Risk Rating

Risk Rating is a quantitative tool used in foreign trade to assess the risk level of counterparties, countries, or industries. It is typically issued by credit insurance companies, banks, or corporate risk control departments. Based on dimensions such as financial condition, historical payment records, political and economic environment, and industry volatility, it classifies risk into different grades (e.g., A, B, C or 1-5). It is used to decide whether to accept orders, which settlement methods to adopt (e.g., letter of credit, advance T/T), and whether to insure export credit risks. Use cases include: credit granting to new customers, approval of large orders, and supply chain finance. Precautions: ratings are dynamic and need regular updates; standards may differ across institutions and cannot be directly compared horizontally; a high rating does not mean zero risk, and a low rating is not an absolute rejection—guarantee measures can be combined. The difference from 'credit rating' is that risk rating focuses more on comprehensive risk at the transaction level, while credit rating mainly targets the entity's debt-servicing capacity.