In any business, avoiding risks altogether is impossible. But risks can certainly be minimized by monitoring the exposure of a business to different risks and taking appropriate plan accordingly.

While operating a SME (Small and Medium Enterprise)s, you may face three main types of risks:  financial risk, market risk, operational risk, strategic risk and environmental risk. Each of these can derail your business.

• Financial risk: In finance, risk has no one definition. It can be broadly defined as the probability of losing some or all of the original investment. Financial risk arises from the financial structure of the business.
• Market risk: Marketing risk is the probability of losing some or all of the original investment due to some events that impact large portions of the market. The causes may include various macro-economic factors such currency fluctuations, new competitors or disruptive technologies, etc.
• Operational risk: It refers to risk associated with various operational and administrative procedures that a business uses to implement its strategies. Any risk related to human resources, key processes and assets can affect your business adversely. 
• Strategic risk: it arises from being in a particular industry and geographical area.
• Environmental risk: It arises from various environmental factors and need separate attention in many businesses
  

Basic steps of risk management 
It is seen that enterprises even from the same industry often choose different risk management strategies. But in general, all such risk strategies involve the following steps-

1. Identifying and ranking the business risks

• It is generally done internally by management through self assessment exercise. You may also hire a consultant.
• Evaluate the risks in terms of their likelihood of occurrence.
• What could be the impact? Try to measure it clearly.
• Categorize the risks in terms of probable frequency of occurrence such as weekly, every month or every ten year. 
• Categorize the risks as high, medium and low risks.
  

2. Determining the appropriate strategy to avoid these risks

• Prepare a list including appropriate steps to be taken for each of the risks.
• There are four main ways to deal to risks: accept, transfer (to an insurance company), reduce or manage, and eliminate. Choose what you think appropriate.
  

3. Implementing controls to manage other potential risks

• Put the preventive measures in action.
• Introduce a reporting and monitoring mechanism.
• Don't rely solely upon self assessment; also employ third party monitoring.
• Evaluate the risks and the preventive measures you have taken on a continual basis.
  

4. Learning from experience and making continual improvements.

• Try to analysis what improvements your risk management require.
  

Risks in export business

Export business can be a great opportunity, but it is risky and challenging at the same time. These risks, totally different from those encountered domestically, are unavoidable, but you can minimize them taking proper precautions. Find here some useful information regarding different export business risks and how to manage them.

One might face different types of risks in the export business:

• Political risk: The country where your client is located may experience major political instability. Such instability could result in defaults on payments, confiscation of property, exchange transfer blockages, etc.
• Legal risk: At domestic level, business are subject to a myriad of laws, regulations, restrictions. But internationally, there are much more complexities. International transactions are governed by unilateral measures, bilateral relationships, multilateral and regional agreements. This difference in law may have impact in such areas as taxation, currency dealings, property rights, employment practices, etc.  
• Credit related risk: While doing business internationally, trading can seem complicated and risky. Besides political, legal and other risks, the most common problem businesses face is the risk in the transaction. To overcome payment related risks, an exporter needs good understanding of different payment methods in international trade. Choose a payment method which provides you with some security. Try to avoid open account method, at least initially.
• Internet frauds: Like in any other place, the Internet is not free from scammers and frauds. These people are are very cunning and being smart it is not enough to protect yourself from them. It is not only individuals who are targets for a variety of illegal schemes but also small as well as large business organizations.
• Quarantine compliance: Many countries (especially the European countries) have strict quarantine requirements to prevent the spread of contagious disease. Before sending a shipment, ensure that your products are allowed to be exported to the destination country.     
  

Minimizing export business risks:

Minimizing political risks and country risks:

• Always do extensive market research and try to about the politics, economy, culture and business environment of the country where your client is located. Besides language barriers and legal restrictions, your business may be get affected by suddenly introduced new regulations, political riots or natural disasters.
  
• If you are dealing in a foreign language, taking assistance of a professional language support is a good idea.
  
• In export business, a clear agreement is very important to get rid of confusion and to reduce risk.
  
• If you find that doing business with a company in a foreign land is very risky, don't get involved in long term business deals.  
  

• Always use a reliable payment method for transaction
  
• Always try to know exactly what costs you and your client are each responsible for. Shipping or air freight, import duties, taxes, onward delivery to your premise- consider all these things before signing the contract
  
• Foreign currency exchange rate could change, and therefore, it is important to keep yourself ready for some extra expenses
  

• Don't get excited. Use your common sense to understand the offer; does he want to buy your product without asking about the price or quality? Has he accepted the deal without bargaining? Is he very quick to know your account number? Analysis all these things and only after that take the next step.
  
• Do not provide financial account information of your company unless there is a good reason to do so.
  
• Get all the terms and conditions, modes of payment, sales conditions, quality inspection, etc. in writing.
  
• Always choose Letter of Credit (L/C) or Escrow as payment methods. Check  the L/C number, opening date & place, name & address of the issuing bank, valid date, shipping date, etc.
  
• Request for a nominal payment for samples.