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).
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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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