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Foreign trade is crucial for people’s livelihood, both due to our reliance on the income that foreign trade brings and the products we source internationally. After all, how would we survive without toilet paper, let alone our vital health supplies? With more inter-country restrictions than ever before, foreign trade has just become significantly more challenging and risky than ever before. However, the following five steps can help us minimize the risks and ensure that we keep international trade operational.
Trade finance alternatives
The first step is to get a full understanding of all the trade finance alternatives that exist. With approximately 90% of global trade utilizing trade finance, you need to be well-versed in how you can capitalize on this option. Essentially, trade finance allows you to use a line of credit to pay suppliers and bridge the gap between purchasing inventory and receiving money from the sale of goods. Types of trade finance include letters of credit, import and export finance, and streamlined credit arrangements.
Hedge Foreign Exchange Rates
Coronavirus is making foreign exchange rates and the international economy unstable and unpredictable. Rather than relying on an exchange rate that could fluctuate at any moment, changing the value of their goods dramatically, many people opt to use currency hedging to reduce the risk of exchange rate shifts over time. Hedging allows companies to estimate their margins, knowing what their raw materials or goods will cost when purchased in a foreign currency.
Seek Professional Advice
Now is the time to get in touch with your team of professionals. Hopefully, your accountant, lawyer, and insurers have already reached out with helpful information about operating in the current market. If not, then get on the phone and ask them for advice. They can help you assess the issues that may impact you and help you develop risk management strategies to overcome or minimize them.
Communicate New Processes to the Team
Your staff members are likely feeling uncertain in the current climate. Are their jobs safe? Will the company survive? What changes are coming their way? Sharing your plans on how you will adapt and pivot to ride out the current challenges will reassure them and build trust.
Additionally, it is essential that everyone within the business knows and understands any shift in the strategic direction. This is central to their ability to implement any new processes or procedures. Organizations often fail to translate how higher-level strategy relates to each person’s role within the business. If you avoid this pitfall and communicate effectively, you will find you have more engaged and motivated employees.
Understand Current Market Trends
Whether you are importing or exporting, customer spending patterns will have changed in the last 12 months. With unemployment rates soaring and lifestyles adapting to suit coronavirus restrictions, people are spending more time at home and more money on home leisure pursuits.
You may be operating in a market that has benefited from this shift, such as home exercise equipment. Or, you may be working in a market that has suffered. The first step to adapting to the new market needs is to understand them, so if you haven’t been scouring trade magazines, surveying your customers, and reviewing your product sales carefully, now is the time to start.
The pandemic won’t halt foreign trade, but it does put a few extra hurdles along the path to success in the industry. By implementing risk reduction strategies in your organization, you will be prepared to comfortably weather the storm.
