Benefits and Risks
Benefits of Taking Your Business Overseas
The decision to export can have direct economic benefits including the opportunity to:
- expand your business;
- spread your risks;
- reduce your dependence on the local market;
- use excess production capacity; and
- buffer against seasonal demand.
There are other significant advantages of exporting. Exporting broadens your skill base through exposure to new ideas, management practices, marketing techniques, and ways of competing. This in turn allows you to increase your efficiency and increase your productivity.
The impact of globalisation and the increase of free trade agreements will change the domestic business environment to more closely reflect the international market place. Meaning that in the near future, the businesses you are competing with overseas are likely to be players in the domestic market.
Risks of Exporting
While exporting offers great benefits, there are also new risks you may not previously have encountered, that need to be considered.
Risks include:
- Political Risk
The political stability of your destination country should be monitored both from a business and personal security perspective. Instability may result in default or blockage of payment or confiscation of property. The Department of Foreign Affairs and Trade’s Smart Traveller website should be consulted in the planning stages and prior to and during any market visits. Likewise Austrade continually monitors the effects of political changes. Their information can be sourced via the Austrade website or by contacting them directly.
- Legal Risk
Every country has its own legal systems. Their legislation will affect all aspects of your business transactions including import procedures, taxation, employment, intellectual property, currency, contracts and agency/distributorship arrangements. It is essential to obtain advice from respected legal practitioners in the countries you are looking at exporting to, or legal practitioners in Australia familiar with the legal system and laws of your target country.
You should also be aware that while graft and corruption may exist in some
countries, under Australian law it is an offence to offer illegal payments
and action can be taken against you on your return to Australia. For additional
information you may wish to obtain the relevant law - the Federal Government’s
Criminal Code Amendment (Theft, Fraud, Bribery and Related Offences) Act 2000.
- Financing Risk
Sources of financial risk should be fully investigated before embarking along the export route. Types of financial risk include:- credit risk - whether the buyer will be able to pay you;
- transfer risk - any economic, political or government restrictions that might impact on you; and
- exchange risk - fluctuations in exchange rates.
Your bank is an excellent source of information on the advantages of the
respective payment options and how to protect against currency fluctuation.
- Transport Risks
Unless you are providing a service, you are likely to be exposed to some risks associated with the transport of your goods to their destination. Risks include damage, loss, theft and, for some products, exposure to the elements. Correct packaging, storage, distribution channels and insurance can assist you to minimise your transport risks.
- Regulations and Quarantine Requirements vary between countries. You need to find out about these requirements upfront. The onus is on you to be aware of all of the requirements to be met at your destination. The consequences of a shipment that is refused entry and needs to be shipped back could be dire.
To clarify the overseas buyer's and your outgoing export quarantine requirements, check with the Australian Quarantine Inspection Service (AQIS).
