Trade Risk, Insurance, Compliance and Ethics

Introduction and Context

International trade creates value by connecting buyers and sellers across jurisdictions, currencies, legal systems and transport networks. The same cross-border structure also creates uncertainty. An exporter may deliver goods that are rejected because of quality defects; a foreign buyer may become insolvent; a government may impose exchange controls; cargo may be damaged at sea; a cybercriminal may redirect payment; or an intermediary may expose the firm to sanctions or bribery allegations.

Trade risk management is therefore not merely an insurance or finance function. It is a strategic management process through which an organisation identifies uncertainty, evaluates its potential effect, selects controls and transfers unavoidable exposures. Effective risk management supports profitable growth while protecting cash flow, reputation, market access and legal standing.

The central principle is that risk should be managed at the level of the complete transaction. A low-risk buyer may operate in a high-risk country. A politically stable country may contain a corrupt port or unreliable logistics provider. A contract may allocate transport risk effectively but leave the exporter exposed to non-payment. Risk analysis must therefore connect commercial, legal, financial, operational, technological and ethical dimensions.

Learning Objectives

After completing this chapter, the learner should be able to:

1. Explain the main categories of risk in export-import transactions.
2. Assess probability, impact, exposure and risk appetite.
3. Select suitable cargo, marine and export-credit insurance.
4. Analyse foreign-exchange, country, political, transport, cyber and fraud risks.
5. Design sanctions, AML/KYC, anti-bribery, data-protection and responsible-sourcing controls.
6. Apply governance principles to trade decisions and third-party relationships.
7. Recommend an integrated risk response in a practical international-trade case.

1. The Nature of Trade Risk

Risk is the possibility that uncertainty will produce an outcome different from the organisation’s objectives. In trade management, risk may result in financial loss, delay, legal liability, physical damage, regulatory enforcement or reputational harm.

A useful distinction is between hazard, exposure, risk event and loss. A hazard is a condition that increases the chance of harm, such as inadequate packaging. Exposure is the value or activity vulnerable to that hazard, such as a container of temperature-sensitive goods. A risk event is the occurrence itself, such as water entering the container. Loss is the resulting consequence, such as spoilage and a customer claim.

Risk is commonly assessed using likelihood and consequence. A simple screening model is:

Likelihood is a rating or estimated probability of occurrence, and impact is the severity of the consequence. If a numerical probability and monetary impact are available, an expected loss estimate may be used:

The formula assumes that the probability is relevant to the specified period and that the estimated loss amount is measured consistently, normally in the same currency. It is a planning measure, not a prediction of the exact loss that will occur. Rare events with catastrophic consequences may require special treatment even when their expected loss appears modest.

Risk responses generally fall into five groups:

Insurance transfers certain financial consequences, but it does not eliminate the underlying event. It normally excludes predictable, illegal, poorly disclosed or deliberately caused losses.

2. Commercial and Counterparty Risk

Commercial risk arises from the buyer, seller or other private party. Important forms include:

• Non-payment risk: the buyer does not pay after receiving goods.
• Insolvency risk: the buyer becomes unable to meet obligations.
• Refusal or repudiation: the buyer rejects conforming goods without valid contractual grounds.
• Performance risk: a supplier fails to manufacture or deliver as agreed.
• Quality and specification risk: the goods do not meet contract, regulatory or customer requirements.
• Documentary risk: errors in invoices, certificates, transport documents or letters of credit prevent payment or customs clearance.
• Concentration risk: excessive sales or purchases depend on one buyer, supplier, bank, route or country.

Counterparty assessment should combine financial and non-financial information. Relevant evidence includes audited accounts, payment history, trade references, ownership information, litigation, sanctions screening, credit reports, management reputation, beneficial ownership and the purpose of the transaction. A buyer’s apparent size is not a substitute for verified creditworthiness.

Contract design is a major control. Contracts should identify the goods, specifications, quantity, price, currency, delivery term, transfer of risk, payment method, inspection rights, claims procedure, governing law, dispute mechanism, force-majeure treatment, compliance obligations and termination rights. Incoterms® rules allocate specific delivery responsibilities and risks, but they do not determine ownership, payment, governing law or every form of liability. The chosen rule must therefore be integrated with the full contract.

Payment methods provide different balances of risk:

A letter of credit is documentary rather than physical performance insurance. Banks examine stipulated documents, not necessarily the actual goods. Documentary discrepancies can cause non-payment even where goods are satisfactory. Staff should therefore conduct a pre-shipment document review.

