What are the financing risks?

What are the risks of financing? Financing risk refers to the risk of income change caused by financing planning in financing activities. Financing risk is affected by both operational risk and financial risk, and proper understanding of the content of financing risk can help us to prevent in advance, and then know how to deal with risks when they occur. below, Nomogram I'll tell you what the financing risks are.

What are the financing risks

1. Credit risk. The credit risk faced by project financing refers to the risk caused by the failure of relevant project participants to fulfill the agreed responsibilities and obligations. Like the banks that provide loan funds, the project sponsors are also very concerned about the reliability, professional ability and credit of all participants.

2. Completion risk. The completion risk refers to the risk that the project cannot be completed, delayed or cannot meet the expected operation standard after completion. The completion risk of the project exists in the project construction stage and the trial production stage, which is one of the main core risks of project financing. The completion risk for the project company means the increase of interest expenses, the extension of loan repayment period and the loss of market opportunities.

3. Production risk. Production risk refers to the general term of risk factors such as technology, resource reserves, energy and raw material supply, production and operation, and labor force status in the trial production stage and production and operation stage of the project. It is another major core risk of project financing. Production risks mainly include: technical risks, resource risks, energy and raw material supply risks, and operation and management risks.

4. Market risk. Market risk refers to whether the product quality and output can be maintained as planned under a certain cost level, as well as the risk caused by the fluctuation of product market demand and market price. Market risk mainly includes price risk, competition risk and demand risk. These three risks are interrelated and affect each other.

5. Financial risks. The financial risk of the project is mainly manifested in the interest rate risk and exchange rate risk in project financing. The project initiator and lender must carefully analyze and predict the possible changes in the financial market that are difficult to control, such as exchange rate fluctuations, interest rate rises, inflation, trends in international trade policies, etc. These factors will lead to financial risks of the project.

6. Political risks. The political risks of the project can be divided into two categories: one is the country risk, such as the collapse of the existing political system in the borrower's country, and the embargo, boycott, and termination of the project products debt Repayment, etc; The other is the stability risk of national political and economic policies, such as changes in tax systems, tariff and non-tariff trade adjustments, and foreign exchange management statute Changes, etc. In any international financing, both the borrower and the lender bear political risks, and the political risks of the project can involve all aspects and stages of the project.

7. Environmental protection risks. Environmental protection risk refers to the risk of adding new asset investment or forcing the project to stop production due to meeting the requirements of environmental protection regulations. As the public is increasingly concerned about the impact of the industrialization process on the natural environment, many countries have issued increasingly stringent laws to control the transport of radiation, waste, harmful substances and inefficient use of energy and non renewable resources. The principle of "polluter bears environmental debt" has been widely accepted. Therefore, attention should also be paid to any environmental protection risks that may occur during the project financing period.

In practice, the risks arising from the financing process are mainly the seven kinds mentioned above, including political risks, production risks, market risks and credit risks. The specific content of the Law and Diagram has been explained above, hoping to help you solve your doubts. If you have any questions in this regard, you can directly call our online law website lawyer 。