At the beginning of 2022, the outlook for world trade was still positive. Now we look at it differently. If you do business internationally, what can you do to help your company respond to today's economic and political risks? We would like to give you four pieces of advice.
Recommendation 1 :
reorganise the supply
reorganise the supply
The supply chain disruption continues. What we have learned from the Corona crisis and the war in Ukraine is that the supply of raw materials and semi-finished products is too vulnerable. This is time to switch from “just-in-time” to “just-in-case” production.
In recent decades, many companies have tried to keep their costs low by aligning their purchases with the orders coming in. With streamlined inventories and manufacturing processes, supply contracts and flexible staffing, entrepreneurs were able to respond quickly and cost-effectively to shifts in market demand.
This approach has held back many companies from further growth in the past two years. This was due to various events over which entrepreneurs had little influence (Brexit, Corona, Ukraine). Many supply chains proved extremely vulnerable. What can you as a company do about this now? Many entrepreneurs are looking at how to organise supply differently to strengthen the resilience of their business.
Measures to achieve just-in-case supply include:
- Find suppliers that are geographically closer to your production facilities;
- Keep more stock of essential raw materials and parts;
- Organise supply chains more regionally;
- Spread inventory across different points in the supply chain
- Ensure that your company has two or more suppliers for all the raw materials it needs.
Recommendation 2 :
organise inflow of talented personnel
organise inflow of talented personnel
Our recent Allianz Trade Global Survey shows that many companies are very concerned about access to the right skills. Many entrepreneurs are suffering from persistent staff shortages. They can't get the right people. That limits their ability to grow exports.
Corona has taught us that it is quite possible to work 'remotely'. The link between skills and location is broken. It offers a different perspective on work patterns. Staff do not have to be within commuting distance. By making use of a more distributed workforce, you as an entrepreneur can better respond to acute staff shortages and wage inflation.
Recommendation 3 :
learn from cyclical companies
learn from cyclical companies
Cyclical industries move strongly with the ups and downs of the economy. Think of industries such as airlines, luxury goods producers, construction, the metal industry, etc. Cyclical companies are accustomed to adopting new tactics or measures in response to fluctuating market conditions. Non-cyclical companies can learn from this.
Consider the following measures:
- Leasing capital goods and buildings instead of buying them;
- Making use of external service and production partners. Don't only work with permanent staff, but also with temporary workers and freelancers (flexible shell);
- Cyclical companies often use short-term contracts that offer a modest base salary but reward employees with significant bonuses during boom times. This allows you to respond directly to the concrete staffing requirements in good and bad times.
Recommendation 4 :
keep an eye on developments in the world
keep an eye on developments in the world
International trade is particularly sensitive to political risks. As an entrepreneur, you can't afford to ignore that. You will always have to consider the risk of instability or political changes within or between countries. The trick is to identify early warning signs of approaching political risks. Closely monitor the social, political and economic stability of countries (regions) where you do business. Are relations between countries deteriorating? Does a new government mean introducing new foreign trade policies, tariffs, legal and regulatory restrictions, and tax rules that could hinder your trading opportunities?
At Allianz Trade, we understand that as an entrepreneur, you have enough other things on your mind to also keep up with all these foreign developments. That's why we do it for you. To do this, we have a team of economists, sector analysts and local experts who continuously assess the risk levels of specific countries. With our information, you'll know what is going on. It also offers you insight into commercial opportunities.
Do you want to know more on exporting?
International protection
In our recent Allianz Trade Global Survey, 75% to 80% of companies surveyed said they expect geopolitical tensions to play a greater role in their international operations. With our trade credit insurance, we offer you, as an internationally operating entrepreneur, protection against the risk of defaults of payment, even abroad. With our trade credit insurance, you 'buy' payment security. Even in the event of non-payment due to (geo) political unrest.