3. Country, Political and Regulatory Risk

Country risk is the possibility that conditions in a foreign state will adversely affect a transaction. It includes economic, financial, legal, social and political factors. Political risk is narrower and may include expropriation, confiscation, war, civil disturbance, import bans, licence cancellation, transfer restrictions and government interference.

Country analysis should consider:

1. Macroeconomic conditions: inflation, interest rates, debt sustainability and growth.
2. Currency convertibility: ability to obtain and transfer the contract currency.
3. Political stability: elections, policy volatility, conflict and institutional strength.
4. Legal enforceability: independence of courts, arbitration recognition and contract enforcement.
5. Trade policy: tariffs, quotas, export controls, local-content rules and customs administration.
6. Infrastructure: ports, roads, power, telecommunications and logistics reliability.
7. Social and environmental conditions: labour standards, security and climate exposure.

Country risk is not a permanent label. Conditions can change rapidly, and analysis must be updated before renewal, shipment, payment or expansion. A country-risk score should not replace professional judgment. It may also conceal regional, sectoral or counterparty differences.

Political-risk mitigation may include political-risk insurance, confirmed letters of credit, staged investment, local partnerships with appropriate due diligence, arbitration clauses, diversification and contractual stabilisation provisions. Such measures have limits: insurance policies contain exclusions, and arbitration awards may still be difficult to enforce in a distressed jurisdiction.

4. Transport, Cargo and Supply-Chain Risk

Transport risk covers loss or damage during inland movement, port handling, storage, loading, carriage, trans-shipment and final delivery. Common causes include collision, grounding, theft, mishandling, moisture, temperature deviation, delay, inadequate packaging, inaccurate marking and documentation failures.

A sound transport-risk programme begins before dispatch. The shipper should classify goods by value, fragility, perishability, hazardous characteristics and sensitivity to time or temperature. Packaging, container selection, seals, route planning, carrier vetting and tracking should reflect that classification.

Cargo insurance may cover physical loss or damage to goods during an insured transit, subject to the policy wording, insured value, voyage, exclusions, deductibles and claims conditions. Common exclusions or limitations may relate to ordinary wear and tear, inherent vice, inadequate packing, delay, wilful misconduct, war, strikes, riots, sanctions and unseaworthiness. War and strikes coverage may need separate extension.

The insured value should be sufficient to reflect the financial interest intended to be protected. Depending on the policy and commercial arrangement, this may include the invoice value, freight, insurance and an agreed margin for expected profit or incidental costs. The exact basis must be confirmed with the insurer; over-insurance does not create a right to profit from a loss.

When damage occurs, the insured should:

• notify the insurer and carrier promptly;
• preserve packaging, seals and evidence;
• obtain a survey or carrier exception report where appropriate;
• mitigate further loss without admitting liability unnecessarily;
• retain invoices, packing lists, transport documents and photographs;
• comply with claims deadlines and subrogation requirements.

The carrier’s liability is not automatically equal to the cargo’s commercial value. Transport conventions and carrier contracts may limit liability. Cargo insurance and carrier liability are therefore different protections.

5. Foreign-Exchange Risk

Foreign-exchange risk arises when exchange-rate movements alter the domestic-currency value of a foreign-currency receipt, payment, asset or liability. Three common forms are:

• Transaction exposure: a contracted foreign-currency cash flow changes in domestic value.
• Translation exposure: foreign financial statements change when consolidated into the reporting currency.
• Economic exposure: exchange movements affect long-term competitiveness, prices and market share.

Suppose an exporter will receive USD 100,000 in 60 days. If the domestic currency value at the current rate is 83 per USD, the expected domestic value is 8,300,000 units. If the rate falls to 80, the receipt is worth 8,000,000 units, creating a reduction of 300,000 units before transaction costs. If the rate rises to 86, the receipt is worth 8,600,000 units. The exporter may hedge with a forward contract, option, natural hedge or currency clause, subject to treasury policy and accounting treatment.

A forward hedge provides certainty but removes the benefit of favourable movements. An option provides a right rather than an obligation, but normally requires a premium. A natural hedge matches foreign-currency receipts and payments. Hedging decisions should consider forecast certainty, hedge cost, credit exposure, liquidity, accounting rules and the organisation’s risk appetite.

Foreign-exchange controls also create transfer risk. A buyer may possess local currency but be unable to remit hard currency because of government restrictions. This is distinct from ordinary market volatility and may require country-risk protection or alternative payment structures.

