When we get into discussion with them, business owners and managers often shy away from exporting because they see it as ‘risky’. When we ask them what they mean, we often get answers that tell us that we need to get clarity about how to measure and deal with risk before we can have a meaningful discussion about exporting.
The practical way to understand risk is to look at the likelihood of something happening and its impact (good or bad) if it did happen.
The four strategies for dealing with risk are Avoidance, Acceptance, Transfer and Mitigation.
Prospective exporters can:
- Accept the risk by allocating a budget to it and writing it off – a sensible course of action if the cost is small relative to the cost of the other strategies.
- Avoid the risk of failing in an export market by re-focusing on the home market – if it still offers potential.
- Transfer the risk by appointing a good team or executive to take on the job; acquire export insurance.
- Mitigate the risk by using proper marketing techniques like smart, deliberate segment targeting and clever positioning.
A team that’s considered these things is more ready to have a meaningful discussion about exporting that addresses questions like these:
How much would we be willing to spend if we thought that after committing to the spend, there were a 50% chance we’d decide not to proceed? A 75% chance? If there were only a 25% chance?
What strategies – it usually makes sense to use a combination of them – should we employ to deal with the risks?