Lawsuits are expensive, complex and time consuming, so liability is something business owners should consider for every aspect of their supply chain.

Planning and preparation are important steps in mitigating product liability. Organizations should assess the product liability risks tied to individual products and in different markets and consider potential loss scenarios. Strategies for product design, manufacturing, marketing and product recall planning can then be developed—to minimize or mitigate liability risk.

Organizations should be proactive and research the quality control measures and risk management plans of all suppliers to have a complete understanding of the supply chain; this includes procedures and plans of second- and third-tier suppliers. Businesses should also consider including language on compliance, indemnification and financial penalties into their supplier contracts.

Another important planning step is the preparation of a crisis plan detailing how organizations will act in the event of a product failure or contamination event. A crisis plan should clearly define roles and processes governing all aspects of a recall. This should include communications—via multiple channels—with customers, regulators, employees, suppliers and news media.

Businesses should be prepared to trace products and components throughout their supply chain, be ready to execute a recall as necessary, and be able to account for all related costs for claims purposes.

Having the right infrastructure in place ahead of time—for example, the ability to launch web sites and staff call centers in multiple languages, and a plan to collect unsafe products and redistribute safe products—can help organizations to quickly initiate a recall and recover from it.

Want to dive deeper into the regulations and requirements for selling in international markets? Check out the FITTskills Products & Services for a Global Market online course.

What should your next steps be to reduce your product liability?

Despite efforts to ensure best in brand quality standards are adhered to, and conscientious compliance with safety and production regulations, product liability disputes can still develop. It is recommended that organizations:

• Routinely buy liability insurance as a safeguard against litigation and factor the cost of liability insurance into their business plans
• Conduct due diligence when engaging in foreign markets
• Engage legal services not only for contract reviews, but also to provide a product liability environmental analysis from the legal perspective
• Ensure production design, testing and quality controls are rigourous, enforced and documented
• Implement proactive strategies to ensure product compliance with regulations in all markets product is distributed, such as by employing compliance specialists
• Put contingency plans in place to manage product recalls and potential liability

Consider creating a global insurance policy inventory

A detailed insurance policy inventory can also help businesses identify coverage gaps that may need to be addressed. A standard commercial general liability policy may offer protection against bodily injury tied to the failure or contamination of a product. But businesses may also consider other forms of coverage that are available in most countries. For example:

• Product liability insurance, which protects manufacturers and sellers from liability for losses or injuries to consumers or others as a result of a product defect or failure. Coverage could also include design defects or “failure to warn” claims.
• Product recall insurance, which can be customized to provide coverage for business interruption and extra expense, brand rehabilitation, third-party risk, and expenses associated with the execution of a recall.
• Industry-specific solutions—for example, clinical trials insurance coverage for life sciences companies.

Handle issues in the future by preparing to do so in the present

In the broadest sense, product liability risks must now be anticipated and managed by businesses participating at every level of the supply chain. The interplay of regulatory regimes and liability regimes cannot be ignored in a world where authorities are increasingly adopting an interventionist approach to product risks, and consumers are connected through Internet-based communications.

With authorities in regular communication across national borders and consumers ever more alert to product safety issues in other countries as well as their own, businesses operating in the global arena need to ensure they are properly advised and coordinated in managing and responding to these issues.

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Small business is bigger than you think. In many ways, the internet and social media have welcomed a new age of entrepreneurship. It’s easier than ever to start a business on an international scale, even from the comfort of your own home. Yet, that doesn’t mean there aren’t still rampant myths and misconceptions.

Today, over half of all Americans either work for a small business or own one themselves. Still, many small businesses continue to fail every year and even more fail to even make it off the ground in the first place. Despite more tech tools and trade agreements breaking barriers between countries and the global trade professionals within them, there is still a lot to learn about the realities of small business today.

In this article, we’ll shed some truth on what it means to own a small business in this global economy.

Myth 1: Only large companies succeed internationally

The biggest and most persistent myth in small business is that international trade is best left to the biggest players. Big-name businesses set the rules, and the smaller players can’t even get off the bench, right? Wrong. In fact, since 2006, the number of small business exporters is up 24.3% according to the U.S. Small Business Administration.

