Empirical analysis of how risk management by Korea’s exporting companies affects export performance

Purpose The purposes of this paper are as follows. First, the paper investigates the causes of risk and methods for managing it based on previous studies of trade risk and trade risk management. Second, the paper analyses the types and forms of trade risk for exporting companies and investigate the relationship between actual trade risks and perceptions of trade risk. Third, the paper establishes a measurement device for trade risk management and export performance based on previous studies. Fourth, the paper derives the concepts based on the accumulated details to establish a research model and verifies a cause and effect relationship. Fifth, the paper analyses what kind of effect the perception of trade risk exerts on trade risk management. And sixth, the paper analyses the effect of the method of trade risk management on the export performance of exporting companies to shed light on the utility of trade risk management. Design/methodology/approach The purpose in this research is to analyse the effects of trade risk management on the export performance of exporting companies. The authors have conducted a review of previous studies about trade risk, trade risk management, and the outcomes thereof. Based on that review, the authors have established a research model, derived hypotheses, and used statistical methods to verify those hypotheses. Findings First, the authors analysed the methods of settling payments, transaction terms, the transportation environment, and experience in trade claims and found that they influenced the perceived level of trade risk. Second, exporting companies’ prior perception of trade risk determines which methods of trade risk management are suitable. Third, the analysis of the methods of trade risk management and export performance found that financial performance was influenced more than non-financial performance by trade risk management. Originality/value The authors determined whether trade risk management effectively counters the losses incurred as a result of the trade risks faced by exporting countries. The authors used an empirical statistical analysis to comprehensively analyse appropriate trade risk management and export performance. Prior to implementing the empirical analysis, the authors conducted research on trade risk and its management and established a research model and research hypotheses based on a theoretical background of trade risk methods appropriate to the circumstances faced by exporting companies.