Foreign and domestic governments take unreasonable and unrealistic decisions all the time. However, with cross-border risk, these decisions tend to produce more consequences than they yield benefits. Enter cross-border risk management, a process to mitigate cross-border risks from the volatility of returns on international investments.
Executive protection agents are known as problem-solvers. But are there problems even they can’t solve for their clients? Especially for clients who invest heavily in foreign countries.
As an executive protection magazine, we have already covered travel risk management and risk assessment. In the latter, we examine this evaluation type’s benefits in increasing your company’s performance exponentially. It’s plausible and doable—Scout’s honor.
In both articles, we address what you can do about your circumstances, how to shift your perspective and become proactive. In this piece, however, we will inspect what countries are doing to make people’s lives better or worse. Especially of those outside their borders.
The Impact of Cross-border Risks
Issues of cross-border risks affect everyone, both the recipient and destination countries. This type of crisis entails the danger of a foreign government or corporation imposing conditions that affect a non-national company or investor’s operations. In most cases, these conditions apply to the transferability and convertibility of foreign currency.
So many big words. But let’s simplify them with the severest example we are witnessing today. The most harrowing instances of all include countries such as Bolivia and Venezuela. In these two states, local governments imposed controls on international companies who operate locally.
Let’s face it. We live in a digitalized, globalized, international world that’s completely interconnected. Say you go out to buy shoes, a computer, or the latest iPhone. Likely, you won’t be buying those from your local manufacturer. Chances are low-wagers in China’s Zhengzhou are willing to assemble that iPhone for USD3,15 an hour.
The Downside of Cross-border Risk Management
To avoid analysis paralysis and overthinking, let’s look at cross-border risks in simple terms. After that, we will consider mitigation measures and other actions to alleviate hazards.
Experts say that the lifting of border restrictions and lowering trade boundaries have increased international business. Yet, increased profits and opportunities come with accompanying challenges. Among the most significant pains is how companies approach risks.
Are they risk-prone or risk-averse? Do they have a so-called risk-free culture? Are they supporting their employees to explore markets even if it proves disruptive?
In medieval times, geography was confining risks to certain places. However, we don’t have that kind of liberty nowadays. We are either forced to take on risks or suffer the ensuing consequences. Either way, we fall victim to inevitable adverse outcomes.
Here is where the importance of mitigating risk enters the stage.
Risk management and alleviation have become a notable enterprise priority. Well, with some companies. Others just went bankrupt, or we don’t hear of them as of late.
With proper risk assessments, it’s possible to minimize any risk a foreign economy or government could impose on your business. You may not be able to invade that country, but you can still predict its internal workings.
Say a country like Russia persecutes undesirable NGOs or accuses their workers of being foreign agents. But your US-based NGO’s local Russian chapter just recently opened an office in Saint Petersburg.
Or even worse, what if your company’s staff is wounded or killed in a Third World country? What do you do?
Our point exactly. If you aren’t willing to cause an international scandal, you just go with the flow. Or publish a public condemnation letter.
The Upside of Cross-border Risk Management
It’s not all in your hands, except for the things that are. That’s the easiest way to describe both the ups and downs of cross-border risk management. There are many things you can do, but you are still restricted in countless ways.
The laws limit you. The law enforcement officers restrict you. The local policies do the same. Although that may sound like a witty invitation to a post-apocalyptic country with an authoritative regime, it’s not. Well, maybe.
If you are managing risk for an organization, you should know you are in for a ride. Here are three risks that you should be concerned about immediately:
- Compliance regulation,
- Cybersecurity,
- Political instability.
If that doesn’t play like genuine Monday morning inspiration in your ears, we don’t know what does. Jokes aside, that seems like a lot for any single professional to handle. But like with all things human, there is a cure for that as well.
Appointing the best chief risk officer out there is one step in that direction. This person needs to know how to factor in local and international risks. They need to be sensitive to local policies and establish mitigation measures plans.
What to Do When Things Go South
What happens when a major fine for non-compliance with GDPR or a ransomware attack shatters your defenses? Ask your chief risk officer what they did to prevent those misfortunate events.
What if your whole staff contracts COVID-19? Again, ask your chief risk officers what measures are in place in your company.
However, no matter our imaginary chief risk officer’s proficiency, this is only one man or woman. What happens when their human abilities fail you? Enter risk management tools.
Automated tools, like Oxial Risk, are perfect for modern businesses.
As the manufacturers of this specific tool claim: Oxial Risk can identify and proactively monitor the mitigation of high-risk areas across the organization and prevent losses with early detection and predictive risk analysis.
What more do you need? No, really, we are asking you.
Conclusion
If you’ve come this far in our piece on cross-border risk management, then you probably fall into one of two groups. Optimists comprise the first, and pessimists are part of the second group. Where do you belong?
If your answer was, somewhere in between, then you got it right this time. There is no clear-cut solution or response to the issue of cross-border risk. That’s why they call it cross-border risk management because you try to manage things, not solve them permanently.
If you are looking to expand your knowledge on cross-border risk management, then visit Oxial’s website. They are among the leaders in the industry.
And don’t forget our advice from this article:
- Risk is predictable and preventable, or most are.
- Human experts are great, but tech equipment is even better.
- Don’t panic. Just do your best. Well, in case you aren’t the chief risk officer. Then please feel free.
To keep learning stuff on mitigating risks, read our Workforce Risks piece here on EP Wired.