Naturally, there are a number of risks associated with foreign expansion. For starters, companies have to be careful when considering moving into volatile or emerging markets. Take Venezuela, where the opposition leader Juan Guaidó wants to entice foreign investors to the country’s oil market. Historically, though, foreign companies in this market saw their assets seized under late president Hugo Chávez. While the answer is not to avoid unstable markets entirely, companies have to evaluate the risks they might pose to business. Every market carries risks to one degree or another, but it pays to be aware of how those risks might matter to your specific company.
You’ll also want to consider that your company must be paid on time. More than that, make sure your company will get paid at all. It’s critical to understand payment culture in different places, as it’s incredibly nuanced.
Data can help you understand the average time it takes to be paid in each country and differences based on location. Another way to assess this risk of non-payment is by looking at the rate of bankruptcies in a given market compared to the number of businesses there. Take what you find into consideration, especially before you begin extending credit to overseas customers. Gain a view of the economy as a whole to gauge your odds of success.
The political environment in certain markets might affect your compliance obligations, too. Regulations have tightened since 9/11, so it’s critical that you know who you’re extending credit to and who you’re working with. Cross-reference potential clients with sanctioned lists to ensure your company won’t be involved with politically volatile or criminal groups.
It’s also prudent to consider the relationship each country has with the U.S. Because some can be considered red flags, they might require added scrutiny, especially when it comes to businesses based in places like Russia and Iran. Any companies that deal with sanctioned countries, for example, face massive fines. For example, Iran’s soccer team accused Nike of not delivering on a promise to supply it with cleats. In reality, though, Nike was complying with legal requirements that limited its ability to do so because of sanctions against the country. It’s key to be aware of these restrictions, or your company might face trouble it didn’t see coming.