Last updated on Aug 1, 2024
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Hedging instruments
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Diversification strategies
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Information and communication
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Cooperation and coordination
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Innovation and learning
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Resilience and contingency
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Here’s what else to consider
Uncertainty is a major challenge for international trade, as it affects the decisions and outcomes of exporters, importers, investors, and policymakers. Uncertainty can arise from various sources, such as exchange rate fluctuations, trade policy changes, political instability, natural disasters, or pandemics. How can you manage uncertainty in international trade and reduce its negative impacts on your business or economy? Here are some strategies and tools that can help you cope with uncertainty and enhance your resilience in the global market.
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- Carlos Salinas Digital Assets Expert. International Speaker. My views are my Own
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1 Hedging instruments
One way to manage uncertainty in international trade is to use hedging instruments, such as forward contracts, futures, options, or swaps, that allow you to lock in a fixed price or exchange rate for a future transaction. Hedging instruments can help you reduce the risk of losses due to unfavorable market movements and protect your profit margins. However, hedging instruments also have some costs and limitations, such as fees, commissions, counterparty risk, or liquidity risk. Therefore, you need to carefully assess your exposure to uncertainty and choose the appropriate hedging instrument for your situation.
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- Carlos Salinas Digital Assets Expert. International Speaker. My views are my Own
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Blockchain technology has the potential to significantly reduce uncertainties in international trade by providing transparency, traceability, and security in transactions.For instance, you coul implement smart contracts so they can automatically enforce and verify the fulfillment of contract terms, reducing disputes and the need for intermediaries.Also, using sing blockchain-based digital currencies or tokens can streamline cross-border payments, reducing transaction times from days to minutes and lowering transaction costs.Tokenizing assets or using blockchain-based derivatives can help in hedging against currency fluctuations, commodity price changes, or other trade-related financial risks.
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- Sie Armand Michael OUATTARA • MBA Business Strategy ™ MBA Finance ™ MBA Finance ™ Business Finance and Financial Markets Specialist || International Trade Finance Consultant Professional || ICRA RATING International Business Partner || WBAF International Partner for BURKINA FASO
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Nous pouvons utiliser les instruments de trade finance pour gérer les risques financiers liés au commerce international.Ce sont principalement la demande de couverture des transactions d'import export par l'émission d'instruments trades finances( lettre de crédit LC , lettre de crédit de soutien SBLC, garantie bancaire BG , garantie de performance PBG, garantie de soumission ou d'appel d'offre TBG, lettre de confort bancaire BCL, lettre de preuve de fond POF, lettre de RWA, lettre de crédit documentaire DLC...)
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2 Diversification strategies
Another way to manage uncertainty in international trade is to diversify your sources of supply and demand, as well as your product portfolio and market segments. Diversification strategies can help you reduce your dependence on a single market or supplier, and increase your flexibility and adaptability to changing conditions. For example, you can seek new export destinations or import partners, expand your product range or quality, or target different customer groups or niches. However, diversification strategies also have some challenges and trade-offs, such as higher costs, complexity, or competition. Therefore, you need to carefully analyze your comparative advantage and competitive edge, and choose the optimal level of diversification for your business.
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The inherent strength of diversification is the availability of opportunity to diffuse the adverse impact of market risk provided there is the necessary transmission channel anchored by a proactive and responsive policymaking framework. For that matter, there must be identification of market drivers of a certain economy, the establishment of the necessary infrastructure and policies to ensure that the market driver will generate added-value to the overall economy, and to ensure that the purchasing power in the consumption side is optimal by ensuring inflationary pressure is tamed while maintaining a healthy trade balance.
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- Carlos Salinas Digital Assets Expert. International Speaker. My views are my Own
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By implementing blockchain technology in international trade you could add enhanced traceability and this allows businesses to verify the authenticity of their products and helps prevent counterfeit goods from entering the supply chain.Also, if the supply chains are made transparent, all parties in a supply chain can have access to the same, immutable information on a blockchain.
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3 Information and communication
A third way to manage uncertainty in international trade is to improve your access to information and communication, as well as your ability to process and use them effectively. Information and communication can help you monitor and anticipate the sources and effects of uncertainty, and adjust your plans and actions accordingly. For example, you can use data and analytics to forecast market trends and demand, consult experts and advisors to understand the legal and regulatory aspects of trade, or communicate with your customers and suppliers to coordinate and negotiate your transactions. However, information and communication also have some challenges and risks, such as reliability, accuracy, or security. Therefore, you need to carefully evaluate the quality and relevance of information and communication, and choose the best channels and methods for your needs.
