Introduction
Whereas the opportunity to sell our products in Ghana offers a prefect room for expansion, a number of risks that encompass our daily operations must be analyzed and managed to ensure business success. These risks have the capacity to inflict serious legal and financial risks to our company given the fact that we will be operating this business in a totally different environment. Risks that our company will have to manage in order to ensure its success include political and economic risks, distance and communication, risks posed by the currency and exchange rates and risks due to legal, corruption and ethical differences. The purpose of this memo is to outline risks the distribution company will have to manage and present recommendations on how they can be managed for business success.
Political and economic risks
Even though Ghana has been hailed as a beacon of democracy in Africa, it is surrounded by politically unstable neighbors such as Liberia, Ivory Coast and Nigeria. Political instability in one or all of these neighbors has the capacity to extend beyond the borders and affect our normal operations. This means that the future of Ghana is devoid of political instability that has been a problem to most international companies conducting business in Africa. The West Coast Africa is a politically unstable region that will definitely hinder the progress of the distribution company. It must be noted that political instability are unforeseen risks that demand constant and continuous high levels of preparedness. According to Erb, Campbell and Tadas (1995), “political instability constitutes one of the predicable risks for any business in emerging markets such as Africa.”
In addition to the above, sudden changes in political leadership may lead to change n economic policies such as increase in taxes or tighter regulations governing the operations of foreign companies. Our ability to manage this risk will largely depend on the plan we develop that understands both political and economic issues of this region.
Distance and communication
In the understanding that products that will be distributed in Ghana will be manufactured in the United States, the distance and communication presents considerable risks for our company. This is because the culture of business in Africa demands constant interaction and trust can only be build over time (Bekaert, 1995). Transporting goods through the sea presents high levels of insecurity and results to increase in transportation and insurance expenses. Furthermore, the products will have to be offloaded from the ships and transported inland through another means. This complicated channel of transportation presents a list of risks to the business that must be analyzed and managed.
Instead on video conferencing and other high tech modes of meetings, our company must shift to adopt face to face meeting in its operations in Ghana because in Africa, business depends on trust that must be cultivated and natured. The problem of communication may not be complicated given the fact that English is the official language in Ghana. However, internal communication in directing operations and movement of goods will present challenges in regard to low levels of communication equipment and office accessories capable of meeting the present demands in chain management.
We must approach this risk from toe perspectives; first is to calculate schedules and response times in a manner that enables us to prepare adequately for arriving cargo. Second, the technicality of communication equipments must be in line with the local market and devoid of sophistication. This is to ensure that our dealing with agents, third parties, intermediaries and employees are done in efficient manner and communications are effective.
Currency and exchange rates
Fluctuations in the currency and exchange rate market will definitely form a significant risk to our company. This is because the international market is prone to constant fluctuations in currencies. The most preferred form of payment that will also be adopted by this company to minimize this risk must be within our favor. This involves the issuance of Letters of Credit detailing that payments must be made within a stipulated number of days in US Dollars. According to Winthrop Corporation (2010), “1US Dollar currently sells at 150.6042 Nigerian Naira.”
Legal risks, corruption and ethical differences
In addition to the United States laws of trade, the inability to understand both aspects of international trade and laws of trade in Ghana presents risks to our business that may lead to expensive legal suits and even closure of our business. To succeed within this market, our business must aim to operate within acceptable levels of ethical standards and understand the socio-cultural aspects of business operations. This will involve full knowledge of the country’s operating permits, licenses and procedures in developing tax records.
Managing Risks
Our capacity to manage these risks will largely depend on a number of steps that we must follow to ensure that this business venture is not only profitable but is also successful. These include;
- Understanding of the risks in greater perspective through research and consultancy efforts.
- Developing mechanisms through proper planning and effective decisions making processes capable of minimizing the risks.
References
Bekaert, G. (1995). Market integration and investment barriers in emerging equity markets, World Bank Economic Review.vol. 9, 75–107.
Erb, C. B., Campbell, R. H. and Tadas, E. V. (1995). Country risk and global equity selection, Journal of Portfolio Management. Vol. 9. 74-83.
Winthrop Corporation (2010). Exchange Rates. Web.