Kauppatieteellinen tiedekunta, 2014
The global economic instability and structural changes in Shipbuilding industry have aroused growing concerns among shipbuilding suppliers over the increased business risks. Due to shipbuilding overcapacity and insufficient trade finance, the ship owners and shipyards face financial difficulties, which mean increased credit risk for the suppliers. Also the business has extended to new market areas, where different kind of business risks exist. The main objective of the thesis is to explain how suppliers could minimize business risk through carefully structured payment terms that guarantee them payment on time and in full amount.
Different business risks are examined, as the first step towards systematic risk management is to identify the risks involved in a single business venture. The riskier the buyer or the market area is the more secure payment terms are required. The basic structure of payment terms involves time, place and method of payment, which are examined case-specifically in order to set logical patterns for planning payment terms and other credit control tools under specific circumstances. Depending on the risk level, the seller should select a payment method that provides optimal level of security. Also the interfaces of payment terms and delivery terms are examined as well as their role as part of commercial contracts. Because the scope of the thesis is governed by contract law, also the juridical context is discussed.
The findings of the thesis strongly implies that by conducting a thorough risk analysis and structuring payment terms accordingly, the underlying risks can be minimized. However, the circumstances differ depending on different buyer-specific and external factors. Also the appetite for and tolerance to risk varies from seller to seller and therefore an explicit instruction on which payment method or how long credit period should be applied each time, cannot be given. However, the thesis provides a logical set of guiding principles that suggest how payment terms should be structured in order to provide sufficient security.