Credit risk in international trade: under the war conditions

Lyubov Klapkiv and Faruk Ülgen ()
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Lyubov Klapkiv: UMCS - Maria Curie-Sklodowska University, CREG - Centre de recherche en économie de Grenoble - UGA - Université Grenoble Alpes
Faruk Ülgen: CREG - Centre de recherche en économie de Grenoble - UGA - Université Grenoble Alpes

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Abstract: The rise of geopolitical risks during the last decade (for instance, wars in Syria, Palestine, and Ukraine) makes the conditions for international trade more volatile. Companies face a number of financial risks when conducting business abroad. One of the main risks that increased as a result of the international tension is the credit risk when counterparties involved in the trade receivable are unable to meet their financial obligations. This type of risk is strongly noticeable in the trade relations with Ukrainian entrepreneurs that result from incomplete information about the creditworthiness of the trading partners. The purpose of this research is to explore and discuss links between the credit risk in trade relations and the war as a kind of political risk. The core hypothesis of the article is that country-specific political risk factors cause obstacles to credit risk. In the study, we use the case of the Russian-Ukrainian war to show the mechanism of credit risk and its evolution. Due to the interdisciplinary nature of the study, which includes political issues and financial risk, the two dimensions will be developed: firstly, the classical theories of credit risk are presented, its nature and conditions under which it appears; secondly, we will discuss war as a new factor of the environment that affects the increase of credit risk in international trade business relations. The article highlighted the main threats that limit the development of international trade. The condition of war is mostly perceived as a factor that holds companies back, but it also can be perceived as an opportunity to get into a new position in the international business.

Keywords: Credit risk; debt; international trade; war (search for similar items in EconPapers)
Date: 2024-05-17
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Published in 16th International Conference "Economies of the Balkan and Eastern European Countries", International Hellenic University; Mykolas Romeris University, May 2024, Vilnius, Lithuania

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