INTRODUCTION

Import export businesses, also known as international trading, are one of the hottest commercial trends of this decade. American companies trade in over 2.5 trillion dollars a year in merchandise, of which small businesses control over 95 percent. As the owner of an import export enterprise, you can work as a distributor by focusing on exporting and importing goods and services that cannot be obtained on national soil (e.g., Russian caviar and French perfumes) or those that are cheaper when imported from other countries (e.g., Chinese electronics). In addition, you can also open an export management company (EMC), where you can help an existing corporation market its products in a foreign country by arranging the shipping and storing of the merchandise for them without doing the actual selling. EMCs can specialize in one industry or work with different types of import export manufacturers. It is also possible to act as a broker for a company, working on commission over the actual sales. This is a great choice for products that are guaranteed to sell because of high demand or an established brand name.

While basically any country can offer opportunities for import export trade, Canada, Mexico, Japan, and China have topped the trading chart for the past two decades. In the last few years, countries in the former Soviet Union and South America have become major players, but there's still much to learn about trading with these new markets.

Opening an import export business requires an initial investment of $5,000 or more, depending not only on the type of merchandise you're setting up to market, but also on whether you plan on working from home or renting an office, hiring employees, etc. Compared to other businesses, however, import export companies have a very low startup cost. While most products can be exported without the need for licenses, some specialty products or high-risk items, such as firearms or pharmaceuticals, may require special government permits. If that's the case, costs may run considerably higher.

To get started, it may be sensible to consult with the local Board of Trade (or the Chamber of Commerce in smaller cities) or call Consulates and Embassies to find out if they have import export programs set up. Many embassies even have a special department to promote the export of their goods to other countries and are more than happy to help potential import export traders.

Global Trade Services from SAP is a bundle of business scenarios which automates international retail processes from the import businesses as well as from the export business. It enables the retailer to manage large numbers of business partners and high volumes of documents out of international trade businesses. Foreign Trade offers the retailer to comply with changing legal regulations and international trading rules within the compliance management part of GTS. From customs perspective the retailer will find in Global Trade Services tools for electronically communication with governments and customs authorities like the AES or NCTS scenarios and an integrated bonded warehouse solution for customs relevant stocks. Trade preference processing and restitution handling will help the retailer to mitigate the financial import and export risks and costs. Also within the risk management of GTS the retailer can minimize the financial risks out of the increasing international business orientation for example with the letter of credit process. The Foreign Trade component Declarations to Government enables the retailer to declare the import and export processes periodically to the authorities.

Export-Import Procedure
Seller and Buyer conclude a sales contract, with method of payment usually by letter of credit (documentary credit). Buyer applies to his issuing bank, usually in Buyer's country, for letter of credit in favor of Seller (beneficiary).

 Issuing bank requests another bank, usually a correspondent bank in Seller's country, to advice, and usually to confirm, the credit. Advising bank, usually in Seller's country, forwards letter of credit to Seller informing about the terms and conditions of credit. If credit terms and conditions conform to sales contract, Seller prepares goods and documentation, and arranges delivery of goods to carrier. Seller presents documents evidencing the shipment and draft (bill of exchange) to paying, accepting or negotiating bank named in the credit (the advising bank usually), or any bank willing to negotiate under the terms of credit. Bank examines the documents and draft for compliance with credit terms. If complied with, bank will pay, accept or negotiate. Bank, if other than the issuing bank, sends the documents and draft to the issuing bank. Bank examines the documents and draft for compliance with credit terms. If complied with, Seller's draft is honored. Documents release to Buyer after payment or on other terms agreed between the bank and Buyer. Buyer surrenders bill of lading to carrier (in case of ocean freight) in exchange for the goods or the delivery order.

CHAPTER 2: EXPORT
Identifying Export Products
A key factor in any export business is clear understanding and detail knowledge of products to be exported. The selected product must be in demand in the countries where it is to be exported. Before making any selection, one should also consider the various government policies associated with the export of a particular product.

Whether companies are exporting first time or have been in export trade for a long time - it is better for both the groups to be methodical and systematic in identifying a right product. Its not sufficient to have all necessary data 'in your mind' but equally important to put everything on paper and in a structured manner. Once this job is done, it becomes easier to find the gaps in the collected information and take necessary corrective actions.

There are products that sell more often than other product in international market. It is not very difficult to find them from various market research tools. However, such products will invariably have more sellers and consequently more competition and fewer margins. On the other hand - a niche product may have less competition and higher margin - but there will be far less buyers.

Fact of the matter is - all products sell, though in varying degrees and there are positive as well as flip sides in whatever decision you take - popular or niche product.

