Every country has its own terms and conditions for importing and the rules vary according to the goods of import. Communist governments especially have stringent and quick rule modifications that have to be accepted without questioning. In places like Zimbabwe, Egypt, Turkey, Afghanistan, Syria and Venezuela, this instability spans politics, market regulations, exchange rates, conflicts or inflation. Exporters meticulously choosing countries to trade with are at risk to some extent. The internal uncertainty of the chosen country tend to influence risk margins. At the same time, one needs to consider the profitability that they can derive when dealing with a country while setting up its risk margins.
Here are some important considerations to be made while setting up norms for risk mitigation:
Understand your risk taking abilities:
Based on the company’s vision, mission and the stance of the top management, business entities can be labeled as risk takers, moderate risk takers, or risk avoiders. Every company might not be eager to enter markets where it sees profitability just as not all companies are conservative when it comes to expanding into new countries. Analyze your entity’s risk tolerance in an open discussion of risk versus opportunity and then balance the result with the list of countries and its market conditions. This can ensure an accurate measurement of your company’s risk profile.
Find out ways to counter likely risks:
Risks exporters face can be effectively mitigated with possible insurance covers. International business insurance for your in-country assets can eliminate immediate risks that might arise due to work stoppages or other damages. In countries prone to internal conflicts it is essential that employees are also covered. Currency fluctuations can work for or against a company. Neutral currency or contracting at a future currency rate could help negate the risks that come with the territory of financial transactions. A well-known international law and accounting firm can aid in helping identifying the issues that could affect the company’s success.
Involvement of importing country:
In-country resources determine the extent of security necessary. If the company has to sell goods that require a physical individual delivery or mandate customer service it is important the country being considered has a low business risk tolerance. This is majorly because of operational advantages that the company possesses in its target country. On the other extreme are companies that operate in multiple countries as their services can be delivered via the internet, consultancies being a good example. Operational risks are pretty much non-existent in such a scenario.