As the old cliché goes, when the going gets tough, the tough get going. Nothing could be more apt in the global shift of U.S. exporters, as they hesitate to grow internationally.
According to the annual Global Trade Survey from Allianz Trade in North America, only 47% of companies expect to invest in new companies. U.S. companies, in particular, are the most reluctant. There might be good reasons for this: fears of recessions in certain regions, the Russian-Ukrainian war, the Israel-Hamas war, U.S. stress with China, and the list goes on and on.
Global risk is inherent and impossible to avoid. Companies looking to take advantage and grow should have a gameplan when it comes to addressing risk.
This is where having the right data at your fingertip and the correct solutions can make or break expansion efforts. If, instead, you’re just using your so-called “gut instinct,” you will never take steps to move forward, points out Justin Seedorf, Regional Vice President for Southwest America for Allianz Trade in North America. You might experience analysis paralysis and never make a move towards expansion and growth.
But despite these challenges, businesses that proactively address risk and develop strategies for expansion will gain a competitive edge over those that stay sidelined. Here’s how your company can prepare for growth in key regions while mitigating risk.
Recognizing the Risk and Reward in Asia
While global instability creates concerns, it doesn’t mean organizations should avoid entire regions. Such is the reality right now in Asia, where Russia’s entanglement with Ukraine has led to worldwide hesitation in the overall region.
Onlookers of China, for instance, will read headlines focused on China’s connection with Russia or the lukewarm relationship overall with the U.S., as well as Taiwan entanglements. Looking through a broader risk lens, however, Allianz Trade in North America finds it’s an above average time to look towardChina at the moment.
The Chinese business environment does provide U.S. firms the greatest risk, along with some economic risk in the region. Meanwhile, there remains very low commercial risk, and it continues to offer great opportunities as the market matures. Businesses who can mitigate the biggest risks will find the biggest reward.
Similarly, India, despite infrastructure challenges, remains an attractive option for expansion, driven by strong GDP growth.
Managing these risks requires knowledge. By partnering with experts familiar with these regions, businesses can navigate risk more effectively and develop backup strategies to safeguard their growth.
Uncovering Opportunities Within Risk in Europe
Europe’s risk profile is influenced by both the Russia-Ukraine war and long-standing challenges, such as high debt levels and slower economic growth. However, sector-specific opportunities exist.
Slovenia and Croatia, for instance, both saw improvements in the global outlook of their energy sector. For those willing to see opportunity there – or address the concerns – it’s a chance to move forward while others still see structural weaknesses and don’t seize opportunity. Turkey’s computer and telecom sector saw a similar improvement during the second quarter, according to Allianz Trade in North America’s sector outlook.
Scenario modeling is critical to mitigating risks. Such models can lean on data to run through significantly more circumstances, creating statistical results that reflect the potential for setbacks. Then your team can use the models to find solutions that improve the enterprise’s standing, even in the face of such risks.
With that in hand, expansion in improving – yet still uncertain – sectors can give you an opportunity to gain ground at an early level of growth.
Understanding the Risk Realities in Africa
It’s important to recognize the financial realities in a region when expanding. Too often, businesses expand globally, while the economics of the product or service lack viability within the new region. This is a common issue to be aware of for businesses considering expansion in Africa, where region-by-region and country-by-country will differ dramatically.
Morocco, for instance, has seen its agrifood sector become far stronger in recent quarters, giving it strong fundamentals and a good outlook moving forward.
South Africa is another country that has seen significant growth over many years, but risks remain, like inefficient utilities that have many disruptions and polarization in the country. Yet, those considering investing in the region, see opportunities, especially if certain efforts take priority, like building the electric grid.
Or there’s the Côte d’Ivoire, which despite the high economic and political risk, has had one of the lowest inflation rates in all of Africa.
Turning Risk into Opportunity
Global expansion in today’s environment requires more than gut instinct. Armed with the right data, a solid plan, and experienced partners, your company can turn international risks into growth opportunities.
Allianz Trade in North America, the world leader in trade credit insurance, has 62,000+ clients worldwide. To learn how Allianz Trade in North America can help you protect your cash flow and grow with confidence, go to https://www.allianz-trade.com/en_US.html.
