The world has perhaps never had a more significant need for risk management, particularly in international trade and logistics, than it does today. Every day, supply chains worldwide keep the steady movement of crucial goods flowing, just like the circulatory system keeps blood, oxygen and nutrients flowing through the body.
The timing is ideal for individuals looking to pursue a career involving risk management in international trade and logistics, as organizations are placing a bigger emphasis than ever on managing risk as it relates to their supply chain.
Managing Risk
Despite what it might sound like, risk management is not about eliminating risks altogether. In fact, risk is at the very center of what makes a business a business, and no company can operate without it.
Instead, risk management is about ensuring that your company knows what and how much risk it faces and how to best mitigate that risk. As a professional dealing in risk management, it will be your responsibility to estimate risks, communicate them to other members of your company and mitigate those risks.
Common Risks to Expect
Throughout your career in international trade and logistics, there are six key types of risk that you can expect to face:
- Credit risk. The risk of not collecting an account receivable.
- International property risk. The risk of third parties making unauthorized use of your business’s proprietary strategic information.
- Foreign exchange risk. The risk of foreign exchange rates fluctuating drastically and interrupting your profit/loss statement.
- Ethics risk. The risk that foreign business partners may adhere to a different set of morals than your own.
- Shipping risks. The risk that goods will be contaminated, seized, broken, stolen or lost while in transit.
- Country and political risks. Risks such as tariffs, central bank exchange regulations, or bans that could interrupt your business.
This is hardly an exhaustive list, and other common risks include inflation, recessions, fluctuating market demand, payment or debt issues and more.
On top of that, the past few years have shown us that unexpected risks can suddenly emerge, such as COVID-19. Other examples include the Russia/Ukraine conflict and when the cargo ship Ever Given ran aground in the Suez Canal and blocked a crucial shipping canal for six days.
Risk Management Strategies
As far as handling the above risks, a detailed answer is beyond the scope of this article and a topic best left to advanced Master of Business Administration (MBA) programs. However, a few common risk management strategies include:
- Exercising due diligence. Especially regarding personnel, engaging with a carrier or providing/accepting documentation.
- Creating contracts. Ensure that the terms of the working arrangement are clear and that all parties are on the same page.
- Communicating promptly. Create timely flows of communication between you, your team, superiors, contractors and other stakeholders. As the saying goes, the tougher a conversation, the sooner you should have it.
Another way to mitigate risk is to react and respond to new risks as swiftly and concretely as possible.
Understanding Current and Projected Events
Given the unexpectedness with which risks can occur, another part of your responsibility will be to react, adapt and establish crisis management mechanisms. If you’re curious about what this might entail, just consider the safeguards and regulations nearly every company had to incorporate during the COVID-19 pandemic.
With this in mind, those working in international trade must understand how current or projected events could impact the company’s operations.
Just like a career in medicine or as a first responder, your actions and decisions will typically have an outsized impact on the organizations you work with, which is a rare position to be in. Additionally, there are extensive resources you can leverage to help prepare for your future career in risk management as it relates to international trade.
Learning to Handle Risk
Since global trade growth projects to increase over the coming years, many MBA programs will offer specialties in International Trade and Logistics. These programs seek to deepen your knowledge of import/export operations and teach you the latest logistics strategies to help steer growth for your company.
For example, Texas A&M International University’s online MBA in International Trade and Logistics program introduces core concepts through its electives like Managerial Economics, Import Operations and Practice and Export Operations and Practice. Risk management is an issue that impacts any discussion of trade and complements the degree program as a whole. After learning foundational industry knowledge and up-to-date best practices, students will be prepared to recognize and manage all aspects of trade and logistics for their prospective employers.
Learn more about Texas A&M International University’s online MBA in International Trade & Logistics program.
