Which of the following is a disadvantage of trading through an export agent?
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 3 common risks to guard against when exporting Easy solutions to avoid pitfalls when selling abroad 4 minutes read Share As far back as 20,000 years ago, early entrepreneurs overlooked the risks of exporting because they recognized the benefits of trading goods between regions. Today, selling internationally still brings complex risks, but they’re still outweighed by the benefits of selling to new markets. On average, Canadian companies that export show higher revenues and profits growth than non-exporters. Yet, only 10% of Canadian businesses with annual revenues under $100 million sell to countries outside of Canada, according to BDC research. Common types of risks confronting exportersOne challenge to exporting is understanding how to deal with export risks. Identifying and guarding against these risks will go a long way to ensuring your exporting projects meet with success. Here are the three main categories of risks facing exporters and how to manage these risks. 1. Economic and financial risksEconomic and financial risks are those that affect your cash flow, profits or company viability, for example:
Some of these risks also exist when selling in the domestic market, but the risk increases when selling internationally. This can be due to a shaky economy, or higher levels of instability and corruption. The risk when exporting is also higher because it’s harder to resolve issues in another country due to distance, different justice systems, language barriers and the like. This is problematic, because a single unpaid invoice can mean the difference between profit and loss. How to avoid economic and financial risks?Fortunately, there are many resources available to help mitigate these risks.
2. Social risksSocial risks are business activities that affect local and global communities such as offering a bribe or involvement in terrorist financing, labour and human rights issues, environmental degradation, or a lapse in cyber security. On a business level, these offences could damage your company’s reputation, brand and credibility, hurt sales, and incur steep financial fines, not to mention the possibility of personal liability and penalties. While you might never intentionally participate in such activities, your company is still at risk. Many businesses have become embroiled in corruption without even realizing it was happening. Cybercrime is a relatively recent but rapidly growing risk, as witnessed by the many businesses that have fallen victim to leaks or viruses. How to avoid social risks?To help avoid social risks, ensure that you and your employees are well versed in spotting signs of potential corruption and terrorist financing and have a plan in place to deal with these risks. 3. Political risksThe global stage can be unpredictable at times. While political instability is more often associated with emerging markets, trade deal renegotiations in the U.S., and the U.K., show that political change can affect exports at any time. The main types of political risks include: Creeping or outright expropriationForeign governments can seize your investment or adopt measures that have the effect of expropriation. Political violencePolitical violence risk can include terrorism, war, civil strife or other political events that can damage your assets or prevent you from conducting operations. Conversion and transfer risksThis type of risk happens when a foreign government or central bank prevents you from converting local currency to hard currencies (i.e., U.S. dollars, Canadian dollars, euros or other safe-haven currencies), or from taking hard currency out of the country. Repossession risksRepossession is when a foreign government prevents you from repossessing or re-exporting physical assets brought into the country (e.g., machinery, equipment, rolling stock, an aircraft, etc.). Non-payment by a governmentGovernments will sometimes refuse to pay their suppliers, which can expose you to non-payment events. How to avoid political risks?While no one can accurately predict when and where political events may disrupt trade, buying political risk insurance can help protect your assets from a number of political risks. This article was written by EDC for use and publication by BDC. For more information, visit EDC’s website at www.edc.ca. What is a disadvantage of trading through an export agent?You remain responsible for shipping and other trade-related logistics - although your agent should be able to help. You need to specify in an agent's contract if you need them to credit check your customers for you.
What are the disadvantages of using an agent?Some of the downside of using commercial agents are:. Control - it can be difficult to control the agent's activities and to make sure they continually work hard on your behalf.. Sales methods - an agent might not sell your product or service in the way that you would like.. Which of the following are the disadvantages of exporting?Disadvantages of exporting. Supply chain disruptions. ... . High up-front costs. ... . Export licenses and documentation. ... . Product adaptation. ... . Political disruptions. ... . Cultural hurdles. ... . Exchange rate fluctuations. ... . Multi-currency payments.. What are disadvantages of import trade and export trade?Limitations of Import and Export. It includes extra packaging, transportation and protection and insurance costs which build up the total cost of items.. Exporting isn't doable in the event that the foreign nation prohibits imports.. |
