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5 things you can do to reduce international business risk

11 August 2014 by National Bank
close up of hands with globe picture at table

If you do business internationally, you have a higher exposure to risk than domestic businesses. Laws, customs, business practices and the geopolitical context can all complicate your work and increase the level of risk. This is true whether you’re doing business in the United States, Asia or Africa.

Contenu

One of the worst errors an entrepreneur can make is to think he can sell goods in the United States the same way he would in Quebec.

While the United States is more stable than Libya, for example, it isn’t necessarily major crises that can have the greatest impact on a company. Recent political unrest in the Middle East or the disaster in Japan are unpredictable occurrences that can have a less severe impact on an SME than the adoption of a measure such as the “Buy American Act” in the United States.

Because of the Buy American Act, some companies have had to close or lay off people here in order to set up shop in the United States.

How to reduce risk? Here are five things you can do to reduce international business risk.

1. Take the time to get to know the other party

Before trusting foreign clients or commercial partners, take the time to really get to know them. Many disputes are the result of bad faith dealings by the other party.

2. Start slow

Test the waters before investing in big international transactions. Start with small transactions to see if everything goes smoothly and the other party is dependable.

3. Do your homework

Have you done all the basic checks to ensure your client or partner is solvent? We strongly suggests visiting the company.

4. Use secure payment methods

Unless you’ve enjoyed a long relationship with a foreign partner, you’ll have to protect yourself. National Bank can help you choose the most appropriate and secure method for your situation. You can request advance payment or get a confirmed letter of credit.

5. Establish a meaningful relationship

A solid and trusting relationship that facilitates commercial exchange is priceless. Take the time you need to establish good relations with your partners and clients. You can have the biggest, most airtight contract, but if you don’t really know who you’re dealing with and if there’s no bond of trust, your client could decide not to pay and you’ll never get to see your money.

Risk management is an essential element of their work supporting decision makers who are venturing out on international markets. National Bank’s experts work with companies to help them structure transactions so that they can reduce their exposure to risk. They can advise clients on such questions as what level and type of coverage to choose. The Bank can also quickly produce the documents required to secure the transaction. Finally, National Bank experts can help their clients find the support they need, whether it’s with export development agencies or banking correspondents just about anywhere in the world. Consult with your banker as soon as there’s an opportunity. Tell him or her about the potential transaction. We’ve got the capabilities to act quickly, to ask the right questions and to highlight the risks. We can help your company think the transaction through and make it a reality.

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Views expressed in this article are those of the person being interviewed. They do not necessarily reflect the opinions of National Bank or its subsidiaries. For financial or business advice, please consult your National Bank advisor, financial planner or an industry professional (e.g., accountant, tax specialist or lawyer).

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