While it’s true there are challenges to selling services and products abroad, these are not insurmountable. New trade agreements make it easier for international trade to take place between small and mid-sized businesses, and this means expanding profits from the ground up.

Today, more than 70% of the world population’s purchasing power is outside of America. If you want to scale your organization’s profits, you need to scale your research and your market entry strategy.

It’s time to shed the myth that only large companies succeed on an international scale, since this is simply untrue.

We live in an increasingly global world, and it’s time for a new era of global small businesses to match.

Myth 2: Health insurance is challenging

One of the most pervasive myths in the United States in particular is that health insurance is too tricky for small businesses. This is especially true for businesses that conduct work internationally, perhaps hiring employees abroad on a remote basis. As a small business, it’s hard to balance this amongst your other expenses. Can you even afford the expense of health insurance, and is it worth all of the trouble?

In short, yes you can afford it and yes it’s worth the trouble. If you have over 50 American-based employees full-time, you’re required to provide insurance thanks to the employer mandate. Offering insurance is an effective way to boost employee morale, appeal to talented job seekers and build a positive work environment with healthy workers. Not to mention, you need health insurance yourself to guarantee you’re equipped to keep working years into the future.

Not sure where to start your search? Using licensed insurance agents with experience in business health insurance is be a great place to begin. These professionals can lead you down the right path in terms of finding a plan that’s right for your employees, budget, and scalability needs.

Myth 3: Being first is always best

With small businesses, there’s a common belief that you need to always be first to the market to succeed. While it’s true that being first with a new product or service has its advantages, don’t make the mistake of thinking this is always the most effective strategy.

In reality, improving upon a product or service that already exists in the market, or offering a similar product or service at a lower price, is usually the most successful avenue.

What exactly does this mean? Let’s take a well-known example for a ride. While Netflix might have been the first business to offer streaming services on an international scale, they mainly left this system as-is. Their competitor Hulu, however, stepped in with a similar service but advanced features like live TV, local channels, and more. Hulu is also priced at $5.99 USD per month, as opposed to $8.99 USD per month like Netflix. As a result, Hulu grew its subscriber base by 8 million people in the U.S. in 2018, compared to growth of 1.1 million people in the U.S. by Netflix during that same time.

Don’t let the myths hold you back from small business success

It’s time to break free from the many misconceptions that surround small businesses in international markets. Don’t let the fear of competition with the big players keep you from trying in the first place. Small businesses, in fact, have many advantages over the bigger ones.

First, they’re better equipped to reach their audience more effectively, since they operate on a smaller scale. Next, they can more successfully address employee needs by investing in key things like health insurance. Finally, they’re in a position to innovate with new technology through their products or services.

Let’s defeat these myths once and for all. Small business is big business, and it’s time to prove it once and for all with your own goals.

Ashley is a writer from Studyclerk and super-connector who helps businesses find their audience online through outreach, partnerships, and networking. She frequently writes about the latest advancements in digital marketing and focuses her efforts on developing customized blogger outreach plans depending on the industry and competition. You can learn more about her here: https://studyclerk.com/research-paper-writing.
Original article: https://tradeready.ca/author/ashley-lipman/

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In international trade, problems involving bad debts are more easily avoided than rectified after they occur.

Credit checks and the other methods can limit the risks involved. Nonetheless, just as in a company’s domestic market, it may occasionally encounter problems with importers who default on payments.

When these problems occur in international trade, obtaining payment can be both difficult and expensive. Even when the exporter has insurance to cover commercial credit risks, a default by an importer still requires time, effort and cost.

The exporter must exhaust all reasonable means of obtaining payment before an insurance claim is honoured, and there is often a significant delay before the insurance payment is made.

Where open account terms result in non-payment by the importer, the exporter must commence collections procedures.

Situations that require collections procedures

The process of collecting past-due invoices is more complicated in export sales in foreign countries with substantially different cultures and legal environments. Communicating directly with the importer, or buyer, is the best way of discovering the reason for payment difficulties. However, the approach must always be adjusted to the circumstances.

