There are many challenges a company will face when considering a new business venture. Those challenges multiply exponentially when the business venture is outside the United States. The risks for organizations when doing business abroad can be both significant and many. Having a clear execution plan and due diligence team that is familiar with these types of ventures are an essential hedge against surprises that could impact the company's strategic goals.
Risk management is a broad term which, simply, means identifying and managing those events that may prevent an organization from realizing their strategic business goals. The result can be both defensive (avoiding risk events that would negatively impact the company) and opportunistic (allowing the organization to take advantage of opportunities because they are aware of unique risks). Either way, any organization's business venture has a greater chance to achieve success by an increased awareness.
Over the next several months, The ALS Group will be writing about issues that directly affect doing business abroad. Topics will include:
- A country risk assessment
- Risk appetite and risk tolerance
- The enterprise risk management (ERM) process – what it means and where to start
- Local country nuances including required insurance, regulatory compliance and political risk exposures
The impact of risks abroad can affect operations ranging from major in-country capital projects, to supply chain exposures and unique human capital risks for employees working abroad. A company should not underestimate the reputational risk the company can face by doing business abroad. One only has to remember the Kathy Lee Gifford child labor scandal of the 1990s and how it affected both the retailer and the apparel industry in general. The question becomes, "Does your venture border on any sensitive sociopolitical issues that could make headlines and cause the company some embarrassment?" A thoughtful crisis communication plan can be an effective risk mitigation tool when the unforeseen happens.
As we have highlighted, a comprehensive risk management strategy that supports the business case for any venture abroad will add certainty to the situation full of unknowns and allow the company to proceed towards an optimized outcome with greater assurance.
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