Reseaech On Risk And Prevention Of L/C For A Company In International Trade

With the integration and globalization of the world economy, international trade becomesincreasingly important in the international settlement process, letter of credit (L/C) is verypopular by the majority of importers and exporters due to the secure and efficient features.However, it can’t prove L/C payment terms perfectly safe. Due to its characteristics, thecomplexity of the operational process, required accuracy and strict requirements of auditingdocuments operations, which make L/C risks constantly increasing in the business ofoperating and the event is much more frequented for refusing to pay, which have seriousdamage to our exporters and disrupted the normal order of international trade. Given thissituation, preventing L/C risks becomes particularly important. Therefore, it requires us haveability of identifying the risks and guarding against them, in order that export trade havestable and healthy development.This article focuses on the status and types of L/C risks on A Company export trade. Andwe try to find the influencing factors of business risks, as well as the causes about it.Depending on the different risk category, corresponding preventive methods have beenputting forward.This paper is broadly divided into seven parts for discussing and analyzing. Theintroduction section explains the background, purpose and significance of the paper study, theresearch dynamic of home and abroad as well as the ideas and methods of study. The secondchapter mainly discusses related theory of L/C risks, including the meaning of L/C risks, thefunctions and characteristics as well as the causes about it. The third chapter analyzes thecurrent situation of L/C business and reveals L/C risk types, including the risk of auditingdocuments, operational risk and risk of soft terms etc. The fourth chapter mainly analyzes thecauses of L/C risks on the basis of analysis of cases in A company. The fifth chapter is mainlyabout prevention countermeasures of L/C risks and the sixth chapter mostly presents remedysupporting measures of risk prevention, the last chapter gives a summary of current researchsituation.According to the actual operation risks analysis and preventive measures study on ACompany L/C business, operational processes of L/C strengthened and standardized havebecome top priority. In addition, it needs to standardize and improve the risk management systems and avoids some risks by virtue of its legal means and services. The correspondingmeasures also can’t be overlooked, for example, export credit insurance, export factoring andforfeiting risk management tools as well as the cooperation between bank and enterprise.