Probably, the biggest blunder an exporter can make is to invest in an overseas market without first carrying out a political risk assessment. It’s true, coups, civil strife, and acts of terrorism do not occur every other day, but the possibility that these unpredictable events can affect a multi-billion export business and bring it to its knees is scary enough to warrant the deployment of some of kind of a safety net. But what exactly should be on your mind as you consider polical risk insurance by Niche Trade Credit for the protection of your business?
Understand the Risks Involved
To reap real benefits of political insurance, you really need to understand the nature and extent of risks involved in the overseas market you’re targeting. Think about the chances that some buyers may fail to compensate you for a shipment that’s already been delivered. Is the market stable enough, and are you looking at macro or micro political risks? You may need to research your target market thoroughly prior to making any significant move.
So, what if a political assessment reveals real risks? Does that mean you don’t invest, or you focus on less risky areas? Far from it! The purpose of studying political risks prior to investing in an overseas market is to give you an insider perspective of issues that can affect your business there, and that helps you identify aspects of your investment that you need protected, for example by polical risk insurance by Niche Trade Credit. Proven risks need not scare you out of business!
True, political risks in a specified market will affect all multinationals operating there, but that does not mean every policy offered is ideal for every type of business. So, anyone promising protection against political risks should be able to provide a custom solution that addresses the exact risks and negative issues your business is going to face, both in the short-term and long-term.
It’s essential that you find out what exact issues are covered under a particular insurance coverage. This is an important safeguard, as your business may be significantly hit if a certain event that’s not covered under your policy occurs. For example, is the policy helpful in case default results from government interference, such as the cancellation of a contract? What’s the deal when a foreign buyer goes bankrupt and they just can’t repay for goods or services already delivered?
Reaching an Understanding
You should not make the mistake of assuming compensation will be immediate and automatic once a risk covered under a policy has come to pass. It, thus, makes sense to have candid conversation with your prospective insurer and discuss issues such as the circumstances under which compensation will be available. In most cases, certain conditions have to be met, and you may even be required to exhaust other avenues for recourse before you can be paid anything for your losses.
Protection, such as polical risk insurance by Niche Trade Credit, can save the day when you’re operating in an uncertain, overseas climate. To be on the safe side, ensure that you know the political risks your business will face, and understand what benefits a specific cover provides.