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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."
Names and ages: Michael Howarth, 47, (pictured on the left) and Henry Mohrschladt, 54
Company name and description: Cabo Yachts Inc. is a designer and manufacturer of sportfishing boats.
Honorable mention: In June, Cabo won the SBA's 1998 Exporter of the Year award, thanks to implementing creative overseas marketing plans, overcoming exporting glitches, developing solid trading partners and quickly increasing export profits.
Based: Adelanto, California
Start-up costs: $710,000
1997 sales: $20 million (approximately $4 million of which was from international business)
1998 projections: $25 million
Setting sail: Cabo's first export was to Japan in 1994, after an intense year-long ad campaign to generate interest from customers and dealers. The company realized its first profits that same year.
International waters: Cabo currently exports to 13 countries, including Ecuador, Greece, Italy, Kenya and Saipan. "Wherever there is warm, deep, clear water and fish, there are people enthusiastic about offshore sportfishing," says Mohrschladt.
Global interest: Mohrschladt says most of the world is still untouched by Cabo, and export revenues increase every year by about $1.9 million.
- Foreign Credit Insurance Association, (212) 306-5000
- Export-Import Bank of the United States, http://www.exim.gov
- Your local chamber of commerce's export assistance center
Cabo Yachts Inc., (760) 246-8917, http://www.caboyachts.com