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Foreign Trade with Bangladesh and its Risks

The Bangladeshi market is a risky market. A foreign company may end up losing capital in the Bangladeshi market.

Using Bangladesh as an example and learning tool to appreciate the complexities of international trade financing.

Draft info about American companies that may like to start exporting goods to Bangladesh using the following questions include proper citations and references:

To what extent would it be risky for the American companies to finance foreign trade with Bangladesh?
What would the biggest concerns be if American companies finance trade with Bangladesh?
How can American companies minimize the risks?
Is there any best method that American companies can use to minimize the risk?
Based on your analysis and findings, what would you recommend to American companies? Should American companies start financing trade with Bangladesh?

Solution Preview

To a great extent it would be risky for American companies to finance foreign trade with Bangladesh. Specifically, the American companies that are planning to export their products into Bangladesh. Exporting to Bangladesh would mean receiving payments for the goods when deliveries are made. If in the interim there is a depreciation of Bangladesh currency, the exporters are likely to lose money. There are several factors that can lead to depreciation of Bangladesh currency. These include sudden political disturbances, economic weakness, or simply destruction by cyclone. If an American company accepts an order for export to Bangladesh, it stands to lose money because of adverse foreign exchange rate fluctuation.

The biggest concern if American companies finance trade with Bangladesh is that the American companies might lose money if the value of Bangladesh currency declines. Other concerns are that the order may get cancelled if the buyer collapses, or the buyer is unable to pay for the goods.

American companies can minimize the risk of foreign exchange ...

Solution Summary

Foreign trade with Bangladesh is explained in a structured manner in this response. The answer includes references used.