Be smarter and safer when doing business internationally by:
When establishing new customer relationships, apply the same standards of due diligence as you do for domestic partners. Check bank and trade credit references or ask a new customer for prepayment against a proforma invoice for the first few orders.
It’s in your best interest to do so: your profits can be affected by debts and long-term growth prospects may be affected by the reputational damage of forming undesirable trading relationships.
Countries that offer promising growth opportunities may also be characterized by economic volatility and unfamiliar political and business cultures. You’ll need to consider:
Understanding these issues ahead of time is imperative. A market that appears to offer outstanding return on equity is less attractive if it’s impossible to repatriate profits, or to do so only at a disadvantageous exchange rate.
Go beyond the headlines to understand how changing regulations and the impact of political developments affect your business. For example, for companies currently active in the EU and UK, two recent game-changing events are the transition to Brexit and the new data protection regulations. Hear what HSBC experts have to say about the potential impact of Brexit and the General Data Protection Regulation introduced by the EU on May 25.
Do your due diligence on the supply side. Growing globalization has increased awareness of supply chain opportunities – and it’s also exposed supply chain vulnerabilities. Make sure your suppliers can fulfill orders and have robust business recovery arrangements in place. Country risks may also impact your suppliers’ ability to deliver.
Potential buyers and suppliers may appear to offer exceptional sales and supply opportunities. But without proper vetting, you face the possibility of fraud, financial loss, criminal proceedings and reputational damage.
Conducting due diligence overseas can be more complicated than at home. You may face the challenges of a different culture and language and, perhaps, limited opportunities for face-to-face contact.
Site visits are the first choice when forming new trading relationships. But given that’s not always feasible, do your research ahead of time, and consider trade credit insurance if non-payment of a trade debt would materially impact your company. When checking credit status, you’ll also want to identify who owns a potential trading partner’s bank account.
Ask yourself the following questions when you’re evaluating new opportunities to seek profit and growth overseas:
These are just some of the issues to consider as you expand internationally. HSBC’s global presence and connectivity gives us the expertise and insight to help our clients expand internationally – smarter, safer and more successfully.