International Business Etiquette

International Business Risk (Arbonne international business investment)

February 1st, 2008

Companies rapidly expanding to the global marketplace may have the great opportunities for profit, however, if unable to carefully evaluate the international business risks involve, the “golden opportunity” perceived may soon turn into an expensive mistake.

Doing business in the domestic marketplace may involve looking only as far as the potential customer’s ability to pay and willingness to pay. When doing business internationally however, the definition of risk expands beyond customer commercial risk that includes country risk. In fact, the first thing that should be analyzed before evaluating the elements of risks associated to individual customers, is the country risk. If the country risk shows of great risk then it is senseless to continue information on the customer, but if the country risk is acceptable then the nature and extent of the country risk can help formulate the method of customer risk analysis.

International Business Risks #1 - Country Risk

Approving and accepting credit to a foreign customer is also accepting the risk of the customer’s country. Country risk analysis means being decisive of the “country credit-worthiness” in terms of the willingness and ability of a foreign government to make available to local companies’ foreign exchange essential to service their foreign currency denominated responsibility or debts to foreign suppliers.

Evaluation of country risks takes into account the possibility of delayed payment or credit loss which can result from any one or a combination of four wide risk conditions such as the resource base, external accounts, political risks, and government policy. Always remember that these factors are interrelated and often overlap with each other.

International Business Risks #2 - Political Risks

Analyzing the political outlook of a country maybe more important than analyzing the financial and economic matters of the country. In political risk analysis, one should look into reasonable assurance that if ever political change comes, as it always does, the change will be

orderly and there will be practical continuity in basic economic and financial policies.

The possibility of suspension on external debt or even rejection should be carefully assessed. Leadership changes can also change the way in which international investment community views the economic future of the country. Wide fluctuations in currency markets can occur as well as government policies threatening to destroy investment and property of commercial investors in a country. Capital flight is inevitable usually resulting to restrictions of the country’s government on the flow of currency and disruption in international trade.

International Business Risk #3 - Foreign Exchange Risks

Like any other commodity, currencies also follow the law of supply and demand which is subject to economic as well as political conditions. Exchange rates can fluctuate uncontrollably, sometimes a lot of times in a day, harshly complicating a company’s short-term and long-term financial strategic decisions.

The importance of analyzing international business risks should never be underestimated as all these risks have a tremendous impact on the trade of goods and services between nations and thus affecting the failure or success of a business internationally.

Tags: international business course, international business issues, international business growth, international business loan, international business opportunity, international business culture, international business company

Tags

International Business Strategy

Entry Filed under: International Business Strategy