Last week I had the pleasure of hosting an interactive webinar to help small- and medium-sized companies understand and manage the risk of doing business internationally. We had a number of experts on hand who shared both their experience and helpful tips, including: Jared Burns, VP of Corporate Foreign Exchange with the firm EncoreFX; Audrey Ross, a logistics and customs specialist with Orchard Private Labelling; and Daniel Tobok, the CEO of Cytelligence. If you didn’t have a chance to watch it live, you can watch it on-demand to learn how to manage the four key risks encountered when entering a new market.
The short answer is, absolutely. That’s like asking if it was worth starting your business in the first place. Of course it was. Were there risks? Yes. Did you figure out how to deal with them? Indeed. And you did that by informing yourself, which is exactly what our program was all about—a one-hour snapshot of what risks are out there and how to fortify your company against them.
Keep in mind, the steps you take to mitigate international risks will net far-reaching dividends. Study after study indicates that exporting companies outperform non-exporters in four distinctive ways:
- They’re more productive and competitive
- They tend to grow faster and have higher revenues
- They’re more innovative
- They’re better prepared to weather economic ups and downs
As a senior economist at EDC, it’s my job to evaluate the political, economic and regulatory risks associated with various countries. To provide some context, here are some boiled-down definitions of each of those risk types. Political risk is any political action or event that could prevent or disrupt the activities of your business. Oftentimes, people think of hostile takeovers in way-off countries, but really, you don’t have to look far to appreciate that even policy changes by a stable nation can carry political risks—take the new tariffs south of the border, for example. Economic risk refers to the macroeconomic conditions that can influence your company. When exchange rates, interest rates or prices fluctuate, they can really put pressure on your buyers and margins. Regulatory risk relates to the laws and policies that exist in the country in which you sell. Obviously, it’s critical to know what they are, how they differ from our domestic regulations and how changes in an international market’s regulatory structure might affect your business.
It goes without saying, if you want to do business in a new market, you need to find out everything you can about what makes it tick. There are several free resources available online, including EDC’s Country Risk Quarterly. It’s an interactive tool that provides risk ratings on more than 100 countries around the world. If you haven’t used it yet, you should really give it a try. We’ve also published a guide on Managing Political Risk which you can download. And don’t forget the Trade Commissioner Service. With more than 1,000 commissioners across Canada and in over 160 countries around the world, they can put you in touch with valuable contacts in your markets of interest.
Financial risk covers a broad range of issues, from not getting paid to contract enforcement, but perhaps one of the biggest thorns in the sides of business owners is currency fluctuations. And again, you don’t have to look far to glean the impact. According to Jared Burns, our FX (foreign exchange) expert panelist, the U.S. and Canadian dollars have been one of the G7 currency pairs that have become extremely difficult to predict, trend and trade. Perhaps what’s most alarming is the fact that nine out of 10 companies that he deals with don’t even understand that they’re operating with considerable FX risk. But riding the exchange-rate rollercoaster doesn’t have to be scary or complex, you simply need to plan for it.
It’s often quoted that your supply chain is only as strong as its weakest link. Logistics and customs specialist, Audrey Ross, had a some suggestions for exporters to vet their suppliers. Understanding and having relevant experience in your business type was key, as was having face-to-face meetings and building a solid relationship. “You simply cannot rely only on email to communicate,” she advised. And of course, building partnerships with customs brokers in each international market is the best way to ensure your goods are delivered on time and in shape, rather than racking up storage fees in a warehouse as proper documentation gets sorted out.
It was little more than a decade ago that cyber criminals focused solely on big business. But now, as smaller companies store their data digitally, they too are the targets of this growing, highly sophisticated and remarkably organized criminal enterprise. The results are chilling when you consider that the global average cost of a data breach has climbed to US$3.6 million. Ransomware, phishing, privacy breaches and infiltration are all things to guard your company against. And as our cyber-crime expert panelist Daniel Tobok warned, it’s essential to have a third party assess your network. No matter how reliable and responsive your IT department may be, you need an unbiased review that provides a security audit and a true penetration test that results in a vulnerability assessment.
As always, our interactive webinar ended with a Q & A session with our audience. One business owner asked how smaller companies can deal with these risks and not break the bank. Our panelists were unanimous in advising that awareness of these risk areas was the first step, then doing some of your own initial research was important, followed by the critical element of working with specialized partners. “Security doesn’t have to be expensive,” Tobok noted. “It’s all about creating the proper strategy, getting the right team involved and having your data available to conduct business, but at the same time minimizing your risk of an external cyberattack.”
EDC will soon publish a new e-guide on managing risk that provides details and checklists to help you create your own plan. And while it does require detail and effort, going through the process will require you to examine all areas of your operations. That’s a good thing. You’ll likely uncover areas that can be improved upon and that will benefit your company in the long run…in ways that not only mitigate risk, but maximize efficiencies, profitability and ensure a business future filled with growth.