Market Selection
After evaluation of companys key capabilities, strengths and weaknesses, the next step is to start evaluating opportunities in promising export markets. It involves the screening of large lists of countries in order to arrive at a short list of four to five. The shorting method should be done on the basis of various political, economic and cultural factors that will potentially affect export operations in chosen market.

Some factors to consider include: Geographical Factors Country, state, region, Time zones, Urban/rural location logistical considerations e.g. freight and distribution channels Economic, Political, and Legal Environmental Factors Regulations including quarantine,

 Labelling standards, Standards and consumer protection rules, Duties and taxes Demographic Factors Age and gender, Income and family structure, Occupation, Cultural beliefs, Major competitors, Similar products, Key brands. Market Characteristics Market size, Availability of domestic manufacturers, Agents, distributors and suppliers.

Export Risk Management

Export pricing is the most important factor in for promoting export and facing international trade competition. It is important for the exporter to keep the prices down keeping in mind all export benefits and expenses. However, there is no fixed formula for successful export pricing and is differ from exporter to exporter depending upon whether the exporter is a merchant exporter or a manufacturer exporter or exporting through a canalising agency.

Like any business transaction, risk is also associated with good to be exported in an overseas market. Export is risk in international trade is quite different from risks involve in domestic trade. So, it becomes important to all the risks related to export in international trade with an extra measure and with a proper risk management.

The various types of export risks involve in an international trade are as follow:

Credit Risk Sometimes because of large distance, it becomes difficult for an exporter to verify the creditworthiness and reputation of an importer or buyer. Any false buyer can increase the risk of non-payment, late payment or even straightforward fraud. So, it is necessary for an exporter to determine the creditworthiness of the foreign buyer. An exporter can seek the help of commercial firms that can provide assistance in credit-checking of foreign companies.

Poor Quality Risk Exported goods can be rejected by an importer on the basis of poor quality. So it is always recommended to properly check the goods to be exported. Sometimes buyer or importer raises the quality issue just to put pressure on an exporter in order to try and negotiate a lower price. So, it is better to allow an inspection procedure by an independent inspection company before shipment. Such an inspection protects both the importer and the exporter. Inspection is normally done at the request of importer and the costs for the inspection are borne by the importer or it may be negotiated that they be included in the contract price.

Alternatively, it may be a good idea to ship one or two samples of the goods being produced to the importer by an international courier company. The final product produced to the same standards is always difficult to reduce.

Transportation Risks With the movement of goods from one continent to another, or even within the same continent, goods face many hazards. There is the risk of theft, damage and possibly the goods not even arriving at all.

Logistic Risk The exporter must understand all aspects of international logistics, in particular the contract of carriage. This contract is drawn up between a shipper and a carrier (transport operator). For this an exporter may refer to Incoterms 2000, ICC publication.

Legal Risks International laws and regulations change frequently. Therefore, it is important for an exporter to drafts a contract in conjunction with a legal firm, thereby ensuring that the exporter's interests are taken care of.

Political Risk Political risk arises due to the changes in the government policies or instability in the government sector. So it is important for an exporter to be constantly aware of the policies of foreign governments so that they can change their marketing tactics accordingly and take the necessary steps to prevent loss of business and investment.

Unforeseen Risks Unforeseen risk such as terrorist attack or a natural disaster like an earthquake may cause damage to exported products. It is therefore important that an exporter ensures a force majeure clause in the export contract.

Exchange Rate Risks Exchange rate risk is occurs due to the uncertainty in the future value of a currency. Exchange risk can be avoided by adopting Hedging scheme.

CHAPTER 3: IMPORT
Preliminaries for Starting Import Business
Starting an import business needs a proper guidelines and understanding of the foreign market. Before starting an import, it is also important for an importer to obtain all the necessary information in matters associated with foreign trade agreement. Starting an import is not a get-rich-quick-scheme. Like an export, import also requires a lot of preparations.

Selecting the Commodity Market Proper selection of the commodity market is an important factor before starting an import. Commodity market data and information collected during research helps to prepare the commodity market report. The right market can be selected by answering the following the following questions. Is the product(s) an importer need to conducting his business available domestically? Is there a lucrative and untapped domestic market for an imported product? Does importing a product increase competitiveness as a business?

An importer should only proceed; if he is determined that importing certain goods will definitely make his business profitable.

Once the importer is confirmed about his importing decision, then he should proceed towards the development of the proper import business plan. While making the import plan, importer of India must evaluate the various government policies and guidelines including the rules and regulation as mentioned in the Foreign Trade Policy Procedures, 2004-09.

