Political & Economic Risks
What is the Foreign Corrupt Practices Act (FCPA) designed to prohibit?
a) Corruption within domestic businesses
b) Bribery of foreign government officials by U.S. businesses
c) Routine payoffs to private sector employees
d) Petty-graft practices within government agencies
B) Bribery of foreign government officials by U.S. Businesses
In the United States, which of these organizations would you purchase political risk insurance from?
A) Financial Insurers of North America (FINA)
B) International Trade Association (ITA)
C) International Development Finance Corporation (DFC)
D) Political Risk Education & Mitigation Center (PREM)
C) International Development Finance Corporation (DFC)
What is Commercial Risk?
A) Risk of paying for the shipping of goods to a foreign buyer
B) Company specific risk associated with foreign buyer’s ability to pay
C) Risk of exposure to financial loss due to the fluctuation of an exchange rate change
D) Risk of exposure to financial loss caused by political, economic, and social conditions and events in a foreign country
B) Company specific risk associated with foreign buyer’s ability to pay
Which of the following Letter of Credit actors is not necessary in all L/C transactions?
A) Beneficiary
B) Issuing Bank
C) Advising Bank
D) Confirming Bank
D) Confirming Bank
What is a downside to “payment up front”
A) The buyer will be upset
B) It lowers the amount of product importers can purchase
C) It guarantees payment for the exporter.
D) Its less risky for the exporter
B) It lowers the amount of product importers can purchase
Which the following options provides a method for exporters to safeguard against political risks in the importing country?
A) Purchasing an export credit insurance policy from private sources
B) Engaging in currency hedging through foreign exchange markets
C) Establishing joint ventures with local partners in the importing country
D) Investing in infrastructure development projects in the importing country
A) Purchasing an export credit insurance policy from private sources
Foreign exchange risk mitigation techniques include all EXCEPT:
A) Pricing in USD
B) Forward Contract
C) Letters of credit
D) Exposure netting
C) Letters of credit
If you are exporting a product to a foreign buyer, what is the least risk prone method of payment?
A) Open Account
B) Documentary Collections
C) Letter of Credit
D) Cash in Advance
D) Cash in Advance
Which of the following describes the type of Letter of Credit where it only takes effect if one of the parties fails to deliver on their part of the sales contract?
A) Revocable L/C
B) Conditional L/C
C) Standby L/C
D) Revolving L/C
C) Standby L/C
Which one is not one of the 3 export financing programs the U.S. SBA offers?
A) U.S. SBA’s International Trade Loan (ITL)
B) U.S. SBA’s Export Working Capital Program (EWCP)
C) SBA’s Export Express
D) SBA Export Capital Loan (ECL)
D) SBA Export Capital Loan (ECL)
Which of the following dates is universally recognized as a day when banking transactions do not occur?
A) January 1st
B) December 25th
C) April 1st
D) July 4th
A) January 1st
Currency Convertibility Risk refers to…
A) When a foreign currency is so devalued that it no longer convertible into US dollars or when a country invokes restrictions on currency conversion
B) When currency is inconvertible due to criminal ties (acquired in criminal acts, laundered money, etc.)
C) When a firm experiences low liquidity and cannot convert assets into currency fast enough to pay its debts
D) The instance where foreign buyers provide payment in a non-fungible form that cannot be readily interchanged
A) When a foreign currency is so devalued that it no longer convertible into US dollars or when a country invokes restrictions on currency conversion
What is NOT a characteristic of the U.S DOC International Company Profile?
Answer:
A) Background and Product Information
B) References contacted by ITA
C) Financial data/creditworthiness information
D) No Fee Applicable
D) No Fee Applicable
Which is NOT true about documentary collections?
A) Allows exporters to retain ownership of the goods until they receive payment or are reasonably certain they will receive it.
B) Bank acts as agent for exporter by holding the title documents.
C) Bank assumes the risk of loss of documents.
D) Banks are only liable for the correct execution of the collection instructions.
C) Bank assumes the risk of loss of documents.
Which is not a U.S. Export & Import Bank (EXIM) Financing Program?
A) EXIM Export Development and Working Capital Financing
B) EXIM Bank’s Financing for your International Buyers
C) EXIM Bank’s Export Express Program
D) EXIM Bank’s Multi Buyer Export Credit Insurance
C) EXIM Bank’s Export Express Program
Which of the following are identified as primary risks to an importer's ability to make or afford payment on time?
A) Decreased demand for imported goods
B) Increased domestic production capacity
C) Devaluations leading to higher foreign exchange conversion costs
D) Government subsidies to facilitate imports
C) Devaluations leading to higher foreign exchange conversion costs
Transactions between a parent company and its subsidiaries are subject to:
A) Additional taxation at the federal level (and associated documentation)
B) California Environmental Quality Act (CEQA)
C) Expropriation by a foreign nation
D) Transfer Pricing Rules
D) Transfer Pricing Rules
Which of the following is a public source to help assess a business financial risk abroad?
A) U.S. DOC Int. Company Profile
B) Dun and Bradstreet
C) Hoovers
D) U.S Foreign Risk Indicator
A) U.S. DOC Int. Company Profile
Which form of documentary collection could have a “date draft” clause?
A) D/P (Documents against Payment)
B) D/R(Documents against Receivables)
C) D/A (Documents against Acceptance)
D) D/C (Documents against Collection)
C) D/A (Documents against Acceptance)
What is the Facilities Guarantee program?
A) Program that helps pay for manufactured goods that aide in the reception of U.S. agricultural product imports in emerging markets
B) Program that helps establish facilities with the purpose of processing US agriculture product for export
C) Program allows US firms to borrow capital for acquisition deals
D) Program allows US firms to borrow capital for constructing production facilities in the US.
A) Program that helps pay for manufactured goods that aide in the reception of U.S. agricultural product imports in emerging markets
What measures should exporters prioritize to minimize company risks effectively?
A) Implementing stringent quality control measures in production facilities
B) Diversifying product offerings to appeal to a wider market
C) Conducting thorough due diligence on prospective partners' financials, performance, and character
D) Establishing exclusive partnerships with government trade assistance organizations
C) Conducting thorough due diligence on prospective partners' financials, performance, and character
What organization provides “Currency Inconvertibility and Transfer Restriction Coverage” to protect against losses from an investor’s inability to legally convert currency and/or transfer it outside host country?
A) World Bank Multilateral Investment Guarantee Agency (MIGA)
B) Global Bank Guarantor Association (GBCA)
C) Foreign Currency Insurance & Coverage Agency (FCIC)
D) Elon Musk Cryptocurrency Trust Fund
A) World Bank Multilateral Investment Guarantee Agency (MIGA)
Which of the following is NOT a mitigation technique when it comes to liming risk in international transactions?
A) Export Credit Insurance through EXIM bank
B) Matching Payment Terms with Level of Risk
C) Establishing Credit Limits based on Credit Reports, Payment History, Financials, Sales, Volume
D) Creating and Additional Financial Contract to Secure the Payment With the Foreign Buyer
D) Creating and Additional Financial Contract to Secure the Payment With the Foreign Buyer
What are the internationally recognized rules for L/C transactions called?
A) Uniform Procedures and Codes for Documentary Credits (UPC600)
B) Unilateral Codes and Procedures for Documentary Collections (UCP600)
C) Uniform Customs and Practice for Documentary Credits (UCP600)
D) Unilateral Practice and Customs for Documentary Collections (UPC600)
C) Uniform Customs and Practice for Documentary Credits (UCP600)
U.S. SBA’s International Trade Loan (ITL) can only be used for pre-export stage projects and purchases:
True OR False
FALSE