Managing a global enterprise is a feat in itself and our clients are aware of this. There are many things that a business and our service teams need to look out for when expanding internationally. It’s best to break the risks into different buckets: financial, political and social. Below we have outlined some examples of some of the risks our clients operating internationally face.
Financial Risks
The top barriers for companies to trading internationally are the global economic environment (19%), tariffs (18%) and concerns around dealing with exchange rates and multiple currencies (16%). Of those that are doing business internationally, businesses are concerned about the uncertainty of the markets, risk of fraud and the speed of payments. Sending money internationally is often a complex and time-consuming process with exchange rates frequently changing. This can lead to businesses paying more or receiving less than expected for services and goods that are exchanged internationally. We can see this in the amount of charges and fees like stamp duties, levies, taxes, clearing fees, and exchange fees that are tacked on after a sale has taken place.
Businesses are also taking into consideration the credit risks associated with not collecting an account receivable. Although, this might not seem like a large issue, depending on the country and industry, US laws might not align with the expectations in the local areas. Other countries might have different expectations on payment deadlines or mandated accounting processes to remain compliant prior to issuing payment.
Another risk inherent in foreign markets, especially in emerging markets, is liquidity risk. This is the risk of not being able to sell an investment quickly without risking substantial losses due to a political or economic crisis. There is no easy way for the average business to protect against liquidity risk in foreign markets.
Social Risks
It is vital to maintain a high ethical standard when offering any product or service in a global market. Companies may face certain questions pertaining to their values while doing international trade. Social conditions and customs vary from country to country, and hence, it is necessary to be especially vigilant. Make sure that foreign suppliers and partners adhere to the company’s values and rules regardless of where they operate from.
Political Risks
Whether companies are shipping goods abroad or locally, they face issues such as contamination, seizure, accident, vandalism, theft, loss, and breakage. Before shipping any goods to the buyers, you need to make sure to have sufficient insurance. This coupled with country and political risks are concerns that every business needs to evaluate. Businesses need to assess the potential laws when manufacturing and shipping goods around the world. What might not be acceptable to manufacture and ship in one country could be acceptable in another.
It’s important to be aware of international news going on in the markets our clients are in. Rest assured, the IMA Global Risk & Benefits team has the necessary partners and information venues to get your clients the information and coverage they need to manage these business risks.
https://londonlovesbusiness.com/uk-businesses-eager-to-trade-overseas/
https://www.universalcargo.com/6-risks-in-international-trade-how-to-manage-them/