Question

Companies face many risks in day to day business operations. Discuss some of the keys risks that Australian companies with overseas operations are exposed to.

Answer 1

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Internationally business can involve different risks from domestic business and will be influenced by the Import country you intend to export .There will always be high risk while entering into new market but identifying those risk in time and taking required measures to reduce the impact of risk . Here are some of the major risks firms doing business internationally can face.

Export risk can be different based on which country your business is exporting . However, there are four common risk all Australian small businesses should be know of while doing business overseas.

Political risk

An uncertain political environment can influence export operations in several ways. An official ban could affect delivery of goods, civil war or political violence could affect the business operations in country. Political instability could result in defaults on payments, seizing of property and assets. Some factors to consider are while doing business overseas.

• Trade officially ban by governments and the international community affect the flow of goods and services and could affect your delivery of goods and getting paid.
• Civil disorder may affect personal security of company staff and contractors
• Some good and servics phobitied by local government.
• Political sudden changes may occur due to economic factors, natural disasters, civil disorder or revolution
• Whether the local country complies with international law requirements, for example, human rights, trade sanctions, recognition of personal property rights etc.
• The Department of Foreign Affairs and Trade (DFAT) continually monitor the political changes on Australian businesses.

Legal risk

Legal risk refer to damage or any loss incurred to a business due to failure to comply with statutory or regulatory obligation.It is important to remember that while doing business outside of home country certain laws of home country still apply .Law may differs from country to country.

Some examples of situations where legal issues can create problems for exporters include:

• Differences in contract law between countries means tailored advice on contract terms is important to ensure they are binding and enforceable.
• The question of which laws will apply in disputes.
• Negligence and misrepresentation laws.
• Patent registration and other Intellectual Property issues.
• For exporters of services provide company, health and safety and employment laws may apply.
• Some countries may not permit local litigation or place restrictions on the types of claims which can be made.
• Taxation and revenue laws

Operating risks

operating risk is define as the risk of loss arise from inadeqate or failed internal process,people,and system,or from external operations.Exporters should have konwledge with the operating environment of new markets, as this can be very different to the Australian operating environment.

Some examples of situations where operation risk issues can create problems for exporters

• Errors or omission by employees
• product failure
• loss of key peopel

Currency risks

Currency risk referd as exchange rate risk that arise from the change in price of currency .Company doing business overseas are exposed to currency risk that may have unpredictable profit and lossto the business.Currency risk can be reduce by only hedging ,which can reduce the fluctuation of currency.

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