It’s vital for every business person to understand that there is a certain amount of risk when conducting any type of business. When it comes to international business, however, it becomes a bit more complex. The panel of experts that spoke at Bryant World Trade Day offered advice on understanding the different types of risks you may encounter and how you can better anticipate and protect your company.

Panelist 1- Dan Schobel, COFACE

Dan spoke about mitigating political and economic risks when conducting business internationally. COFACE sells receivables insurance that protects you against a company you may be doing business with from closing and leaving you without any payment. One example that he gave was the protection they could offer you if you were doing business in Crimea. This particular insurance would have been very helpful to you given their current political climate and its impact on business operations to ensure payment for your future receivables.

Panelist 2- Richard Cant, Dezan Shira & Associates

Richard touched upon a few things that keep CEO’s and CFO’s up at night when doing business overseas, primarily in China. Security risks are of top concern to executives and a real issue. With the recent riots in Vietnam surrounding the removal of an oil rig which closed down the largest business park in Ho Chi Min City. This particular business park is home to many businesses including those owned by companies based in the U.S. and across Europe. Random unforeseen political risk can come at any time, knowing how to deal with it is key.

Other risks Richard mentioned were mismatched interests between owners and investors regarding funding choices. This can be of particular concern because once a deadlock situation has been entered particularly in venture capital the venture is halted and in some instances many never move forward from that point.

Integrity of the supply chain is the number one issue companies doing business in China are worried about. The lack of integrity in the supply chain can have deadly implications for companies. A great example of this was KFC and the HMO’s that were being used in the chickens they were sourcing from China. When this story broke KFC was hit by a media frenzy to which they still haven’t recovered from.

Physically getting capital in and out of China can also be very difficult. Payment systems in China are another huge pain point for business owners. There are millions of dollars essentially “trapped” in China due to extra tax and transfer pricing issues that make it very difficult to extract cash from this country.

Panelist 3- Ian Moss, Goulston Storrs

Ian spoke about the norms of doing business in foreign countries and the reasonable expectation that you are to understand the jurisdiction and classification of your product. He emphasized the importance of knowing what licenses you need for your products and the legal implications that they can have on your business as it matures. Licenses in foreign countries are very complex and there can be multiple levels of classification for each.

There is also a list of people that you are restricted from doing business with including those such as terrorists etc. It is important to find out who your international customers are, make sure they are credible and that your product is being used for its intended purpose.

Panelist 4- Mary Beth Schneider, Alex & Ani

Mary Beth spoke about the importance of protecting what is yours and both your intangible and tangible assets. She gave the example of Disney and how Alex and Ani has the right to produce their bracelets with Mickey on them but can only sell them on Disney property as they hold the contract rights to production.

This is an extreme example but these types of precautions need to be set up for your business if you are doing business in China. She stressed the fact that it is important to protect both your tangible assets as well as things that are intangible about your product such as the actual name of the item and where your logo or brand name may appear. This can be costly to manage and is very difficult to monitor however it is a very important component when participating in international business.

Gaining the correct patents and protecting your ideas are critical to your business success. She illustrated this point with the example of Xerox and how they were actually the first to develop a personal computer but because they did not have the correct patents Apple was able to steal their idea for a mere 1 million dollars.

To learn more about doing business in China contact the KLR International Tax Services Group.