Islip FTZ Authority

Benefits and Risks of International Trade

International commerce offers a wide range of benefits, but there are risks involved with moving business overseas as well. On the benefits side, you can enjoy:


Growing Your Business

When you trade internationally, your available pool of clients and suppliers increases significantly each time you start operating in another country. This allows you to grow your business more easily and more quickly than you might be able to in your saturated home market.

Diversifying Risk

Relying on a single market or single currency is incredibly risky. A financial meltdown, natural disaster or political upheaval could significantly damage your market if you only have one. By having several available markets by trading internationally, your business may be able to survive.

Receiving Earlier Payments

To stymie some of the risk, you and your business partners overseas will want to complete transactions in the quickest and safest way possible. Often, overseas payers will choose to pay upfront so that there is less of a risk, which in turn helps your working capital.

Less Competition

While your home market may be close to saturated with businesses like yours, you may be the only one willing to offer your products or services in some countries, making you a unique business. You will instantly have a market with less competition where you truly stand out, thus boosting your sales potential.

On the risk side, you face issues with:

Not Fully Defining and Understanding the Risks

It is crucial to have a clear understanding of all of the risks and rewards that come with international trade before you become involved. Do your research before your initial foray into international business and before you expand to new markets. Expect hiccups in the process.

Assuming Laws Are Similar

Laws are different in every country. Your company will need to be aware of how local laws differ from the laws with which you are accustomed to working. Find a good local lawyer and perform your due diligence to ensure that you are complying with local laws.

Not Communicating with Local Business Partners

When international borders, major time zone differences and language barriers are between you, it can sometimes be difficult to communicate with your business partner in your international market. You must make an effort to spend time visiting in person, talking on the telephone and developing the relationship overall for it to be a success.

Unstable Profits

Currency exchange is one of the places where you can experience significant losses if you are not prepared. You obviously want to get the best possible exchange rate to maximize your profits, but you must plan for the market to be volatile in order to do that. Remember that even leading currencies like the dollar can change in worth for the worse!