Macro Versus Micro Risk Management
Global economic trends once concerned only multinational companies. With today’s intertwined economies, however, seemingly small events in another country can affect your business. You must simultaneously manage the risks -- politics, new competitors, cheaper products and shifts in customer’s tastes -- in your neighborhood, region or even your industry.
If you depend on products or raw materials that come from foreign markets, you run the risk of running out of inventory if a shipper fails to deliver or if a company loses its capacity to stop and sell the materials you need. To manage such a risk, have multiple vendors in multiple countries. Even if some vendors charge more than others, you can maintain a steady supply. Make sure you know where your products or supplies come from; even if they’re shipped to you by a multinational company based in the United States, that company could experience disruptions from its foreign suppliers.
Ultimately, all deliveries are local. No matter how far products travel, you receive your delivery from a local provider, meaning you run a risk of missing shipments if your local delivery service fails or is mismanaged. You can manage this risk by having a backup delivery service on call to pick up any shipments that haven’t reached your door.
Your ability to borrow money depends to some extent on the worldwide interest rate and lending environment. Because even small U.S. banks lend to foreign banks, interest rates are sensitive to world conditions. At the same time, if American banks are concerned about foreign defaults on loans, they may be increasingly conservative when it comes to making loans to businesses like yours. You can manage this risk by having backup plans for raising money. For example, if you can’t get a bank loan, consider selling bonds to raise capital, selling excess inventory at a discount and negotiating with vendors for extended credit.
Much of your ability to borrow depends on your relationship with your local bank. Although the bank may have broad policies, individual loan officers have some leeway in approving loans. In addition, you can explore loan options through the U.S. Small Business Administration.
If you sell products to foreign markets, having new outlets can boost your bottom line. However, you run several risks. A market can dry up quickly if animosity develops between a foreign country and the U.S. In addition, some countries run the risk of having their industries and markets nationalized, meaning the government decides what gets bought and sold there. One of your protections in this risk is keeping the percentage of your revenues from any given country fairly small. You can spread the risk by doing business in several countries at once.
A growing business continually seeks out new local markets. This can involve a demographic that hasn’t been reached before in regions and neighborhoods the business has yet to explore. One of the primary risks of any market is saturation. You can mitigate this risk by developing new marketing strategies for new targets and by introducing new products.