6. Cyber, Fraud and Information Risk

International trade relies on electronic invoices, enterprise systems, customs portals, logistics platforms, email and digital payments. This creates exposure to ransomware, credential theft, business-email compromise, invoice manipulation, malware, data leakage, fraudulent shipping instructions and unauthorised changes to beneficiary accounts.

A practical cyber-control framework includes:

1. Identity and access management: unique accounts, least privilege, multi-factor authentication and prompt removal of leavers.
2. Payment verification: independent callback using a trusted contact, dual approval and controlled changes to bank details.
3. Data protection: classification, encryption, retention limits, secure transfer and access logging.
4. Resilience: tested backups, recovery plans, incident response and supplier continuity arrangements.
5. Awareness: training staff to recognise phishing, spoofed domains, urgent payment demands and unusual attachments.
6. Third-party security: contractual requirements, audits and assessment of freight forwarders, agents and technology providers.

Fraud controls should separate duties. The person who creates a supplier should not be the sole person who approves payment. System changes, unusual discounts, duplicate invoices, altered shipping instructions and rushed exceptions should generate review alerts. Artificial intelligence can assist anomaly detection and document comparison, but it can also produce false positives, amplify biased data or be manipulated by adversaries. Human approval, explainability, audit trails and data governance remain necessary.

7. Insurance Selection and Export-Credit Protection

Insurance selection should follow an exposure analysis rather than a search for the cheapest premium. The decision process should identify the property or receivable at risk, event covered, financial limit, deductible, territorial scope, exclusions, claims procedure, insurer credit quality and policy coordination.

Cargo insurance protects goods in transit. Export-credit insurance protects against specified commercial and political causes of non-payment. It may cover insolvency, protracted default, buyer repudiation, political events or transfer restrictions, depending on policy terms. Political-risk insurance may protect investments or receivables against government-related events. Trade-credit insurance can support receivables management and borrowing capacity, but it usually requires credit limits and prompt reporting of overdue accounts.

A policy should be evaluated by its effective protection, not its headline limit. Important questions include:

• Is the buyer, country and shipment approved before exposure begins?
• Is the full transaction value insured, or only a percentage?
• Does the policy cover pre-shipment and post-shipment risk?
• What waiting period applies to protracted default?
• Are sanctions, fraud, poor documentation or contractual disputes excluded?
• Is political violence distinguished from ordinary war?
• Does the policy require debt collection or legal action?
• Who bears the deductible and uninsured percentage?

For example, if an insured receivable is 500,000 currency units, the policy covers 90% and the deductible is 10% of the loss, the maximum indemnity—assuming a covered total loss and no other limit—is 450,000 units. The policy wording must be checked because some deductibles apply differently.

Insurance cannot compensate for illegal conduct, deliberate misrepresentation or failure to follow policy conditions. It should complement, not replace, credit assessment and internal controls.

8. Sanctions, Export Controls, AML and KYC

Sanctions are restrictions imposed by governments or international bodies against states, entities, individuals, sectors, vessels or activities. Export controls regulate the transfer of controlled goods, software, technology and technical knowledge. A transaction may be unlawful because of the destination, end user, end use, product classification, financing bank, vessel or intermediary.

A compliance programme should include:

• classification of products and technologies;
• screening of customers, beneficial owners, banks, vessels and intermediaries;
• end-user and end-use verification;
• assessment of routing, trans-shipment and unusual trade patterns;
• licence determination before commitment or shipment;
• escalation of potential matches and documented disposition;
• monitoring for regulatory changes;
• record retention and periodic testing.

A name-screening alert is not automatically a confirmed match. It must be investigated using identifiers such as date of birth, address, registration number, nationality, ownership and business activity. Staff must not circumvent restrictions by changing invoice descriptions, routing through a third country or using an undisclosed intermediary.

Know Your Customer (KYC) is the process of identifying and understanding a customer and its ownership, activities and risk. Anti-money-laundering (AML) controls seek to prevent the use of trade or financial systems to disguise criminal proceeds. Trade-based money laundering indicators may include over- or under-invoicing, mismatched goods and payments, circular shipments, unexplained third parties, unusual routes, excessive use of cash and transactions inconsistent with the customer’s business.

A risk-based approach allocates stronger controls to higher-risk customers and transactions. It does not mean ignoring low-value or low-risk activity; it means applying proportionate controls and documenting the rationale.

