Modelling the Risks of International Trade Contracts

Abstract

Current globalization trends in the global economy and trade, as well as integration processes, have significantly aggravated competition and complicated the nature of the foreign economic interaction of companies from different countries. At the same time, the ambiguity in the development of these processes is expressed by the increased degree of probability of the influence of numerous uncertainty factors in international markets, generating a set of specific foreign trade risks and financial losses; which are exposed to most foreign and domestic companies engaged in foreign economic activity. The contract risk management methodology proposed in the article will allow the decision-maker: to avoid opportunity costs and direct costs, as well as take preventive measures commensurate with the risks. A company may consider several alternative strategies: attract a contractor (accept risk); attract a contractor while maintaining control over business processes (mitigate the risk) and provide the service yourself (avoid the risk associated with attracting contractors).