The coronavirus pandemic has disrupted global trade. While the situation is changing daily, we are witnessing a lot of changes along the value chain. These include:
- fast and dramatic foreign exchange fluctuation
- reduction in buyers
- a decline in sales and production activities
- a lack of logistic services
- shortage of raw materials and packaging supply
- increasing sea freight and air freight cost, increasing lead time for production, shipment, quarantine and customs clearance
- an increasing number of businesses close down
- the rising unemployment rate
- mismatching of information and channels for products of high demand.
However, it is not all negative. We have also observed innovative exporters looking at new markets, new channels and new models to operate their business. The slowdown of global trade activities allows exporters to review their business and prepare a robust business and export strategy. When the pandemic effects ease, businesses can be better equipped and work on full speed.
To help you get through these times, here's some advice for exporters:
1. develop a risk management plan
- If you are highly dependent on a limited number of overseas buyers or one or two markets only, you may consider diversity the markets to reduce market dependency risks.
- If you are facing the challenges of shortage of raw materials and packaging supply imported from overseas, start looking for backup suppliers in another country, or even double-check the availability in the domestic market. Do allocate a small amount of supply from these new partners to keep the business relationship warm. They will come to your rescue when major suppliers cannot meet your demand.
- Consider forex hedging and/or natural hedging through both having import and export activities, to minimise the forex (foreign exchange market) risks.