Businesses involved in international trade have to deal not just with risks locally but also other business development risks such as ethics, transportation, intellectual property, credit, currency, insolvency, restructuring, and a lot more. If you have international business exposed to serious risks, you’ll need certainly a solid consultation and involvement with an expert legal team in mitigating business risks internationally.
All business comes with an element of risk. Some of the most significant risks to be aware of, no matter what industry you operate in and where in the world you’re based, include strategic risks and financial risks, along with the risks around compliance. There are also cyber risks to consider, as we all conduct our work on a digital level.
Top Risks for International Trade
However, for businesses that trade internationally, these risks remain very present, but there are additional issues to consider. If you have recently expanded your business to have an international reach or you’re planning on branching out, here is an overview of the main risks to be aware of in international trade.
We have described the top business risks in international trade including insolvency and international restructuring processes and their complex legally.
Laws and regulations
One of the biggest risks posed to businesses that want to operate overseas is the laws that govern the target region. By going into business abroad, you are setting up in a country that may have different local laws and regulations that will affect how you run your business there.
For instance, tax laws differ from country to country. Likewise, business and employment laws can vary, depending on the country you’re setting up in, and you could find yourself in trouble if you don’t adhere to these.
Therefore, before you set up in the region you’re targeting, take the time to understand what rules and legal restrictions there are. Make sure you understand how they differ from what you know and if you’re unsure, try setting up meetings with local lawyers to get an idea of the legal requirements you face when launching your business in the area.
Insolvency and international restructuring processes
As well as understanding the legalities of setting up abroad, you’ll need to have a team ready to work in the region. There are risks involved here as you’ll need to make sure you have a clear idea of how your business is structured abroad.
For instance, will you run everything from a headquarters or are you planning on having a local team in your target region? If you’re opting for the latter, you’ll need to decide who will manage the team, how it will be structured, and how you’ll communicate with them.
It’s important to get this in place before you do anything else as this will help you to hit the ground running.
However, the risk here is if things don’t go to plan. Perhaps the market isn’t there or you need to restructure the international offices. Here, you’ll need legal experts to help you navigate this. As with any restructuring, there can be a ripple effect and the right legal advisors will be able to assist you.
Currency fluctuations
Currencies fluctuate in value on a daily basis and the changes are caused by everything from economic concerns to political issues. This has always been the case, but the events of the last year have played a huge role in the value of these currencies. For instance, major events such as the pandemic and Brexit have gone a long way towards changing the value of the pound against other global currencies.
As a business owner, you will need to be aware of the events that can impact on the value of the currency in your target countries. This is because successfully doing international trade depends on currencies being stable – otherwise, the products you’re selling or the business agreements you’re trying to reach can be negatively affected.
These are the top risks to be aware of when branching out into international trade. Before you grow your business, it’s important that you do your research and speak to the experts. This will put you in a good position.
