Risky Business: How to Mitigate Risk When Running an International Company

Business.com / Starting a Business / Last Modified: February 22, 2017

There are plenty of risks that an international company faces. Here is how to deal with them.

There are more companies that do a majority of their business around the world.

Risks seem to multiply as soon as a business crosses the international border and begins doing business.

Some of these risks are because of laws differing from country to country while others have to do with logistics.

Whatever the reason for the risk, they have to be mitigated as a few pieces of bad press or an audit can stop a new business in its tracks.

Related Article: Going Global: Building an International Footprint as a SMB

The following are some ways to mitigate some risks if having an international company.

Be Aware of What Partners Are Doing

Having partners scattered all over the world is becoming more common especially since technology has made it possible to telecommute without a loss in production.

Personal behavior as well as business behavior will be put under a microscope if a high ranking official gets into turmoil.

Keeping a close eye on these people professionally and personally is quite important.

Something as private as a highly publicized divorce can have a big impact on quarterly numbers if customers catch wind of it.

Avoiding Being Taken Down With Other Executives

  • A thorough vetting of investors and board members is essential as a personal flaw could be construed as a company flaw. A board member who constantly goes big game hunting and posts about it on social media is a great example. This can reflect badly on the company and include having to do a cleanup of online reputation management for the individual or the company.
  • Not making the board public has its disadvantages and advantages. The advantages are that the person won’t be associated with the company publicly. The disadvantages are that some people are selected to a board to associate a name with a company; board members can generate millions of dollars in business so it is important to pick them carefully.
  • Picking someone on the board who is involved with large corporations with a good image with the public can be a hack. These large companies have the resources to vet this person completely so trusting their judgement could save money and time.

Document All Transactions

There can be quite a few transactions so it can be difficult to account for all of these. This is the most essential thing that can be done as an audit could cripple a company financially and leave them in shambles.

With the rise in international business, money laundering has become a huge problem and undisclosed profits have also become a common occurrence.

Related Article: So International: Business Etiquette From Around the World

How To Mitigate Risk of Auditing

  • Document all transactions no matter how small.
  • Hire a CPA to make sure all documentation follows IRS guidelines.
  • Make sure the bank the business works with is of the highest moral standard. Working with a bank that could take risky clients can lead to all accounts being frozen.
  • Ask if the bank has taken an anti-money laundering and sactions training. These courses can help sure up the bank employees so they can spot accounts that should be turned away. This will help reduce the chance of bank funds being frozen while criminal or financial investigations are done. Frozen money can cripple a company as it will not be able to function for very long.
  • Have an outside party handle the accounting so in the case of the audit, their lawyers and resources will be used instead of the company.

Visit All Offices and Do It at Least Once Randomly

The worst thing that can happen to a company is if a PR nightmare is started by employing people in less than habitable conditions.

Although many people internationally might think of certain offices as workable, others in the western world can see this as sort of a sweat shop.

Businesses that have international offices or outsourced labor already face a PR challenge so it is up to a high ranking executive to make sure that all things are running smoothly regardless of location.

Building an international brand takes quite a lot of research and cultural training as it is important to not offend the market of a certain branch.

How to Make Sure Offices and Factories Hit a Certain Standard

  • Set the standards to the standards of the largest portion of customers. For example, if a majority of customers come from Canada, implementing their standards for offices can save face with them.
  • Use some of the costs saved on the outsourced labor to build a permanent office that is up to code.
  • Guidelines for how people are to be treated should be set for all employees including international employees. In certain countries, verbal reprimand crosses the line so making sure set policies for how employees are treated should be set immediately.
  • Visit an office at random, because behavior and conditions can deteriorate as soon as an executive leaves. The random nature of the visit will give the executive a real look at how things are working.

Running an internationally based business can boost profits and drive down prices.

Related Article: Bridging the Cross-Cultural Gap Through Global Business Email Etiquette

These rewards do come with a few liabilities in a myriad of different areas. Make sure to do research and due diligence when it comes to expanding to new partners, countries, and office spaces.

This could mean the difference between a flash in the pan company and one that people all around the world know.

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