Importers and exporters of goods face uncertainties in their operations just like other businesses. With most import/export businesses, medium or large-sized, uncertainties can wreak untold havoc if there are no mitigation practices in place. Imagine the hit that these businesses will take when a ship on transit with their goods sink. It can cripple the entire operation and jeopardize the firm's ability to be a going concern. The first step in shielding the import/export business from uncertainties involves recognizing the risks that the business is likely to face. Here are some risks in the import/export trade
1. Exposure to Product Liability
Product liability refers to the responsibility that an exporter/importer bears in case consumers of the product suffer any detriment. Importers and exporters need to abreast with the laws and regulations of their markets to ensure they remain compliant. In most cases, product liability arises from the manufacturer's negligence. Manufacturers can however prove their innocence and pass the fault to the distributors (the importers and exporters). In such cases, product liability insurance helps cover the hefty penalties that the regulatory body will impose.
Importers and exporters can argue and succeed in product liability cases. This is if their market is in a country that doesn’t have jurisdiction over them. But this still has cost implications in terms of legal charges. It also affects the reputation of the business and stifles its growth. Foreign countries can impose sanctions on the products. Even if this is not the case, business relations will take a natural dip if you refuse to be accountable for the products.
2. Inland Marine Exposure
Importers and exporters ship their products regularly. It’s therefore very easy to think that inland marine exposure relates to the uncertainties associated with transiting the goods on water. Inland marine exposures relate to risks arising from shipping the product on land. The common risks in transporting products on land are collisions and theft of cargo.
Property insurance can help you cover property that you keep in a specific location. It also covers the equipment that your employee travels with to nearby sites. However, basic property insurance normally excludes the coverage of specialty products. If you are shipping high-value products, they will fall under the specialty category therefore basic property insurance isn’t enough for you. An inland marine insurance policy will give you coverage for these products.
3. Worker’s Compensation
You can't do everything alone in the import/export business. You'll have to hire some people to help keep the operations in motion. Employees face a myriad of risks when they are working for the business. For instance, they can sustain injuries from the job or even fall sick because of the job. Most regulatory bodies will require that the employer cover the medical bills for such employees. Sometimes, the employer may have to compensate an injured employee for lost wages.
In the export/import business, this exposure relates to office and travel injuries. Taking workers' compensation insurance will help cover the bills in case this risk manifests itself. Some simple actions can also help in reducing the chances of the risk occurring. Making sure all workstations have an ergonomic design is one of them. Ergonomic workstations protect employees from strains and injuries because of repetitive motions.
4. Fluctuations in Foreign Currency and Exchange
Buyers and sellers use different currencies in the import/export industry. These players mutually agree on a particular currency to trade with when they transact. This brings about the risk of fluctuating exchange rates in the future. Consider a situation where the currency for trade depreciates significantly between the time of finalizing a deal and the time of payment. The importer or exporter will incur a loss if they are the ones receiving the payment.
The simplest way to protect the export or import business is to quote your prices in U.S. dollars. This transfers the risk straight to the buyers. Keep in mind that competitors can use this strategy against you. The competitors may resort to being flexible and deal with any currency. They can lure some of your buyers who find their arrangement more attractive.
5. Exposure to Crime
The employees that work for the business can conspire to steal from it. This is a threat that many businesses face. The size of the workforce determines how easy it is to mitigate this risk. A big firm may not be able to ascertain the values of the people who work for them. But smaller firms can do so because of the limited workforce. Import/export businesses can limit criminal activities in their firms by conduction extensive background researchers on their labor force. They can also implement the principle of separation of duties as a check and balance mechanism.
Protect Your Import/Export Business With Varas Insurance Brokerage
You can’t control the uncertainties that will befall the import/export business. But you can develop a master plan to help shield it from the adverse effects of these uncertainties. Getting insurance coverage is the best master plan you can have. Varas Insurance has a consolidated package that will ensure the cargo remains safe until it reaches its destination. Contact us today for a quote.