Risks associated to export business and their solutions | Risks and their solutions involved in export business

Export provides significant opportunities to the exporters to expand their market reach and increase profitability. Nevertheless, in any business, risk is involved and export is not the exception. Let us understand some common risks involved in export business and their potential solution.

1. Political and Legal Risks
2. Payment Risks
3. Market and Competitive Risks
4. Logistics and Supply Chain Risks
5. Cultural and Communication Risks
6. Intellectual Property (IP) Risks

Now let us understand each point in details.
 
Political and Legal Risks:
In export process, the goods travel through different countries having different political & legal environments. The law of the land is different for different countries including trade barriers. These are the potential risks, which can disrupt the business execution, political instability also can be a cause of disruption.

Solution:
Before starting the export shipment, exporter should conduct a research and collect information regarding the law of the land, they should know about the legal and political landscape of the market they are targeting. Establishing relationship with local partners who are well aware of local market. Exporters should not target single market or region, they should diversify their export market to mitigate the risks because of legal and political changes in a particular region.
 
Payment Risks:
One of the main concern for exporters is late payment or non-payment (payment default), other risks are currency fluctuations, unfamiliar payment methods and credit risks. These things can lead to financial losses.

Solution:
Use secure payment methods such as Letter of Credit & bank guarantee. Credit risk department should be established which can conduct credit checks and thorough due diligence on potential buyers. Exporters should use credit insurance services to mitigate payment risks.
 
Market and Competitive Risks:
Whenever any exporter wants to enter into a new market, they face issues like competition from local as well as international suppliers. Lack of knowledge about the market, failure to understand the local preferences and existing competition can lead to failure of the business.

Solution:
Exporters should understand the target market, consumer behaviour and competitive landscape, for that they need to conduct a thorough market research, they should monitor the market trends continuously so that they can offer relevant product for competitive price. Marketing strategies also plays a vital role here, based on the market & consumer behaviour correct marketing strategy needs to be implemented.
 
Logistics and Supply Chain Risks:
Logistics & Supply chain management are the integral part of any export business, it includes transportation of goods across the globe, custom procedures, terminal handling, local transportation etc. Any type of delay in shipping process or damage of the product during transit because of poor packaging or handling can lead to loss of reputation & customer dissatisfaction.

Solution:
Make sure packaging is done as per export standards, appoint reliable freight forwarders and transporters. Keep tracking the shipment regularly. There should be clear communication between supplier, logistics partners & customers so that any potential issues can be addressed promptly.
 
Cultural and Communication Risks:
As the goods travel from one country to another in case of export, the potential risks are language and culture. The problems an exporter may face in identifying cultural barriers, understanding local business practices, understanding legal issues, handling operations due to language barrier etc.

Solution:
If possible, invest in cultural awareness and communication training. Hire local agents for your operations, so that risks related to local issues and language can be mitigated. Localize your marketing materials, website and product information.
 
Intellectual Property (IP) Risks:
In foreign market it’s always a challenge to protect your intellectual property rights, it may lead to unauthorized use, online fraud or infringement.

Solution:
Appoint legal advisor for IP protection. Before enter into partnership, conduct due diligence on potential partners. Register patent, trademark & copyright in the market you are targeting.
 

These are the common risks involved in export business and their solutions. Risks are always there in international business but we can mitigate those risks through proper research, planning and taking protective measures.