International Insurances: Key Policies for Global Business Success
Every business owner dreams of the day their company goes international. Being an international company opens up multiple doors of opportunities and benefits. Global business success takes a large amount of effort, connections and also risk management.
Global business success comes with various international risks that can close those doors immediately. Working with foreign clients, international customers, and investors can be challenging for new and experienced businesses.
The best risk management to deal with international business risks is to have international insurances. A range of insurances that can cover global risks that most businesses will face when they expand their market.
Hence the article will highlight the main international insurance policies businesses will need to deal with risks and reach global success.
International Insurances Needed to Cover Global Business Risks
When a business begins to sell products or provide services to foreign markets, it must consider liability risks. Countless liability risks can negatively impact a company and its activities.
The liability risks could arise due to many reasons depending on what the business does. A company could be sued when its service causes financial damage due to negligence. It could also be legally liable if the CEO or managers do not follow the international fiduciary duty. Additionally, a product business may also have to face claims if its product causes injuries or property damage.
Other risks include cross-cultural differences, intellectual property risks, foreign government laws, international investor risks, etc. All these risks can lead to expensive liability lawsuits for a global business.
Each insurance financially covers different liability claims resulting from negligence, breach of duty or product defects. The three insurance is vital to defend liability cases and compensate the affected party.
When a company begins to work with various global clients or has new foreign customers, they are automatically linked electronically. Clients will have access to company servers, and customers will save their payment data on the website. Thus, successfully entering the international market comes with cyber risks.
The chance of cyber-attacks increases when companies are known internationally. Global data attract cybercriminals, and the amount of data makes them perfect victims of a data breach.
Internationally connected businesses can also be victims of cyber-attacks through clients and suppliers. These attacks are known as supply chain attacks when malware moves from clients to the other business’s servers they have access to. Therefore a cyber-attack could occur from anywhere and even through trusted parties (without them knowing).
To deal with cyber risks, cyber insurance is a crucial part of international insurances for global businesses. The insurance will cover cyber experts’ advice, threat removal, data recovery, informing third parties and financial loss. Cyber risks can ruin a company financially and its reputation without cyber insurance.
Trade Credit Insurance
In the B2B industry, typically, clients pay for products or services through trade credit terms. Expanding clients is great for any business, but some clients are not as great as they seem. There is always the risk that clients get a large product order or service but do not provide the agreed payments.
The international market is full of credit risks, where clients do not pay on time or entirely cannot pay due to political or commercial risks. Commercial risks include when a client cannot pay due to insolvency or bankruptcy. Political risks are non-payment reasons due to new laws, wars or government issues.
These risks affect supplying businesses (sellers) as the non-payment can cause severe financial disruption. These risks are higher internationally due to different political issues and unknown financial information. Trade credit risks can occur at any point, even due to trusted clients.
Trade credit insurance is a factor of international insurances to help companies deal with credit risks. The insurance will reimburse a portion of the non-payment or late payment due to the covered reasons. Additionally, the insurance, when purchased, will also provide a financial health study on each client to help understand which company may increase credit risks.
Trade credit insurance is one of the best credit risk management for any B2B company.
When running an international product business, moving of goods is a huge part of the business activities. Products need to be sent to clients and customers in various countries through different routes. When sending products globally, logistics risk immediately increases.
The products that are packed and sent in bulk are also known as cargo, which typically moves by sea or air. Cargo risk can affect any product business and result in significant financial loss and relationship damage. Cargo risks can include cargo damage, loss or theft while moving from one location to another.
For example, a lot of cargo is lost or damaged in the sea due to bad weather and poor handling. One large wave can result in a cargo container falling off a ship and floating away.
The product business will suffer the financial loss and will have to re-send the products quickly. For these reasons, cargo insurance is one of the must international insurances for product businesses. The insurance will cover the financial loss of damaged, lost or stolen cargo while moving from location A to location B.
Cargo risks can occur at any point, and with cargo insurance, companies can worry less when shipping products internationally.
Group Travel Insurance
When businesses convert from local to international business, travelling becomes crucial. Business employees and managers will have to travel to meet clients, attend business networking events or even start new operations abroad. Work trips are meant to be quick and productive, but that can all be disturbed when affected by travel risks.
Travel risks can ruin work trips and result in financial loss for businesses. Travel risks can include sudden cancellations, lost baggage or documents or medical emergency abroad. In all cases, the company will be liable to cover the financial loss related to a work travel trip. Flying out employees is not cheap, and these additional surprising costs can result in huge losses.
International insurances can include travel insurance to help businesses cover travel risks. International companies should consider purchasing group travel insurance covering several employees and multiple trips. Group travel insurance will cover the financial loss due to cancellations, lost baggage/ documents, medical emergencies and third-party accidents.
Travel risk can occur during or before any trip, and having cover helps businesses financially.
Who Needs International Insurances?
An international business is any company that operates across various global borders. International insurances are essential to any business that deals with international clients & customers or plans to expand their business.
International businesses can include companies that sell products or provide services to clients globally. More and more businesses are participating in global trade and reaching new markets.
No industry is safe from international business risks; even if your business just provides advice to clients abroad, you can be affected by international business risks. Therefore all global companies must recognise international risks and purchase international insurances to reach global success risk-free.