Assessing the Risk of Exporting

Risk Accept AvoidWhen we get into discussion with them, business owners and managers often shy away from exporting because they see it as ‘risky’. When we ask them what they mean, we often get answers that tell us that we need to get clarity about how to measure and deal with risk before we can have a meaningful discussion about exporting.

The practical way to understand risk is to look at the likelihood of something happening and its impact (good or bad) if it did happen.

The four strategies for dealing with risk are Avoidance, Acceptance, Transfer and Mitigation.

Prospective exporters can:

  • Accept the risk by allocating a budget to it and writing it off – a sensible course of action if the cost is small relative to the cost of the other strategies.
  • Avoid the risk of failing in an export market by re-focusing on the home market – if it still offers potential.
  • Transfer the risk by appointing a good team or executive to take on the job; acquire export insurance.
  • Mitigate the risk by using proper marketing techniques like smart, deliberate segment targeting and clever positioning.

A team that’s considered these things is more ready to have a meaningful discussion about exporting that addresses questions like these:

How much would we be willing to spend if we thought that after committing to the spend, there were a 50% chance we’d decide not to proceed? A 75% chance? If there were only a 25% chance?

What strategies – it usually makes sense to use a combination of them – should we employ to deal with the risks?

Simon O'Keeffe - Beacon InitiativeSimon O’Keeffe – Marketing & Sales Advisory

Simon is part of the Beacon Initiative, Grow Programme Virtual Management Team, which can assist qualifying SME’s to grow through the provision of management expertise that may not be accessible to them currently

One thought on “Assessing the Risk of Exporting

  1. The absence of expertise required to deal with exporting is a risk factor. Most SMEs will not have the budget or economies of scale to employ an export professional when first entering export markets. Their options may be summarised as follows :

    1. Outsource the professional expertise necessary on a case by case basis until volume has built up to the extent to consider other options. This option facilitates budgeting for the comparatively small cost on a case by case basis.
    2. Arrange appropriate training for current personnel, but be mindful that nobody can become an expert overnight. The risk here may be in determining the nature and extent of training appropriate to future needs.
    3. Proceed on an ad hoc basis, attempting to solve each problem as it arises.

    These options are listed in order of preference regarding mitigation of risk. Unfortunately, many firms take the worst option, principally because it is apparently the cheapest.

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