For any Canadian business entering a new market—especially in a country on the other side of the globe—the risks can be daunting.
Finding new customers, suppliers and partners, understanding the local business culture and trade laws, and working out the logistics of shipping your goods are just a few of the challenges of doing business beyond our borders. And what about foreign exchange fluctuations, potential language barriers, geopolitical developments and accessing the working capital you need to expand into an international market?
The reality is there are many possible country, political and financial risks that you need to familiarize yourself with before entering any market of opportunity. And more importantly, you need to understand how these risks could impact your company’s operations—and plan accordingly.
As international risk experts, Export Development Canada (EDC) can help you mitigate these risks to set your business up for success. But don’t expect it to happen overnight.
“There’s no short cut. You need to take your time to truly understand the market, including making multiple market visits and establishing in-market contacts,” advises Chia Wan Liew, EDC’s chief representative for Greater China.
Gathering as much intel and insights as you can is key, he adds. “Attend trade events and undertake market studies to educate yourself of the risks and opportunities, including understanding the competition, and diversify the sources of your information about your target market.”
Ladislau Papara, EDC’s chief rep for India, says it’s also important to be honest with yourself to determine “if your company is ready to export by understanding your capacity to grow, the appeal of your product and if you have the right leadership/people to connect you with that market.”
His advice: “Do a deep dive on the specific requirements of the market you wish to export into and understand your end customer, logistics and promotion needs.”
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Once you’ve researched your target market and determined your export readiness, it’s essential to map out a strategy to mitigate and manage potential risks.
Risk management plan
Developing a risk management plan helps highlight potential problems, so you can develop possible solutions and action plans before a situation arises. You need to ask yourself several “what ifs?” What if your supplier goes bankrupt? What if your goods get stuck in customs? What if new tariffs are introduced?
Once you’ve identified and assessed each of these risks and their impacts, you can move on to planning your response. Essentially, for every risk, there are four possible responses.
Maybe after careful consideration, you’ve determined that doing business in a particular country is just too risky at this time. Perhaps there’s a lot of civil unrest, or an election is imminent, and you’d like to wait until the dust has settled. You’re not saying never—just not now.
Sometimes, there are risks, but if you take certain precautions, you can alleviate their impact. For example, if there are safety concerns in a certain region, you can train your employees on safety measures to help reduce the likelihood of an incident happening.
Transferring risk is about finding ways to have someone else assume the responsibility. Let’s say you’re not sure if a new customer on the other side of the world will pay for the goods you’ve just shipped. There’s a simple solution: EDC Credit Insurance. By paying a small margin, you can offset the risk of non-payment to an insurer.
At the end of the day, the opportunity may be worth the risks—especially if you’ve found ways to reduce and transfer as much of the burden as possible and have planned for all eventualities. Risk is inherent in all business; in fact, there’s sometimes more of a risk in not acting.
Move forward … and monitor
Once you’ve developed your risk management strategy, there’s one more critical step to consider: Routine monitoring. Risks don’t stand still—they can change quite a bit. You’ll need to re-evaluate them periodically, just in case things heat up. Or, as in the “avoid” scenario mentioned above, maybe the time has come to enter the new market that was too risky just 10 months ago. Identifying and assigning the task of a risk manager is invaluable to your company’s peace of mind as you move forward. That person should be responsible for clearly articulating your risk strategy, monitoring the changing landscape and coming up with alternative responses to fill in any gaps. Presenting these findings in quarterly or biannual meetings will ensure all executives are in the loop and can make informed decisions.
Reap the rewards of planning ahead
Having a mitigation strategy in place will reduce the impacts of various risks on your company. By anticipating problems, you’ll be better positioned to overcome them, then pivot to your next move. This translates not only into higher confidence levels within your own organization, but externally as well. There’s a lot of equity that accrues from sound risk management practices in the eyes of your customers and investors.
One of the best ways to truly understand an international market is by being there, which is why the Trade Commissioner Service (TCS) is an important resource for in-market intelligence. The TCS has trade professionals and commissioners working in more than 160 markets around the globe. They can help you understand the risks in each of those markets and introduce you to vetted trade partners on the ground. That includes accountants, lawyers, interpreters and customs brokers. They can assist you in vetting new customers in those markets—giving you the inside scoop as to whether or not they’re known as trustworthy. They can even put you in touch with the right government officials to overcome regulatory risks, and in some cases, troubleshoot on your behalf.
EDC is also here to help. We offer three valuable resources for assessing risk: The Country Risk Quarterly, Global Export Forecast and Top 10 global trends. Have questions? Tap into our Export Help Hub. It’s a free online platform where you’ll find answers to commonly asked trade-related questions and can ask our trade advisors specific questions.
Chia Wan Liew and Ladislau Papara will be expert panelists on our webinar, Opportunity knocks: 3 promising markets for Canadians, on Jan. 20.