Doing business internationally: limit your trade risks
You want to conquer the international market. Doing business on the international stage inevitably involves trade risks, so make sure you step onto the stage with confidence. We can help you identify the main risks and show you how to limit them.
Risk 1: not getting your money or your goods
The idea of not getting paid doesn’t bear thinking about. When trading internationally, make sure you do it with confidence. When you’re exporting, you want to make sure that your client pays, and when you’re importing you want to be certain that the goods are delivered. It’s essential that you make clear agreements about payment. A Bank Guarantee gives you security if the other party doesn't hold up their end of the deal. A Documentary Collection and (standby) Letter of Credit give even more certainty when you’re doing business internationally.
Risk 2: insufficient knowledge of import and export rules
Make sure that you know the main rules that apply to you as an international businessperson. You’ll encounter regulations applying to EU and non-EU countries. The Access2Markets tool is essential. This gives you all the information you need about import and export by country and by product. First of all, find out which criteria your product needs to satisfy.
Then look into the rules regarding transport. These may include import duties and customs regulations. Certain goods, such as foods and chemical products, may require specific customs controls. You can use Incoterms to make agreements about transport. Using Incoterms, you can agree who is responsible for making the arrangements, for the costs and for the risk of transport.
Risk 3: exchange rate fluctuations
If you have to trade in a foreign currency, be aware of fluctuations in the exchange rate. A change in the exchange rate could form a risk for your business. Currency management gives you more certainty. Set your margins safely and protect yourself from unfavourable exchange rates.
Trading internationally is much easier with a foreign currency account, as it allows you to pay and be paid in the same currency. And it gives you a strong negotiating position. You can set competitive prices, because the currency risk will not have to be passed on to you.
To be even more confident about cross-border business, use our International Desks. They can help you with banking abroad and put you in touch with their local networks.
Risk 4: country risk
The situation in a country can change suddenly. The local economy may stagnate or deteriorate, or there may be political unrest, conflicts or a natural disaster. You should also pay heed to the reliability of a country's legal system. If the country is known for fraud or corruption, for example, be prepared for the risks. Look into the market and the situation (in Dutch) in the country and engage the right (in Dutch) networks and contacts abroad.
If you want to protect yourself from the country risk, discover how a letter of credit can cover this risk.
Risk 5: language and cultural differences
Language and cultural differences can increase the risk of miscommunication. For example, if you’re doing business with countries in Africa or Asia for the first time, you’ll notice a difference in business cultures. Here too: make sure you’re well prepared. Do some research into your foreign partner or client. Is the company financially healthy, who is mandated to make decisions, what are the standards and customs within the company? You also need reliable company information. This (in Dutch) will explain more about the foreign market and anything you need to take into consideration. Of course, it’s best if you speak the language, but if you don’t, find a local interpreter or make the right contacts (in Dutch) in the country.
