How To Manage Risk in International Business

You can't manage what you can't see. Learn how to recognise and manage the many economic risk factors that your organisation is experiencing, and make sure you always know what to expect.

23 May 2023 Jason Kaye

4 min

Reading Time: 4 minutes

This article can assist you in managing economic risk factors in your international business by cutting through the noise. You’ll discover the primary methods for identifying and addressing emerging or endemic economic risks in your enterprise and explore some minor indicators that could serve as warning signs.

Continue reading if you want to discover how to control economic risk in global trade.

  • How to identify your business’s KPIs
  • Trustworthy measures of economic performance
  • Indicators of economic risk to your business
  • How to manage economic risk in international business

How to identify your business’s KPIs

To effectively manage risks in your business, it is crucial first to understand what to watch for. This is where identifying KPIs (or key performance indicators) becomes essential. However, it’s crucial to determine what “key” means in the context of your business strategy beforehand.

If your business operates seasonally, tracking performance can be more challenging since your sales window is shorter. Moreover, proactive management of risk factors affecting your international business becomes even more critical.

For instance, customer experience and retention may be the primary KPIs for a service provider, while e-commerce businesses may focus on monitoring return rates and delivery times. KPIs should satisfy two criteria:

  • It’s crucial to focus on measurable aspects of your business processes. For instance, return rates can be easily quantified, such as X returns in May, Y in June, etc. On the other hand, assessing customer experience can be more challenging since it’s less tangible.
  • Moreover, it’s essential to measure comprehensively what you’re attempting to measure. Although numerical data suffices for return rates in most cases, understanding the reasons behind high returns is crucial when trying to reduce inventory and operational burden. For example, are your products of poor quality and easily breakable, or are orders failing to arrive on time for customers to utilize them? Comprehensive insights into these factors are essential.

Trustworthy measures of economic performance

While many of the KPIs you choose will be unique to your business, including commonly used economic performance indicators such as cash flow, gross and net profits, and product sales volumes, is also crucial. These metrics provide insights into your business’s financial performance and highlight potential risk sources in your international operations.

Moreover, keeping track of political developments in your operating countries is equally vital. For instance, if political parties pledge to revamp tax legislation or licensing frameworks for businesses, it’s possible to predict whether economic risks to your enterprise are likely to increase. Therefore, staying informed about politics in each national economy where you sell your products or services is crucial.

Other indicators of economic risk to your business

Unfortunately, profit statements and cash flow reports only reflect business economic performance after customers decide. To achieve successful expansion, it’s essential to stay one step ahead.

However, modern businesses can leverage technology to gain better insight into customers’ real-time attitudes and forecast critical KPIs like sales and growth.

For instance, if your profits are high and your customers are satisfied with their experience, they will likely engage favorably with your marketing materials or website. Monitoring early warning signals can help prevent problems before they escalate at the month’s or quarter’s end. This approach is similar to the concept of a canary in a coal mine.

Don’t overlook the following when you consider how to manage risks in your company:

  • Website traffic to bounce rate and sales conversions ratio
  • Time spent on social media, number of views, emails opened, and likes
  • Brand knowledge and awareness

At a personal level, you can use your schedule to identify potential economic risk factors in your business. While it’s an indirect measure, the time you allocate to different areas of your business can offer insights into whether you’re developing the right KPIs.

Tasks such as accounting and invoicing require completion, but determining the time spent on business development and KPI strategy is subjective. By tracking your schedule, you can evaluate whether the economic risk stems from the external customer market or your business’s internal performance.

How to manage economic risk in international business

Now that you have established what you need to measure, it’s time to understand how to manage economic risks in international business when they arise.

Unfortunately, there is no single solution to economic risk factors. If you miss KPI targets, your strategy for future success will depend on the nature of the performance criteria.

For instance, to increase customer retention, you may use incentives such as rewards and discounts that increase with the length of the consumer relationship. On the other hand, if you want to reduce delivery prices for your customers, consider eliminating wasted packaging or partnering with a local fulfillment center to reduce transportation distances for your products.

Zyla is your partner in managing international business riskĀ 

As an international business, you’ll be familiar with the impact of exchange rates and the real economic risk they present. Facilitating transactions from customers or suppliers can be draining, as you have to face expensive fees and slow speeds.

If you’d like to reduce this particular economic risk to your international business, we have the solution. Zyla allows you to lock in FX rates for extended periods, allowing you to budget with clarity.

Take your pick of major global currencies and ensure your money reaches its destination in hours rather than days. All you have to do is meet the transfer cut-off times, and Zyla will handle the rest.

  • Open multi-currency accounts with local account details
  • Make fast and secure global payments to suppliers, staff and partners
  • Collect funds from marketplace sales
  • Keep costs down with competitive rates

Open an account today and you could be approved, set up and trading internationally in 24 hours. Get started or find out more by calling (855) 797-3366 today.