9. Anti-Bribery, Responsible Sourcing and Ethics

Bribery risk is significant where permits, customs clearance, inspections, public procurement or state-owned enterprises are involved. It may involve cash, gifts, travel, employment, charitable donations, facilitation payments or indirect benefits through agents.

Core anti-bribery controls include senior-management commitment, a clear prohibition, risk assessment, third-party due diligence, approval of gifts and hospitality, accurate books and records, training, confidential reporting, investigation and disciplinary action. Commissions should reflect legitimate services, be commercially reasonable and be paid to properly identified parties through transparent accounts. “Everyone does it” is neither an ethical nor a legal defence.

Responsible sourcing extends risk analysis to labour, human rights, health and safety, environmental damage and conflict minerals. A code of conduct is useful only when supported by supplier mapping, contractual standards, audits, worker grievance channels, remediation and responsible disengagement. Audits alone may fail if suppliers conceal violations or if purchasing pressure encourages unsafe production. Effective due diligence is continuous and should seek improvement rather than merely produce paperwork.

Ethical trade decisions may involve conflicts between price, speed, compliance and social outcomes. A procurement team that rewards only the lowest price may unintentionally encourage forced labour, environmental shortcuts or fraudulent documentation. Governance should therefore incorporate non-price criteria and escalation rights.

10. Data Protection and Records Governance

Trade organisations process personal data relating to customers, employees, drivers, customs contacts, beneficial owners and suppliers. Data protection principles commonly include lawfulness, fairness, transparency, purpose limitation, data minimisation, accuracy, storage limitation, security and accountability. Exact legal duties depend on applicable jurisdictions and the organisation’s role.

Practical controls include a data inventory, lawful processing assessment, privacy notices, access restrictions, retention schedules, processor agreements, cross-border transfer safeguards, breach response and deletion procedures. Compliance staff should avoid collecting identity documents or personal information merely because it might be useful later.

Records must be accurate, retrievable and protected from alteration. Trade records may include contracts, licences, screening results, invoices, shipping documents, approvals, correspondence and investigation files. Retention periods should follow applicable law and internal policy. Poor records can turn a manageable error into an inability to demonstrate compliance.

11. Governance and the Three Lines Model

A strong governance structure assigns responsibility clearly:

• First line: commercial and operational teams own day-to-day risks and controls.
• Second line: compliance, risk and legal functions establish frameworks, advise and monitor.
• Third line: internal audit provides independent assurance to governance bodies.

The board or senior management should approve risk appetite, receive meaningful reporting and ensure that incentives do not reward unlawful or reckless behaviour. Useful indicators include overdue receivables, policy breaches, screening alerts, document discrepancies, claims frequency, supplier concentration, cyber incidents, training completion and unresolved audit findings.

A control is effective only when it is designed appropriately, performed consistently, evidenced and periodically tested. Excessive controls can delay legitimate trade and encourage workarounds; weak controls create unacceptable exposure. Governance therefore requires proportionality, independence and continuous improvement.

Applied Case: Meridian Components’ Export to Arcturus

Background

Meridian Components, an illustrative mid-sized manufacturer, receives an order worth USD 2 million from Arcturus Industrial, a new distributor in a politically unstable market. The proposed terms are open account, delivery under an Incoterms® rule placing substantial transport responsibility on Meridian, and payment 90 days after shipment. Arcturus requests that a local consultant receive a 7% commission and asks Meridian to describe the goods generically to accelerate customs clearance.

Problem

Meridian faces counterparty default, political transfer restrictions, cargo loss, foreign-exchange exposure, sanctions and export-control concerns, bribery risk, customs misdescription and possible cyber fraud. The commercial team argues that refusing the order will lose an important market.

Analysis

The distributor’s ownership must be verified, including beneficial owners and links to sanctioned parties. The products must be classified for export-control purposes, and the proposed end use and end user must be documented. The consultant requires enhanced due diligence, a written scope of legitimate services, compensation benchmarking and anti-bribery approval.

Open-account terms create substantial receivable risk. The transaction should be restructured through an irrevocable letter of credit, confirmed where appropriate, or through a substantial advance payment and insured balance. Export-credit insurance should be obtained before shipment, with an approved buyer limit and clear compliance with notification conditions.

Cargo insurance should cover the intended transit, while packaging, seals, carrier selection and temperature or handling requirements should be reviewed. Meridian should hedge the USD exposure if its domestic-currency budget requires certainty. A sanctions clause, accurate customs description, audit rights, governing-law provision and termination rights should be included.

