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Exporting may potentially expose your company to risks that go beyond those typically encountered domestically, such as: foreign exchange risk, transportation risks, legal issues, and government regulations. If these risks are not carefully planned for or managed well, it can lead to financial loss or failure of your exporting venture. As such, having a strategy in place is ideal and it will enable you to address and mitigate these risks.

Identifying the risks
Unless all possible risks are identified, your company will not be able to develop a realistic, cost-effective strategy for dealing with them. When identifying the risks, ask:

• What could cause a loss to the export venture?
• How serious or costly would that loss be?

 It is vital to note that information is likely to be the most critical aspect of an export risk optimisation strategy. When a firm gets access to information in a timely manner, it will have a solid understanding of the risks involved. Therefore, it can select the risk management strategy best suited to its specific circumstances.

Export risk-related information is available from a wide range of sources, such as federal government agencies- Austrade, various state governments, private credit information agencies, banks, and EFIC. The OECD has also released a Risk Awareness Tool for Multinational Enterprises in Weak Governance Zones which aims to help firms address risks and ethical dilemmas that they are likely to face in weak governance zones.

Insurance & Managing Risks
Choose to avoid risky activities. For example, an export firm may choose not to export to a particular country or avoid pursuing business with a particular foreign buyer, after identifying and assessing the risks related to those activities.

Transportation insurance
This type of insurance can protect you as an exporter from loss or damage to goods during transportation. However, the degree of coverage varies from contract to contract according to the agreement between the two parties- i.e. either between the exporter and importer, or the exporter and carrier or private insurers.

Credit insurance
This type of insurance can protect you as an exporter against buyer insolvency or buyer prolonged defaults. You can also include political risk cover. However, the degree of coverage will largely depend on the payment terms negotiated between buyer and seller. Insurance against the risk of non-payment can be obtained through insurance companies like Atradius, QBE and Coface. The following risks will usually be covered:

• Default by buyers
• Buyers refusal to accept delivery
• Buyer insolvency
• Delivery affected by unforeseen events
• War, hostilities or civil disturbances
• Government intervention

Product liability Insurance
This type of insurance is designed to cover you should your product cause damage or injury to another business and/or person. You may also be held responsible for products that are either modified by you, form part of another product or is imported by you. It is particularly important in the US market.

Other strategies
Guarantees: such as bid bonds, performance bond, standby letter of credit. EFIC can provide these facilities in certain cases, should you not be able to through your bank.