Identify Major Types of Business Risk is Risk Management Plan | EDC

a) Political risk

Changes in government regimes or even changes in policy can negatively impact how you do business in a region. The ongoing renegotiation of NAFTA and increasing protectionism in the U.S. is an example of political risk.

b) Economic risk

Getting paid for products or services that you sell in an international market is the goal. But there are many factors to consider including the foreign exchange rate against the Canadian dollar, payment terms and whether the economy is stable overall. For Canadian exporters doing business in the U.S., a swing in the value of the Loonie against the U.S. dollar can impact overall profits. 

c) Social Risk

This type of risk refers to socio-economic factors that can impact your business such as culture and corruption. In Hungary, for example, culture is a major issue, specifically language. The manner of speaking tends to be formal in a business context and you must be prepared for that. Where Canadians may come across as a little informal, Hungarians tend to be very correct.

d) Legal Risk

There will be contracts governed by the laws and policies of the specific country where you are doing business. It’s crucial to understand the laws that regulate your industry, potential legislative changes and how that might impact your business.

e) Environmental Risk

Companies can’t control mother nature but if you’re targeting a market prone to natural occurrences like hurricanes, earthquakes and flooding, a climate-event can disrupt your supply chain.