The simplest and least costly solution to a payment problem is to contact and negotiate with the importer. With patience, understanding and flexibility, an exporter can often resolve conflicts to the satisfaction of both sides. Even though the exporter may be required to compromise on certain points—perhaps even on the price of the committed goods—the company may save a valuable customer and profit in the long run.

If the initial approach to the importer proves unsuccessful, it may be necessary to place the collection of the account in the hands of a collection agency or legal firm.

Such cases may involve circumstances where the importer is unable to service the credit due to insolvency or because of fraudulent behaviour.

It is critical for every company to determine the most prudent course of action when a receivable is deemed uncollectible. If, however, negotiations fail and the sum involved is large enough to warrant the effort, a company should obtain the assistance and advice of its bank, legal counsel and other qualified experts.

It is preferable if both parties can agree to take their dispute to an arbitration agency because arbitration is often faster and less costly than taking legal action. The International Chamber of Commerce handles much of international arbitrations and is usually acceptable to foreign companies because it is not affiliated with any single country. More information on handling disputes in international trade is covered in Unit 5.

Using External Parties

Prior to contacting any collection agencies or government bodies for assistance, it is important that the exporter determine the amount which is outstanding. To do so, the exporter must maintain a good record of all its accounts receivable and closely follow the aging report to adequately determine the total amount outstanding with any importer at any point in time.

The first step is for the exporter to determine the total amount outstanding and gather the necessary invoices, proof of shipment or completion of performance on the contract, as well as any supporting email communications with the importer.

Be confident in everything an importer or exporter needs to know about payment, risk mitigation, financing, and the flow of goods and services. Learn more about this topic in the FITTskills International Trade Finance online course.

Insurance Policies

To mitigate risk, many exporters obtain an accounts receivable insurance (ARI) policy that helps secure their receivable in case of non-collection. In such a situation, the exporter should contact the insurance company to inform them of the situation and collaboratively identify the necessary steps moving forward.

Generally, if buyers have declared bankruptcy or have obtained sufficient information of a fraudulent transaction, insurers pay the exporter the outstanding amount and write-off the amount off their balance sheet. However, if the reason for non-collection is different than those previously mentioned, insurers pay the exporter and take ownership of the receivables. The insurer then establishes a connection with the buyer to collect the outstanding amount.

When an insurer contacts the buyers, it is in the buyer’s interest to negotiate the total outstanding amount that they would like to pay back and negotiate a repayment schedule. In any given country, many exporting companies would like to sell to one buyer, especially if the buyer is a large company, a well-known entity or a well-connected distributer or wholesaler. In situations where the insurer obtains a claim on a buyer and is unable to collect funds, the insurer excludes the buyer from all future coverage for all exporters, which indirectly limits future business with the buyer.

Collection Services

There are a multitude of collection agencies around the world that offer collection services. For example, Dun & Bradstreet offers worldwide collection services through its international affiliates. Fees are calculated as a percentage of the amount collected.

The exporter may also contact a local collection agency or legal firm directly, although care must be taken that the collection costs do not exceed the expected proceeds. Since the administrative and legal costs of processing foreign collection procedures are much higher than domestic costs, these collection procedures often recover little or none of the outstanding claim.

Exporters can also seek assistance from Trade Commissioners working at consulates and embassies of any given country. Although the mission of a trade commissioner is to connect potential buyers and sellers of goods in the foreign market to its local market, they can also assist in reaching the buyer to collect funds. In some situations, export credit agency (ECA) foreign representatives can also be of similar assistance, however their reach is limited due to jurisdictional differences.

Although the most obvious step is to hire a collections agency to help collect the funds, it is also possible for the company to write off the receivable as a loss and move on.

When a company hires a collections agency, its employees must dedicate time and energy to provide the required documents to the agents and continued support for future questions. Additionally, the collections agency might charge a flat fee or a commission-based fees, both of which will be paid from the pockets of the exporter. Considering the effort required, it might be worthwhile for the exporter to write off the loss and spend its time and energy on other profitable business.

Have you ever had an issue with non-payment from one of your international clients? Tell us about your experience in the comments below!

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