Political risk is an unavoidable part of doing international business. However, since global IT deployments are an essential part of many businesses, it’s imperative to understand the risk you face and ways you can minimize it. There are several ways to mitigate the effects of political risk and make your international project even more secure.
The first step is to research the target market and complete a political risk analysis, ensuring you and your team have a handle on the area’s political landscape. You should also take time to identify any potential problems that could arise in the country’s political sphere during or immediately following your deployment.
For example, have their tax rates increased recently? Is the country currently ramping up for an election? Understanding these factors will help inform your mitigation strategy.
In some cases, it might be a good idea to bring together a team of stakeholders and those who will be involved in the deployment to ensure everyone is on the same page in terms of the potential political risk. Once you have a strong sense of the scope of political risk in the country you’ll be working in, you can begin to take steps to mitigate that risk.
6 Ways of Mitigating Political Risk During International Business
1. Purchase Political Risk Insurance
There are many different options you can try when you’re thinking about political risk. One option is to purchase political risk insurance. This insurance would be able to compensate you if a problematic event occurred. However, the cost of political risk insurance can vary substantially by country, and it might not make sense for your company and situation.
2. Avoid Countries With High Political Risk
This should go without saying, but avoid doing business in countries with a very high risk, if at all possible. If a particular country has a strong risk of adverse political events of any sort — whether it’s armed conflict or diplomatic tensions — it’s likely in your best interest to find a different place to do business or postpone the project until tensions calm or the problem has passed.
3. Be Transparent & Document Your Terms of Service
Now, that said, there are still times when you need to move forward with a global IT deployment, even if you know political risk is high. If that’s the case, clearly document your company’s terms of service and the customer’s acknowledgement of those terms — in case of a disruption to operations. This step may or may not help you, as countries have varying legal systems, and in some places it’s very difficult for a foreign company to win a case in court. However, it would at least give you a base level of protection to try.
Regardless, documentation plays an important role in establishing transparency, which leads to better customer relationships both locally and internationally.
4. Diversify Your International Business Portfolio
Another option is to diversify your international business portfolio. This way you won’t be entirely reliant on one particular project working out the way you hope. Diversification is a good strategy anyway, but it can be difficult especially if you’re beginning your international business endeavors. In that case, begin with a less politically risky country, and then add in more risky countries as you can.
5. Consider as Many Scenarios as Possible
In any situation, you’ll always want to hope for the best and prepare for the worst, so to speak. If you’ve prepared and planned for a number of worst-case scenarios, you’ll be able to respond and recover more quickly if political risk becomes a reality. This is an excellent way to mitigate your risk and be more confident in going forward with your global IT deployment.
6. Work With a Global Partner
Finally, you can minimize your risk by working with an experienced partner. Companies with global expertise can help navigate the political risks that are inherently involved in doing a global IT deployment. Kinettix has teams of technicians in over 90 countries around the world and has years of experience assisting companies with their global IT deployments. From taxes, laws and regulations in China to providing field technicians and knowing labor laws in India, and everything in between, Kinettix is an expert in various countries and regions around the world.
Kinettix is the go-to global leader in providing field technicians and offering break/fix support to US-based enterprises and field service managers. If you need help navigating your next global IT deployment — especially if it’s your first foray into international business — contact Kinettix. With the team’s assistance, you can successfully mitigate political risk and complete your deployment.