Are you at risk?
As an entrepreneur, you understand better than most that good opportunities come with some element of risk. When you export your products or services, or join a global supply chain, you will no doubt experience both challenges and rewards. After all, risk is impossible to eliminate.
The good news is that planning and preparing for risk makes your business more proactive, competitive and flexible. These are all the markers of sustainable growth. In fact, the best strategy for ensuring your business’ success is to develop sound risk management policies and a plan for dealing with the types of risks you will encounter in international markets.
In this chapter
Measuring risk – from cash to quakes
“How much warning will we have? What can we do to protect ourselves from disaster?” These vital questions are at the heart of risk analysis for earthquakes, geohazards and other potentially damaging events. They are equally important to understanding your export risks.
Ottawa-based Nanometrics knows both types of risks well. The firm designs and produces sensitive instruments that monitor structures and serve as early warning systems. The company’s instruments help lessen the impact of events by providing early warnings that can minimize damage, injury or even death.
When Nanometrics first decided to launch its international operations, the company found itself asking disaster questions from a corporate perspective.
“Our search for knowledge has taken us on a remarkable journey, full of risk and reward. So too has our expansion into frontier markets,” says Neil Spriggs, CEO of Nanometrics. Now, Nanometrics supplies instruments to 100 markets around the world and serves as a trusted advisor to seismic researchers everywhere.
- Company size: Are you an exporter looking to expand, or are you starting small and looking at exporting as part of your growth strategy? Your strategy depends on your competition’s size and strength. Small and medium-sized enterprises can succeed in export markets when they use the types of risk management tools used by their larger competitors.
- Industry: What is the demand for products or services in your industry? Canada’s top 5 exports in 2018 were crude oil, vehicles, machinery, gems and precious metals, and wood. If the market is growing, you also need to ask: How can we grow with it?
- Market(s): Why do so many Canadian exporters choose the United States as their point of entry to the world of exporting? Given that the language, culture and tastes are similar on both sides of the border, many first-time exporters choose the U.S. because it seems like an easy place to start. When you consider exporting to a market farther afield, including emerging markets, you will face different types of country risks. Learn more about country risk.
- Financial strength:Does your company have a strong financial foundation? Is your credit healthy and your cash flow robust? Exporters can face a steep learning curve on financial risks, but if your domestic finances are strong and your bank finds you creditworthy, the financial risks you face abroad may be manageable. Learn more about financial risk.
Know your risks: Learn about the types of risks exporters in your sector and industry face. Determine which risks stand out in your target market(s). Be aware that new risks may emerge at any time.
Hire a risk manager: Hire or appoint someone on your team to identify and monitor the risks that exist in your intended market and sector. Use their expertise and insight to guide your decision-making.
Create a risk management plan:When a risk assessment reveals that the risks you’re facing can be managed, it’s time to put the systems and processes in place to ensure that it’s done properly. Create a risk management plan that is tailored to your sector and circumstances. Your plan should set out steps to respond to specific risks, monitor ongoing risks and communicate responses for both known and emerging risks.
Find out how to develop a risk management plan.