With all these challenges in mind, here are seven ways to maximize potential opportunities despite the risks involved.
1. Research country risk
The risk of a business deal turning badly because of events beyond your control in a foreign country is commonly known as country risk.
There are two broad types of country risks:
- Economic risks—Also known as financial risks, this includes issues such as non-payment by a client, breached contracts and a sudden change in the value of foreign currency, amongst other things.
- Political risks—These risks include legal or regulatory changes that negatively impact your business, expropriation by a foreign government, import restrictions, currency controls that stop you from bringing money back to Canada and political violence, amongst other things.
You should include a country risk assessment as part of your overall research when looking to enter new markets. Export Development Canada (EDC) publishes a quarterly analysis of country risk for over 100 countries that can help you assess risk in your target markets.
2. Create a risk management program
Use the results of your risk assessment to create a risk management program. This program will:
- Identify the risks you face in your chosen market and estimate your potential loses
- Specify actions you can take to mitigate these risks and limit your potential loses
- Be updated regularly to ensure you are prepared for any eventuality
3. Consider insurance to mitigate risks
Credit insurance and other insurance products such as political risk insurance could allow you to consider a target market that otherwise wouldn’t be an option due, for example, to political uncertainty or the perceived risk of not getting paid.
Most banks require some added comfort before lending against foreign receivables, so insurance can help you get the additional working capital you need to support your export expansion.
Being aware of your insurance options early on can also help you in contract negotiations with foreign partners.
EDC offers a variety of insurance and guarantee products that cover credit, political and currency risks for exporters.
4. Take time to build trusted relationships
In many countries, a commitment to building long-term personal relationships is vital for your project to get off the ground and succeed. It can take significant time to build trust and understanding, sometimes requiring several in-country trips and months of contact.
The effort is well worth it. After all, choosing the right partners can make or break your export venture. That’s why it’s important that you complete a thorough due diligence check on partners before you commit to working with them. Take a special look at their reputation and financial health. You can create a list of criteria they must meet to help you evaluate their potential.
5. Overcome cultural barriers
Language is another obvious barrier to doing business in many emerging markets. You can, of course, hire interpreters and bilingual staff, but also arm yourself in other ways, like making all your promotional materials, price sheets, business cards and PowerPoint decks in the local language.
Also work on your soft skills. Be patient when talking with business relations in your export market. And take time to learn about local manners and customs. Little touches such as giving a business card with two hands in some Asian countries can build trust and help you adapt to another business culture.
6. Be ready to adapt
Many Canadian companies don’t achieve optimal results abroad because they assume a product that sells well in Canada will sell elsewhere without any adaptation. However, failure to adapt to the needs and desires of foreign customers can result in costly false starts.
For example, while discretionary income has increased in many emerging markets, consumers still tend to have less purchasing power than Canadians and are less likely to buy products with costly frills. One way to adapt is to offer cheaper versions of your products with fewer features.
7. Help is available
Canadian businesses don’t have to navigate these choppy waters alone. There’s advice and services available from various government organizations in Canada.
For example, BDC’s International Expansion team advises Canadian entrepreneurs on their exporting and international expansion projects.
Another good source of assistance is the Canadian Trade Commissioner Service, which has a presence in 161 cities worldwide and offices across Canada. It offers advice on exporting and free information about specific countries and sectors.