Risky Business?

Insurance makes you more secure.

As an international entrepreneur, you face risks every day you do business. The cargo you're exporting could fall off the ship, or it might get stolen in transit. Or maybe a customer went out of business and didn't pay for the last shipment you delivered. Even acts of nature can throw a wrench into an otherwise smoothly functioning global business. So if you haven't already, it's time to consider whether or not you're prepared for what the future might bring.

Insurance offers protection, peace of mind and much more. "The reason you use [insurance] to mitigate risk is so you can increase your business," says Jeffrey Meyer, director of international trade programs at Wright State University in Dayton, Ohio. "It's a means by which you can go into more risky markets to get more business, and that makes your business more competitive."

The types of coverage available to exporters are numerous and include cargo insurance (to protect your goods in transit), credit insurance (to protect against nonpayment), fire and theft insurance, and foreign investment and trade risk insurance (for confiscation or expropriation of your property overseas).

Policies can be purchased separately or together in a "package deal" offered by many insurers. To determine the kind of protection you'll need, consider each country and situation individually, and research the risks involved. You may even want to talk to a professional consultant. But no matter what, says Meyer, "You have to insure your cargo. After you get past that, you're looking to see whether you need to insure your receivables [and so on]."

Of course, certain situations allow for a degree of chance. If you have a relationship with a customer in a politically stable country, such as the United Kingdom, you might choose to forego credit insurance. But it probably wouldn't be a good idea if you're shipping to Africa, which insurers consider to be the riskiest part of the world.

The cost of insurance depends on many factors, such as where you're shipping cargo, who your customer is, how valuable the goods are and the means by which you ship. And policies, which expire anywhere from after one transaction to after one year, should be reviewed on a continual basis. Says Meyer, "If you want to do it right, you should match your risk management tools to the situation."

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This article was originally published in the October 1998 print edition of Entrepreneur with the headline: Risky Business?.

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