5 tips to protect your business from international trade risks

As a business owner, you're no stranger to hard work. But when you take your business abroad, you open the door to a new set of challenges. Small- and medium-sized businesses have to deal with market volatility, changing interest rates, rising supply costs, currency fluctuations and socioeconomic uncertainty. Any one of these could undermine the financial stability of your business and force you to rethink your strategy.

Here are some recommendations to help your business turn these challenges into opportunities and stay competitive in today's economy.

In an unpredictable global environment, one of your top priorities should be to minimize your financial risks, including the risks of doing business in another currency. 

To eliminate some of the uncertainties created by currency fluctuations, you need a hedging strategy. Financial tools such as forward contracts, swaps and options can all act as a shield against this unpredictability.

Common currency hedging instruments include :

It's important to establish reliable and effective practices to make sure you get paid and ensure your financial stability. We've all heard of phantom suppliers and orders that never arrive, but there are tools to protect businesses like yours from this kind of situation. 

Letters of credit and credit insurance are both great ways to protect your cash flow without disrupting your supply chain. You could also renegotiate your payment agreements. Whatever you choose, the key is having an extra layer of security when a foreign exporter requires payment in advance.

Other challenges you may face include transporting goods internationally and managing employees. If a conflict or pandemic impacts your chosen shipping method, who is responsible for finding an alternative and paying any extra costs? Your sales contract must spell out this information. Make sure you have a range of resources at your disposal to avoid any unpleasant surprises.

Everyone knows you shouldn't put all your eggs in one basket, especially in times of uncertainty. By maintaining a list of quality vendors that can provide the vital products you need, you can stay agile and enjoy peace of mind while your business keeps running smoothly. Having different suppliers in strategic locations around the world is also a wise choice. This way, you can reduce the likelihood that your entire business is paralyzed by problems in one region, such as economic or political upheaval or a public health crisis.

The more flexible your supply chain, the better the chances you'll receive your goods on schedule, even during challenging times. 

In periods of economic turmoil, there's no silver bullet to keep all your problems at bay. However, when it comes to international trade, a flexible and proactive approach can go a long way. Markets evolve quickly, and SMEs that can adapt and respond effectively to these changes will have a competitive advantage. This requires constant attention, and it's a good idea to build a network of partners to help you avoid any problems if a situation arises.