 1

The five risks associated with global transportation are:-

1. Transaction; with differences in trade law, currency, legal obligations, transactions sometimes become a risk that needs to be mitigated by the use of trade laws put up in the contract.

2. Communication: becomes hard especially while managing a problem or a risk factor due to the differences in the countries for example, difference time schedules and documentation error that needs to be solved. This is mitigated by building proper freight documentation.

3. Distribution: is based on the channels that need to be selected in order to minimize cost and maximize efficiency at the same time, providing the least amount of risk to the cargo. This is also caused due to the presence of the factor of long-distance connections and therefore, involving intermediaries can solve this problem.

4. Security: goods can be insecure if proper laws and processes are not followed and this becomes a liability. This can be mitigated by the use of cargo insurance.

5. Mode and carrier selection; is the most important decision and can cause an entire shipment a lot of money which might not even be recovered from the shipment. This is especially possible in the case of poor planning, disaster or any such forces and therefore, needs the selection of proper mode of carrier in order to maintain efficiency.