Learn How To Mitigate Risk During Global Expansion

By TJ Salvatore

The prerequisite for survival in the current global climate is to plan for the future through proper risk mitigation. Modern businesses operate in constant threat of known and unknown risks.  

Instead of reacting to market conditions, become the type of business that plans ahead so you can respond appropriately when it’s time to pivot to other markets.

If you’re planning to take your company global, here are some tips that’ll help you prepare for the eventual challenges that come with this step in your expansion.  

Learn How To Mitigate Risk During Global Expansion

Consider political and commercial factors

UK’s recent Brexit vote is proof that no matter how stable a market appears, curve balls are inevitable. This change meant that long-established import/export strategies would have to undergo significant changes that’ll affect international currency markets. 

Political factors such as regime changes in developing markets can have unexpected security and legal implications for businesses as well. 

One way to prepare for the unexpected in global markets is to have an iron-clad business plan that takes into account both the business and political landscape. Your business plan should include the following:

  1. Determine the level of demand for your product or service.
  2. Consider the effect of staff remuneration, reporting, taxes and legal compliance on your overhead costs. 
  3. Assess the distribution and transportation infrastructure required to realize your business goals. 

Choose your partners wisely

The last thing you want is to partner with an equally inexperienced partner who’s caught in the headlights like you are. Partner with a local company that understands the best practices, requirements and culture of the region you’re expanding into. 

Keep in mind that accepted practices that work in another country may not work in another market. For instance, bribing might be considered a form of “sealing the deal” and a showing of appreciation in some countries, while it’s completely illegal in other parts of the work. 

As a rule, it’s ill-advised to invest heavily in markets with trade restrictions that are difficult to surmount, or difficult market conditions. If there’s a desirable opportunity in such markets, consider dipping your toes through a joint venture or a strategic alliance before going all-in. 

How To Mitigate Risks

Hire smart

Most countries require international businesses to hire local talent. This is not just to improve the employment rate, but makes business sense. Locals will help you follow protocol, use proper language and observe the country’s unique cultural perspectives in your marketing.  

Take your time when hiring employees and do a background check on each candidate. Make sure your due diligence includes work history, criminal record check, an interview and follow up on provided references.  

You might need to invest in some employee training, so it’s worth making sure that you hire the right people. 

Make sure you have a relevant business model

When incorporating a business in a new country, it’s important to base it on a business model that meets the needs of the country you’re expanding into. For instance, a large country like China requires a multi-tiered business model that takes into account the differences inherent in the country’s various regions. 

Determine projected profits and best operating models for your intended target market. The latter will be determined by cultural, social and economic factors that affect the overall business environment. The goal is to ensure that the product or service is positioned in a way that appeals to the target market. It’ll also help you determine the demand for your product or service beforehand. 

Developing a business model that considers international trade expenses will help you to account for tariff and duty costs, shipping methods, protectionist laws and region-specific trade zones. You may need to hire a third party logistics supplier who’ll guide you through all the trade compliance and supply chain management requirements. 

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TJ Salvatore

A freelancer. A nomad. LGBTQ and animal rights activist. Love meeting new people, exploring new styles of living, new technologies and gadgets, new ways of making money.

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