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In this age of disinformation it is so important that you rely on reliable & trustworthy data and stay away from making decisions based on a sensationalist headline or tweet. Communicate often and well with all your partners in the supplychain. Critical thinking skills and problem solving are essential in dealing with the uncertainty in international trade. Consult with experts, advisors & legal counsel that knows your business & the market and geography in which you operate. Don't just rely on digital automation because disasters can happen where you need people who are aware of how it was done before technology was invented.
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- Carlos Salinas Digital Assets Expert. International Speaker. My views are my Own
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Another added bonus of using blockchain technology to improve information and communication in international trade is the real time visibility with real-time tracking of goods and transactions can help businesses react more quickly to supply chain disruptions or market changes. This is possible because the ledger is visible and accesible to everyone.
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4 Cooperation and coordination
A fourth way to manage uncertainty in international trade is to enhance your cooperation and coordination with other actors and stakeholders in the global value chain, such as other firms, associations, institutions, or governments. Cooperation and coordination can help you share and pool resources, knowledge, and risks, and create synergies and benefits for all parties involved. For example, you can join or form networks, alliances, or clusters with other firms that have complementary capabilities or objectives, participate in trade promotion or facilitation programs or initiatives, or advocate for trade policy reforms or agreements that can reduce uncertainty and improve market access. However, cooperation and coordination also have some costs and constraints, such as trust, commitment, or compliance. Therefore, you need to carefully select and manage your partners and relationships, and choose the most suitable forms and levels of cooperation and coordination for your goals.
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- Carlos Salinas Digital Assets Expert. International Speaker. My views are my Own
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Blockchain can foster collaborative ecosystems where multiple stakeholders (like shippers, customs authorities, and financial institutions) can operate on a shared platform, increasing efficiency and trust.
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5 Innovation and learning
A fifth way to manage uncertainty in international trade is to foster your innovation and learning capabilities, as well as your culture and mindset. Innovation and learning can help you create and exploit new opportunities, improve your performance and competitiveness, and overcome challenges and problems. For example, you can invest in research and development, adopt new technologies or processes, or develop new skills or competencies. However, innovation and learning also have some barriers and risks, such as costs, uncertainty, or failure. Therefore, you need to carefully balance your exploration and exploitation activities, and choose the most appropriate strategies and tools for your innovation and learning processes.
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6 Resilience and contingency
A sixth way to manage uncertainty in international trade is to build your resilience and contingency capacities, as well as your preparedness and response mechanisms. Resilience and contingency can help you cope with shocks and disruptions, minimize your losses and damages, and recover and restore your operations and functions. For example, you can assess your vulnerability and exposure to uncertainty, design and implement risk management plans or policies, or establish backup or alternative plans or solutions. However, resilience and contingency also have some limitations and trade-offs, such as resources, time, or opportunity costs. Therefore, you need to carefully prioritize your actions and measures, and choose the most effective and efficient ways to enhance your resilience and contingency in international trade.
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Embrace the uncertainty & let every blow strengthen resilience. Have risk based programs & matrices in place. Build contingency plans that involve alot of interdisciplinary cooperation.
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7 Here’s what else to consider
This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?
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- Carlos Salinas Digital Assets Expert. International Speaker. My views are my Own
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To implement blockchain effectively in international trade, it's essential to ensure interoperability between different blockchain platforms, advocate for standardized protocols, and ensure compliance with local regulations. Adopting blockchain is not just about technology; it's also about reshaping business processes and fostering collaboration across the trade ecosystem.
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- Sie Armand Michael OUATTARA • MBA Business Strategy ™ MBA Finance ™ MBA Finance ™ Business Finance and Financial Markets Specialist || International Trade Finance Consultant Professional || ICRA RATING International Business Partner || WBAF International Partner for BURKINA FASO
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Pour gérer les processus d'externalisation ou de mondialisation en entrant dans le commerce international les entreprises peuvent utiliser les stratégies d'externalisation suivantes:1.Le piggybacking2.La licence3.La franchise4.L'externalisation des processus métier5.L'externalisation des processus de connaissances6.Co-entreprise
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