An importer is always free to import goods in India provided that such goods are imported under the regulations of ITC- HS Classifications of Export Import items. ITC-HS codes are divided into two schedules. All the rules and regulations related to the Indian import is mentioned in the Schedule I of the ITC.

Import Risk
Like an export, import of goods is also associated with various types of risks. Some of these are

 Transport Risk This risk is associated with the loss of goods during transportation. Quality Risk This risk is associated with the final quality of the products. Delivery Risk This risk arises when the goods are not delivered on time. Exchange Risk This risk arises due to the change in the value of currency.

These risks are explained more fully below.

Transport Risk For a better transport risk management, an importer must ensure that the goods supplied by the exporter are insured. Whether the goods are transported by Sea or by Air, the risk can be covered by Insurance. It is always advisable to set out the agreement between the parties as to the type of cover to be obtained in the Contract of Sale. Often Importers will wish to obtain Insurance cover from their own Insurance Company under a 'blanket cover' called an 'Open Policy' thus taking advantage of bulk billing and other relationships.

Quality Risk The proper quality risk analysis is important for the importer to ensure that the final products are as good as the sample. Occasionally, it has been found that the goods are not in accordance with samples, quality is not as specified, or they are otherwise unsatisfactory. To handle such situations in future, importer must take necessary protective measures in advance. One the best method to avoid such situation is to investigate the reputation and standing of the supplier. Even before receiving the final product, inspection can be done from the importer side or exporter side or by a third party agency.

In case of Bill of Exchange, with documents released against acceptance, the Importer is able to inspect the goods before payment is made to the Supplier at the maturity date. In this method of payment, if the goods are not in accordance with the Contract of Sale the Importer is able to stop payment on the accepted draft prior to maturity. Importers should consider what measures can be taken to ensure that the

need for legal action does not arise. If the Importer has an agent in the Supplier's country it may be possible for closer supervision to be maintained over shipments.

Delivery Risk Delivery of goods on time is important factor for the importer to reach the target market. For example any product or item which has been ordered for Christmas is of no use if it is received after the Christmas. Importer must make the import contract very specific, so that importer always has an option of refusing payment if it is apparent that goods have not been shipped by the specific shipment date. Where an Importer is paying for goods by means of a Documentary Credit, the Issuing Bank can be instructed to include a 'latest date for shipment' in the terms of the Credit.

Exchange Risk Before entering into a commercial contract, it is always advisable for the importer to determine the value of the product in domestic currency. As there is always a gap between the time of entering into the contract and the actual payment for the goods is received, so determining the value of the good in domestic currency will help an exporter to quote the right price for the product. Contracting to import in Indian Rupees. Entering into a Foreign Exchange Contract through Bank. Offsetting Export receivables against Import payables in the same currency by using a Foreign Currency Account. Where Pre / Post-Shipment Finance is provided with a Foreign Currency Loan in the currency of the transaction and Export receipts repay the loan.

The Foreign Trade Policy (FTP) 2009-2014, incorporating provisions relating to export and import of goods and services, shall come into force with effect from 27th August, 2009 and shall remain in force upto 31st March, 2014 unless otherwise specified. All exports and imports upto 26th August 2009 shall be accordingly governed by the FTP 2004-2009. (b) The Foreign Trade Policy, 2009-2014, incorporating the Annual Supplement as updated on 5th June, 2012 shall come into force with effect

With a view to continously increasing our percentage share of global trade and expanding employment opportunities, certain special focus initiatives have been identified/continued for Market Diversification, Technological Upgradation, Support to status holders, Agriculture, Handlooms, Handicraft, Gems & Jewellery, Leather, Marine, Electronics and IT Hardware manufacturing Industries, Green products, Exports of products from North-East, Sports Goods and Toys sectors. Government of India shall make concerted efforts to promote exports in these sectors by specific sectoral strategies that shall be notified from time to time.
(1) Risk Assessment and the Firms Foreign Market Entry Strategy: When a firm is considering its entry or expansion in a foreign market, it must consider all options and decide on a course of action commensurate with its objectives, capabilities and its willingness to assume risk. Selling to a customer in another country results in less risk to the firm than licensing trademarks, patents and copyrights there. (2) Managing Distance and Communications: The risks of doing business in a foreign country are different from those encountered at home. A firm doing business in a foreign country would encounter greater distances; problems in communications; language and cultural barriers; differences in ethical, moral and religious codes; exposure to strange foreign laws and government regulations; and different currencies. All these factors affect the risks of doing business abroad. (3) Managing Currency and Exchange Rate Risks: Currency risk is risk a firm is exposed to as a result of buying, selling, or holding a foreign currency. Currency risk includes: (i) Exchange Rate Risk (ii) Currency Control Risk