The request for a generic description is rejected because it may constitute customs fraud or concealment of controlled goods. Payment instructions will be verified through an independent channel, and no bank-account change will be accepted solely by email.

Approach and Outcome

Meridian delays shipment until screening, licensing and customer verification are complete. The consultant fails to provide transparent ownership information and is removed from the transaction. A bank confirms that the distributor’s proposed financing bank creates an additional sanctions concern. Meridian either restructures the deal with acceptable parties and payment protection or declines it.

The immediate order may be smaller than originally proposed, but Meridian avoids an uninsured default, regulatory violation and reputational loss. It also develops a country-risk checklist and approval matrix for future transactions.

Learning Points

1. Commercial opportunity does not override legal or ethical duties.
2. Payment, cargo, sanctions and bribery risks must be assessed together.
3. Accurate documents are a compliance control, not an administrative detail.
4. Insurance is effective only when eligibility and policy conditions are satisfied.
5. Third-party transparency is essential where commissions and public interfaces exist.

Challenges and Limitations

Risk assessment is affected by incomplete information, rapidly changing sanctions, unreliable country data and uncertainty about rare events. Scoring systems can create false precision: a rating of “12” does not have the same meaning across all organisations. Insurance may contain exclusions, deductibles, waiting periods and claims disputes. Hedging may create opportunity cost and counterparty exposure. Screening systems may generate false positives or miss sophisticated evasion. Audits may be superficial, and compliance teams may lack independence.

Managers should respond through scenario analysis, stress testing, independent review, escalation of uncertainty and periodic updating. They should distinguish residual risk from zero risk. No control system can guarantee that misconduct or loss will never occur; the objective is reasonable prevention, early detection, effective response and organisational learning.

Contemporary Developments and Best Practices

Trade risk management is increasingly shaped by digitalisation, climate disruption, geopolitical fragmentation and supply-chain concentration. Electronic bills of lading, digital customs systems and automated screening can improve speed and traceability, but they increase dependence on data integrity and system availability. Climate-related floods, droughts, heat and storms affect production, transport routes, insurance pricing and supplier continuity.

Best practice includes:

• maintain a transaction-level risk register;
• apply risk-based KYC and sanctions controls before commitment;
• map critical suppliers, routes, ports and technology providers;
• combine insurance with prevention and contractual controls;
• use dual approval for master-data and payment changes;
• test business continuity and cyber recovery;
• train employees using realistic scenarios;
• document decisions and exceptions;
• monitor leading indicators rather than waiting for losses;
• review controls after incidents, regulatory change and market entry.

Chapter Summary

International trade risk includes commercial, country, political, transport, cyber, fraud and foreign-exchange exposures. Effective management begins with identification of hazards, exposed values and possible consequences, followed by proportionate avoidance, reduction, transfer, sharing or retention. Counterparty due diligence, contract design, payment security and accurate documentation are central commercial controls.

Cargo insurance protects goods in transit, while export-credit and political-risk insurance address specified non-payment and government-related events. Policy limits, exclusions, deductibles and compliance conditions must be understood. Foreign-exchange exposure may be managed through forwards, options, natural hedges and contractual arrangements.

Sanctions, export controls, AML/KYC, anti-bribery, data protection and responsible sourcing are essential elements of lawful trade. Governance requires clear accountability, independent assurance, reliable records and a risk-based approach. Technology can strengthen monitoring but cannot replace human judgment, ethical leadership or effective oversight. The strategic objective is not risk elimination, which is impossible, but informed and responsible trade within the organisation’s risk appetite.

Key Terms

Risk: The possibility that uncertainty will affect objectives.

Hazard: A condition that increases the likelihood or severity of harm.

Exposure: The person, asset, transaction or value vulnerable to a risk.

Counterparty risk: The possibility that another contracting party will fail to perform.

Country risk: Risk arising from economic, legal, political or social conditions in a country.

Political risk: Risk of government action or political events damaging a transaction or investment.

Cargo insurance: Insurance covering specified physical loss or damage to goods in transit.

Export-credit insurance: Protection against specified commercial or political non-payment.

Deductible: The portion of an insured loss retained by the insured.

Foreign-exchange risk: Risk caused by movements in currency values.

Transaction exposure: Currency exposure arising from a contracted foreign-currency cash flow.

Sanctions: Legal restrictions imposed on specified countries, persons, entities, sectors or activities.

Export control: Regulation of controlled goods, technology, software, end users or destinations.

