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Risks in Chemical Trading That You Need to be Aware of!

Once basic requirements for chemical trading has been established, it is better to be aware of various chemical trading risks which can broadly be categorized into market-related and company-specific risks.

Market-Related Risks

Political risks
Changes in laws and regulations, Eg. Customs regulations, export regulations, and other laws and regulations in countries where the company operates affects its operations negatively.

Global economic conditions
A protracted recession with a reduced drive for new developments among customers could lead to a reduction in demand for the company’s products. That can result in orders not being received, being canceled or being postponed.

Company-Specific Risks

Growth Management
As a result of increased demand for the products, there may be a phase of growth that would place high demands on the company’s management and operating and financial infrastructure.

Penetration of New Product
At a stage when the basic product list is performing well in the market and when you decide to introduce new products to broaden your market range, then the risk of competitors in that domain will directly affect your success.

Employees Dependency
Future growth depends on the knowledge, experience, and creativity of existing employees as well as the company’s ability to recruit and retain key personnel. Failing to recruit and retain qualified personnel could lead to failures in business strategy.

Financial risks
Foreign exchange risk, Price risk, Interest rate risk, Credit risk, and financing and liquidity risk are some attributes of financial risk.

Liquidity risk
Financing risk is defined as the risk of the refinancing of maturing loans being made difficult or becoming costly. Liquidity risk is defined as the risk of not being able to fulfill payment obligations when they fall due. Protective action against potential refinancing risks by a balance maturity profile for financial indebtedness as well as through diversification in various financial markets.

Foreign exchange risk
Foreign exchange risks exist in the form of both transaction risks and translation risks. Transaction risks occur in conjunction with purchases and sales of products and services in currencies other than the respective company’s local currency.
Once you are aware of the risks in chemical trading ahead, then proper backup steps can be accounted for a smoother run. For more information regarding chemical trading, visit our website or blog page.

-Written By

      Manikandan Jayaraj

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