(i) Exchange Rate Risk: Exchange rate risk results from the fluctuations in the relative values of the foreign currencies against each other when they are bought and sold on international financial markets. (ii) Currency Control Risk: Some countries, particularly developing countries where access to ready foreign reserve is limited, put restrictions on currency transactions. In order to preserve the little foreign exchange that is available for international transactions, such as importing merchandise, these countries restrict the amount of foreign currency that they will sell to private companies. This limitation can cause problems for a U.S or any other country exporter waiting for payment from its foreign customer who cannot obtain the dollars needed to pay for the goods. (4) Special Transactions Risks in Contracts for the Sale of Goods: Special risks are inherent in international transactions for the purchase and sale of goods. These transactions present special risks to both the parties because the process of shipping goods and receiving payment between distant countries is riskier than within a country. Such risks are: (i) Payment or Credit Risk (ii) Property or Marine Risk (iii) Delivery Risk (iv) Pilferage and Theft Risk (5) Managing Political Risk: Political Risk is generally defined as the risk to a firms business interests arising from political instability or political change in a country in which the firm is doing business. Political Risk includes risk derived from potentially adverse actions of Governments of the foreign countries in which one is doing business or whose laws and regulations one is subject to.

It also includes laws and Government policies instituted by the firms home country which adversely affect the firms that do business in a foreign country.

(6) Risks of Foreign Laws and Courts: Many Acts that are perfectly legal in one country can be illegal in another. Indeed, most travelers to a foreign country could conceivably break a host of laws and not even be aware of it. The same is true for the law of contracts, employment, competition, torts and other business laws. It is virtually impossible to catalog all of the differences between these laws from country to country (7) Commercial Risks: The risks arising from suitability of the product for the market or otherwise change in supply and demand conditions and changes in price. Commercial risks arise due to: (i) Lack of Knowledge (ii) Inability to adapt to the environment (iii) Different kinds of situations to be dealt with (iv) Greater transit time involved (8) Cargo Risk: Transit disasters are an ever present hazard for those engaged in ExportImport business. Every shipment runs the risk of a long list of hazards such as storm, collision, theft, leakage, explosion, spoilage etc. It is possible to transfer the financial losses resulting from perils of and in transit to professional risk bearers known as underwriters. As most goods are transported by marine transport, every exporter should have an elementary knowledge of marine insurance to get the protection at the minimum cost.

HOW TO BEGIN WITH THE PROCESS OF ERM AND TO GET THE STRATIGIC BENEFIT FORM THE ROBUST ERM APPROACH TO RISK MANAGEMENT
Knowingly or unknowingly the organizations practice some form of risk management but mostly these actions and activities are on ad hoc basis absolutely informal uncontrolled and uncoordianated. The major risk activities are focused on compliance , ethics and the company's operational activities. The organization fails to focus on the strategic risks and the emerging risks which become the major factors effecting the success of the organization. By overlooking the reasons of their failure the organizations further fail to understand the impact of not implementing the well defined, complete and structured COSO risk management process. The promoters of the business or the senior management or the directors stay in dark as to how the risk management is being implemented in their organizations. They fail to understand the importance of a structured way of interpretation , evaluation of the emerging risks. This evaluation is possible only through the implementation of the enterprise wide risk management which is transparent and updates the promoters / directors / stakeholders of the business on the core issues relating to risk management. Implementation of ERM imparts confidence in the owners of the business. The issue that remains unsolved is "HOW TO BEGIN WITH THE PROCESS OF ERM AND TO GET THE STRATIGIC BENEFIT FORM THE ROBUST ERM APPROACH TO RISK MANAGEMENT" In India Risk Management is still in a nascent stage and organisations still recognise RM for its academic importance and allocating resources for a robust RM structure is not on priority. But with globalisation and increasing use of technology a continuous and proactive ERM is a must for the sustenance of the business enterprise. A continuous assesment of risk profile and risk tolerance is needed. Indian corporates are still not being professionally. Even big corporate houses are being run on gut feeling basis and there is too much of yesmanship in India. In such a scenario when there is no professional culture where is the place for Risk Management. AJIT KUMAR CHATURVEDI we are always late in implementing things that is the reason for us being still the 3rd world country. hope things will change fast and we will be able to fulfill the dreams of our ex president abdul kalam azad of making india economically dependent country by 2020. i am sure risk management will play a vital role.