KYC: Know Your Customer procedures for identifying and understanding customers and ownership.

AML: Anti-money-laundering controls designed to prevent use of financial systems for criminal proceeds.

Beneficial owner: The natural person who ultimately owns or controls an entity.

Business-email compromise: Fraud involving manipulation of electronic communications, often to redirect payment.

Responsible sourcing: Procurement that considers human rights, labour, environmental and ethical impacts.

Residual risk: Risk remaining after controls have been implemented.

Three lines model: Governance model distinguishing operational ownership, oversight functions and independent assurance.

Review Questions

Short Answer Questions

1. Distinguish between a hazard, an exposure, a risk event and a loss.
2. What is the difference between cargo insurance and export-credit insurance?
3. Identify three indicators of possible trade-based money laundering.
4. Explain why a letter of credit does not guarantee the physical quality of goods.
5. State two controls that reduce business-email compromise.

Long Answer Questions

1. Explain how an exporter should assess and manage counterparty risk before granting open-account credit.
2. Discuss the relationship between country risk, political risk and export-credit insurance.
3. Compare forwards, options and natural hedges as methods of managing foreign-exchange exposure.
4. Describe the essential elements of a risk-based sanctions, AML and KYC programme.
5. Explain how ethical sourcing, anti-bribery controls and governance contribute to sustainable international trade.

Analytical / Application Questions

1. An exporter is offered a large order from a new buyer in a country with currency-transfer restrictions. The buyer requests open-account terms and payment through an unrelated third party. Analyse the risks and recommend a transaction structure.
2. A supplier’s container arrives with water damage, but the packing list and transport documents contain inconsistent descriptions. Explain the immediate claims, compliance and investigation actions required.
3. Design a proportionate control framework for a company using overseas agents, digital payment systems and suppliers in high-risk jurisdictions. Justify the controls and identify limitations.

Multiple Choice Questions with Answers

Question 1

Which risk response involves declining to enter a prohibited destination market?

A. Avoidance

B. Transfer

C. Retention

D. Sharing

Correct Answer: A. Avoidance

Question 2

What does a letter of credit primarily require banks to examine?

A. The physical condition of the goods

B. The stipulated documents

C. The buyer’s marketing plan

D. The carrier’s fuel consumption

Correct Answer: B. The stipulated documents

Question 3

An exporter will receive USD 100,000 when the exchange rate is 80 domestic currency units per USD. What is the domestic-currency value?

A. 800,000

B. 8,000,000

C. 80,100,000

D. 1,250

Correct Answer: B. 8,000,000

Question 4

Which is a typical indicator of business-email compromise?

A. A verified annual supplier audit

B. An independently confirmed bank account

C. An urgent request to change payment instructions by email

D. A signed packing list

Correct Answer: C. An urgent request to change payment instructions by email

Question 5

Which information is most relevant to identifying a beneficial owner?

A. The colour of the company logo

B. The natural person who ultimately owns or controls the entity

C. The vessel’s engine size

D. The warehouse temperature

Correct Answer: B. The natural person who ultimately owns or controls the entity

Question 6

What is the principal purpose of export-credit insurance?

A. To guarantee that goods meet technical specifications

B. To protect against specified commercial or political non-payment

C. To eliminate all foreign-exchange movements

D. To replace customer due diligence

Correct Answer: B. To protect against specified commercial or political non-payment

Question 7

Which action is most appropriate when a sanctions-screening alert appears?

A. Ignore it if the order is profitable

B. Change the product description

C. Investigate identifiers and document the disposition

D. Route the goods through another country immediately

Correct Answer: C. Investigate identifiers and document the disposition

Question 8

Which control best supports segregation of duties?

A. One employee creates suppliers and approves all payments

B. The same person changes bank details and releases funds

C. Different employees create suppliers, approve invoices and release payments

D. All employees share one administrator password

Correct Answer: C. Different employees create suppliers, approve invoices and release payments

Question 9

A policy covers 90% of a covered loss of 500,000 currency units, assuming no other limit or deductible. What is the indemnity?

A. 50,000

B. 450,000

C. 500,000

D. 550,000

Correct Answer: B. 450,000

Question 10

Which statement about responsible sourcing is most accurate?

A. A single supplier audit eliminates all labour risk

B. Lowest price should always be the only selection criterion

C. Due diligence should address human rights, labour, environmental impacts and remediation

D. Responsible sourcing applies only to domestic suppliers

Correct Answer: C. Due diligence should address human rights, labour, environmental impacts and remediation