Manage the risks of exporting
Learn how you can identify and manage export risks.
Exporting can be a great opportunity to develop new customers and increase profits. However, trading internationally presents extra risks and challenges. You can't eliminate these risks altogether, but you can manage and minimise them.
This guide looks at the risks of exporting and how to minimise the risks of exporting. It also highlights the importance of having a good knowledge of overseas markets.
The video below from Invest NI explains some of the risks involved with trading internationally.
Risks of exporting
Discover some of the risks involved when exporting.
Whenever you sell there are risks - your customer fails to pay, for example, or you get sued for harm caused by your product. But doing business with a customer in a different country, and perhaps using a different language and a different currency, can create extra risks and complications.
What risks are involved when exporting?
There are a number of potential risks when exporting including:
- Assessing the creditworthiness of your customer can be more difficult, while at the same time taking legal action to recover unpaid debts might be expensive or even impossible.
- Dealing with a different language, business culture and legal system can increase the risk of confusion and potential problems. Understanding the market is essential.
- Your customer's country can present risks. For example, the country might be economically weak, politically unstable or prone to natural disasters.
- Goods generally take longer to deliver overseas, adding an extra delay from when you incur costs such as raw materials to when the customer receives the goods and pays for them. This can increase your financial burden so it's important to check that you can afford to tie up working capital in exports. Read more about the basics of cashflow management.
- If you quote or sell in foreign currency, it's a good idea to protect yourself against the risk of changes in the exchange rate. Read more about foreign currency and exchange risks.
- You must register for Intrastat if, in any calendar year (from 1 January to 31 December), your business either: receives more than 拢500,000 worth of goods from the EU into Northern Ireland or moves more than 拢250,000 worth of goods to the EU from Northern Ireland. You do not need to use Intrastat for goods you move between Great Britain (England, Wales and Scotland) and the EU, or between Great Britain and Northern Ireland. Read our introduction to Intrastat.
- Companies overseas may try to copy your ideas or abuse your trade marks, and it can be difficult to protect and enforce your rights. Read more about intellectual property protection overseas.
- Managing international deliveries and payments can be more complex than when trading within the UK. You need to make sure that you have the right skills and resources.
- Your customer may be based in a country that imposes restrictions or limits on the type of goods you wish to export, which could cause delays or even prevent your dealings.
- If you are trading in a third country outside the European Union and there are trade barriers which make trading difficult, you can appeal using the . This is a single entry point where you can request clarification on third-country tariffs, import formalities, documentation and other measures. You can also make complaints if you think trade barriers are unrealistic or illegal or are imposed unfairly.
Minimise the risks of exporting
Research, insurance, foreign exchange cover and the right partners can all help reduce export risks.
Exporting can present risks and challenges for your business. You can't eliminate these risks altogether, but you can manage and minimise them.
How to minimise risk when exporting
The first step to minimising the risks of exporting is to conduct thorough market research. Market research helps you understand the risks of doing business in a particular country. You can then decide how you want to control those risks.
Researching export markets online is a useful start, this can help you to pull together valuable information which can be crucial to your export planning. Read country guides: exporting to the EU and country guides: exporting to GB and outside the EU.
You should also check whether the UK has any agreement with the country to help reduce export risks.
You are likely to want to visit the country to learn more. Support and subsidies may be available through events and visits arranged by Invest NI. Read more about building your knowledge of overseas markets and conducting in-market export research.
Working with the right partners can also help you reduce the risks as you can benefit from their expertise and contacts. For example, you might work with a reliable agent or sell through a local distributor.
Reducing financial risk when exporting
Before agreeing an export deal, you will want to assess the impact on your cashflow and make sure you have enough working capital.
You may want some kind of insurance cover. Read more about risk management and insurance services.
Read information about insurance for international trade.
If you are trading in a foreign currency, you also need to protect yourself against foreign exchange risk. The amount you receive (in pounds sterling) could be lower than you expect if the foreign currency falls. You can protect yourself using forward foreign exchange contracts and currency options. Read more about foreign currency and exchange risks.
UK Export Finance 91香蕉黄色视频
UK Export Finance, the UK's official export credit agency may be able to offer you an export insurance policy, export credit guarantee or other product if your export contract is for semi-capital or capital goods and related services to the value of at least 拢20,000. For non-capital goods, if you have been unable to arrange an export insurance policy through a commercial provider, you may be eligible for a UK Export Finance product. UK Export Finance's range of products and services include:
- insurance of UK exporters against non-payment of an export contract by overseas buyers
- the guarantee of bank loans to help overseas buyers finance purchase of goods and/or services from UK exporters
- sharing credit risks with banks in order to assist exporters in the raising of tender and contract bonds, in accessing pre- and post-shipment working capital finance and in securing confirmations of letters of credit
- insurance of UK investors in overseas markets against political risks
Read more about the financial 91香蕉黄色视频 for exporting.
Note that the actual amount and terms of 91香蕉黄色视频 available will depend on the risk involved.
Risk management and insurance services
Credit insurance options for exports.
There are several products and services available to businesses to reduce the risks of trading internationally. The type and level of insurance that will best suit the needs of your business will depend on a number of factors, such as the size and length of the contract and the amount of risk involved.
Partnership with a credit insurer
This is a tailored service, where the insurer identifies and assesses your business prospects and covers the risk on your exports.
Individual insurance policy per deal
This is a tailored policy and is ideal for one-off contracts that you would not need to insure regularly. There are many credit insurance companies that provide this service. UK Export Finance offers a range of products and services to complement commercial products and services and to 91香蕉黄色视频 exporters who have not been able to raise finance commercially.
Managed credit insurance
This scheme provides a full research service, providing country information, verifying customer details and credit limits, debt collecting and management as well as making claims. It is the preferred service for new or smaller exporters looking to contract out the risk.
The British Chambers of Commerce and the Association of British Insurers all have lists with details of reputable companies.
Details of specialist advisers can be found on websites of organisations such as the .
can advise companies seeking guidance on export finance and credit insurance matters.
Read more about insuring your business when trading abroad.
Knowledge of overseas markets
Know your target export market and where to get help in penetrating it successfully.
Apart from your time commitment, you should expect to invest in at least two short visits to - and some market research about - the country you are investigating. Detailed research and site visits will incur early costs but will ensure that you are targeting the right country, and are a wise investment to save costly mistakes later on.
The following resources will aid your research of your potential overseas markets:
- The Department for International Trade can help you.
Read more about researching and entering overseas markets.
Agreements with overseas markets
Investment promotion and protection agreements and explanation of "double taxation".
Investment promotion and protection agreements between the UK and other nations exist to protect investors with internationally recognised standards. These will minimise your exposure to financial and legal risk when exporting.
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Key elements of these agreements include:
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provisions for equal and non-discriminatory treatment of investors and their investments
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compensations for expropriation (seizing property)
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transfer of capital and returns
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access to independent settlement of disputes
Governments of most developed countries show their commitment to fair treatment for investors through their membership of the OECD, European Union and/or European Economic Area and therefore there is no need for an additional investment agreement.
Double taxation
Double taxation can occur when a foreign country taxes your business as well as being taxed in the UK on the same income.
Many countries have now reached double taxation agreements with the UK where they will only tax your income once.
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