Compare and contrast the strategies in reducing the risks of international lending.

Strategies to reduce the risk of international lending.

The international capital market instils certain risks in lending to states and entitles. Lenders should be aware of the credit ratings of your foreign borrowers, and also the local economic and political factors that could impact their capacity to pay, this would render it much easier to cover your debts (Müllner 2017). Measures to mitigate the dangers of foreign loans include: 

Firstly, review the current borrower's credit record carefully. Finding global banking knowledge can be difficult, developing economies. Local and foreign consultancy services may be able to assist, and lenders may also get help from the international financial institutions, e.g. IMF, and WB. Secondly, lenders should utilise the first credit to start developing a client partnership. Most crucial credit risk management strategy is building a long-term, trustworthy partnership. It will take years to do this truly. But establishing the foundations by negotiating the repayment terms with a potential client before offering credit will allow the lender to gauge the customer's credit behaviour and fully comprehend exactly what you want from them. Thirdly, take into account the use of a Master Credit deal for a potential client, instead of depending on payment agreements to set lending terms. Set caps on credit on a potential client, lenders can use resources like credit-agency reports, which can offer detailed information on the financial performance of a borrower. Bank accounts, which can include descriptions of the partnership between the bank and the client, the credit capacity of the borrower and the amount of debt. The audited financial that will offer a good picture of the liquidity, productivity and cash flow of the client. Lastly, lenders should ensure the terms of credit of the lending deal are transparent. A credit agreement that provides well-worded, detailed credit terms will decrease the chances of conflicts and increase the odds of being paid in full and on schedule.