The ability of a firm to make a strategic decision in order to respond to the forces that are a source of risk.
Share on Facebook As if there are not enough uncertainties being in business, risk factors are multiplied when you expand into international trade. Whether you are importing materials or exporting finished products, you will encounter new issues.
Expanding your small business to the international arena is not difficult if you are aware of the steps involved. Political While most of the countries where you are likely to be doing business have stable governments, there are concerns that you will confront.
All member nations of the World Trade Organization are committed to free trade, but protectionism is still a fact of life with some. Tariffs and quotas may place restrictions on your ability to trade.
Import and export licenses, customs duties, and laws regulating currency control are requirements you must explore. You must also be mindful that each country where you do business has a different political and legal system. Theft of intellectual property and illegal knock-offs are facts of life, so be prepared.
Financial One risk of engaging in international business lies with exchange rates.
This is not a factor when your business is all domestic, but when your buyer has another currency, you must protect yourself against losses due to exchange rate changes.
Foreign exchange markets are fairly stable, and, barring an international crisis, your risk is not great. Managing international transactions requires extra precautions about payments. If your buyer is abroad you must take steps to assure that you will be paid.
Foreign credit insurance and letters of credit can alleviate much of the risk of selling your products in overseas markets, since they will provide you with the knowledge of the buyer's ability to pay.
Economic There are several economic issues that you must deal with when engaging in international operations. If you are importing materials or products, you must take extra precautions to insure timely delivery.
Geography and economic conditions in the country you are dealing with are factors. Mountains and oceans create international barriers that you must work into your business plan.
Economic instability may be an issue if your transactions involve businesses in third world nations. Even if they are politically stable, they may lack the infrastructure to provide a sound economic environment.
Resources To asses the risks of engaging in business overseas, there are practical sources of information available to you. This information provides up-to-date evaluations of conditions in every country of the world.
Check with your area Small Business Administration office to see when it will be conducting a workshop on the import-export business.The main risks that are associated with businesses engaging in and overall success of a company doing business transactions in international finance activities can.
ABSTRACT Risk analysis and knowledge of diversity in the world of international transactions has a great practical importance, because it allows business people to identify the tools and policies to reduce / eliminate the risk and the damage they cause.
1. 4 Risks in International Business Source: Cavusgil, Rammal, and Freeman () Cross-cultural risk refers to a situation or event where a cultural miscommuni- cation puts some human value at stake. Global business is a term used to collectively describe all commercial transactions, that take place between two or more regions, countries and nations beyond their political boundary.
Risks in International Business.
ular risk is known as transaction risk and is associated with foreign exchange rates. The Foreign Exchange Market Future payments or distributions payable in a foreign currency carry the risk that the foreign currency will depreciate in value before the foreign currency payment is received and is exchanged into U.S.
dollars. Risk Management in International Business Author: April Xuemei Hou Subject: There are two major categories of risks that are unique in international business- currency exchange rate risk and country risk.
Currency exchange rate risk includes transaction exposure, translation exposure, and .