Effective Ways In Which The Blockchain Technology Has Improved The Financial System-- The Enhancement Of Trade Finance Processes #006
Hello great minds,
It is another beautiful day to come before you all to discuss on an issue of great importance in the cryptospace.
I trust you are all doing perfectly fine and are enjoying your activities in the community as you actively promote steemit across various social media platform.
Today being another day, we shall be learning about another interesting concept of trade finance process.
In our last post we discussed about some key players in trade finance process, and we shall be continuing today.
KEY PLAYERS IN TRADE FINANCE PROCESS
There are very important personel in trade finance process and we shall discuss about one of them now.
Insurers in trade finance plays a very important role in the mitigation of risks related to international transaction.
This risks can range from commercial uncertainties to political instabilities, and insurers helps to provide a security for businesses engaging in global trade.
Explained below are some roles played by insurers in trade finance process.
PROVISION OF TRADE CREDIT INSURANCE
The provision of trade credit insurance is one of the primary roles of insurer in trade finance process.
This type of insurance serves as a security to businesses should incase they don't get paid by their business partner.
In international trades, credit terms are often extended by companies to their customers, thus allowing them to make payment at later times.
And this introduces the risk of default due to financial difficulties on the side of the buyer.
The insurer in this scenerio act as a safeguard, ensuring that the company will be paid even when the buyer fails to pay for the commodity.
MITIGATING POLITICAL RISKS
Another Important role of insurer is to mitigate political risks associated with cross border trades.
Political risks insurance helps in protecting a business against loss that may arise as a result of political events such as currency incovertibility, political violence etc.
A company's operation in foreign market can be significantly affected by these risks and a layer of protection is provided by the political risks insurance, encouraging businesses to explore new market without fear of unfavourable political events.
Cargo insurance is another aspect of trade finance where the operation of insurer is needed.
Cargo insurance is a type of insurance that covers the loss of goods on transit.
Considering the unpredictability and complexity of international shipping , cargo insurance helps the exporters and importers to have peace of mind of the goods on transit.
This helps to ensure that any goods that got damaged during transit will be compensated for, thus allowing businesses to be more focused on their main operations rather than wondering about the logistical set back.
Insurers indeed play an important role in trade finance process.
They help in covering the losses that may be encountered by businesses in the process of carrying out the trade.