In an increasingly global business world, it has become common for companies to consider international expansion. Foreign economic growth creates opportunities to tap into new markets, target new consumers/buyers and expand a company’s brand awareness. However, expansion of any kind comes with some degree of risk and in many cases, that risk is higher when dealing with international factors. We suggest several precautionary measures that should be taken to enhance the safety and security of all involved.
Choosing a Safe Location for International Growth
When considering international expansion, in-depth research is vital and an initial focus must be on location. Picking the right location is critical and you must know as much as you can about the business climate, government agencies available, the labor force and the region’s tolerance for foreign companies operating in the area. Some key questions to answer are:
● What is the crime rate for the region?
● What were the last 3-5 foreign companies to create new operations and, what issues, if any, did they encounter?
● How active are the police in protecting foreign companies?
● Does the government openly work with companies to encourage growth in the region?
● Are there unions/organized labor groups and if so, do they work well with foreign companies?
Additionally, it is highly recommended to locate to an area where a government entity is nearby and then get to know the key officials. Business associations that are in the region are also important so that you can learn from other business leaders about operating in the market and what threats exist.
The Overseas Security Advisory Council (OSAC) is a good place to start finding information about international market threats. OSAC was created by the U.S. Secretary of State to “promote an open dialogue between the U.S. Government and the American private sector on security issues abroad, ” according to the U.S. Department of State. The council is directed by “34 representatives from companies and government agencies concerned by overseas security . . . [and] offers its visitors the latest in safety and security-related information, public announcements, warden messages, travel advisories, significant anniversary dates, terrorist groups profiles, country crime and safety reports, special topic reports, foreign press reports, and much more.”
From this initial location evaluation, a company will develop a strong sense of which areas have the best potential for expansion.
Understand the International Risks of Business
We next recommend companies perform an in-depth risk assessment and evaluation of the areas under consideration for expansion. This assessment will gauge threats and vulnerabilities applicable to the physical location. However, it will also evaluate all vendors to be involved. For most companies, the biggest threat comes in the form of people. It is important you know with whom you are working and determine the level of trust you can put in them.
You will be working with a number of local businesses, whether they are attorneys, CPAs, manufacturers, distributors or other vendors. Background checks on these businesses and their employees are necessary. What may seem at first glance to be a qualified and dependable business contact may be one with a past filled with questionable ethics and fraud. A risk assessment will bring these risks to light before they have an impact on your company.
It is important to know that that things change and so does your vulnerability. A risk assessment is a living document that needs to be updated based on current events. New threats can erupt overnight and it is necessary to stay diligent in monitoring the region. At a minimum, schedule annual or semi-annual evaluations of the company’s risk assessment to ensure that all pertinent information is continually up to date and new threats are noted for future consideration.
If you follow these basic steps, you will be on your way towards an international business expansion that minimizes risk and maximizes potential growth!
Question for discussion: What factor do you think companies often overlook when looking to expand overseas?