Learn How To Mitigate Risk During Global Expansion

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.  

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.
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. 

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 starting a business in a new country, make sure you 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. 

It's all determined by cultural, social and economic factors that affect the overall business environment. The goal is to ensure that the product is positioned in a way that appeals to the target market. It’ll also help you determine the demand for your product 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. 

Conduct thorough market research

Before expanding into a new market, it's essential to conduct comprehensive market research. This research should include an analysis of the local market, competitors, and regulations.

Market research helps businesses to understand the local market, including consumer behavior, local competition, market trends, and potential barriers to entry. This information is essential in determining the feasibility of entering a new market and developing a successful market entry strategy.

In addition, market research can help businesses to identify untapped opportunities, refine their product offerings, and adjust their marketing strategies to appeal to the local market. Overall, market research is a vital component of any successful global expansion strategy.

Develop a robust business plan 

A robust business plan is critical to the success of any global expansion. This plan should include a detailed analysis of the market, financial projections, and a risk management strategy.

A business plan is a detailed roadmap that outlines the goals, strategies, and actions needed to achieve success in a new market. It should include a thorough analysis of the market, including competition, local regulations, cultural differences, and potential risks and opportunities.

A robust business plan should also include financial projections, including revenue, expenses, and cash flow, to ensure the financial viability of the expansion. The plan should also outline the necessary resources, such as staffing, infrastructure, and technology, needed to support the expansion.

A well-developed business plan serves as a guide for decision-making throughout the expansion process, helps to align stakeholders around common goals, and provides a framework for measuring success. It is a critical tool for securing financing from investors or lenders and for communicating the expansion strategy to stakeholders and employees.

Secure local partnerships

Partnering with a local company can help mitigate the risks associated with global expansion. A local partner can provide valuable insights into the local market and help navigate regulatory hurdles. A local partner can provide valuable insights into the local market, including cultural nuances, consumer behavior, and regulatory requirements. They can also provide access to local networks and resources, such as suppliers, distributors, and government officials.

Partnering with a local company can also help businesses to overcome language barriers, navigate local regulations, and establish a presence in the local community more quickly. Additionally, a local partner can help to build trust and credibility with local stakeholders, which is essential for long-term success in a new market.

However, when selecting a local partner, businesses should conduct thorough due diligence to ensure that the partner is reputable, has the necessary expertise and resources, and shares common values and goals. A well-designed partnership agreement should also be put in place to establish clear expectations and minimize potential conflicts.

This method will provide access to local knowledge and resources, enhance credibility and trust, and can help businesses to establish a foothold in a new market super quickly.

Hire a knowledgeable legal team

The legal landscape in each country can be vastly different, and it's essential to have a legal team that understands the local regulations and can help navigate legal issues.

Global expansion requires compliance with a variety of legal and regulatory requirements, including labor laws, tax regulations, intellectual property laws, and data protection laws, among others. Failure to comply with these regulations can result in legal penalties, damage to the company's reputation, and even legal disputes.

A knowledgeable legal team can help businesses to understand the legal and regulatory landscape in a new market, identify potential risks, and develop strategies to mitigate these risks. They can also assist with the legal aspects of setting up operations in a new market, including incorporation, licensing, and registration.

In addition, a legal team can help businesses to navigate cultural differences that may impact legal issues. They can provide advice on local customs and practices that may impact legal negotiations or disputes and help to ensure that the company's legal strategy aligns with local cultural norms.

It is vital to comply with local regulations, and therefore to protect the company's interests in a new market.

Establish a strong local presence

Building a strong local presence is essential to success in a new market. This can include hiring local staff, establishing local offices, and building relationships with local stakeholders.

Establishing a local presence means more than just opening an office or storefront. It involves developing a deep understanding of the local market and consumer preferences, building relationships with local stakeholders, and adapting business practices to align with local culture and customs.

One of the primary benefits of building a strong local presence is the ability to establish credibility and trust with local stakeholders, including customers, suppliers, and government officials. This can help to build brand awareness, increase sales, and establish a positive reputation in the local community.

In addition, building a strong local presence can help businesses to identify new opportunities and adapt their offerings to meet local demand. This may involve adjusting the offerings, developing new marketing strategies, or establishing partnerships with local companies or organizations.

Finally, a strong local presence can help businesses to better navigate the challenges and complexities of doing business in a new market. This includes understanding local regulations, navigating cultural differences, and managing local staff and operations.

All this involves a long-term commitment to understanding the local market, building relationships with local stakeholders, and adapting business practices to align with local culture and customs.

Invest in cybersecurity

Global expansion often involves sharing sensitive data across borders. Investing in cybersecurity measures can help protect your company from cyber threats. We all know that cybersecurity threats are becoming increasingly common, and businesses expanding into new markets may face unique challenges, such as new regulations and unfamiliar technology.

To protect against cyber threats, businesses should invest in cybersecurity measures that align with local regulations and best practices. This may include securing networks, implementing multi-factor authentication, encrypting data, and monitoring for suspicious activity. Make sure you establish clear policies for data handling and incident response, and to provide ongoing training to employees to ensure that they are aware of potential threats and best practices for cybersecurity.

In addition, businesses should work with local partners and experts to ensure that their cybersecurity measures align with local regulations and best practices. This may include working with local cybersecurity firms or consultants to conduct risk assessments and develop customized cybersecurity solutions.

A good investment in cybersecurity measures helps to protect sensitive data, prevent cyber attacks, and maintain the trust of customers and stakeholders. By working with local partners and experts to develop customized solutions, businesses can ensure that their cybersecurity measures align with local regulations and best practices and are effective in mitigating potential cyber threats.

Monitor and adjust

Global expansion is an ongoing process, and it's essential to monitor progress and adjust strategies as necessary. Regular assessments can help identify potential risks and opportunities for improvement, ensuring that the business remains on track to achieve its goals in the new market.

Regular assessments may include monitoring key performance indicators (KPIs) such as sales revenue, customer satisfaction, and market share. It may also involve gathering feedback from customers, employees, and other stakeholders to identify areas for improvement and opportunities for growth.

Based on the results of these assessments, businesses should be prepared to adjust their strategies as necessary. This may involve modifying offers, adjusting marketing strategies, or even pivoting the business model to better align with local demand.

Be responsive to changes in the local market, including changes in regulations, consumer behavior, and competitive landscape. By staying abreast of these changes, businesses can proactively adjust their strategies to maintain a competitive advantage and mitigate potential risks.

By being responsive and flexible, businesses can improve their chances of success in the new market and achieve long-term growth and profitability.