Risks of international investment and how to mitigate them

Investing is always a game of skill and luck, circumstance and nifty moves. Whether your money is near or far, it is subject to the same fluctuations of the market, the vagaries of the day, and the instability of differing and unpredictable environments and events. While international investment presents various opportunities for diversification and growth, it also comes with inherent risks that investors need to carefully assess and manage.

Understanding and mitigating these risks are crucial actions for your success in the global marketplace. Are you going to be able to do it all by yourself? Probably not, unless you’re a fundi. So before you quail at the long list of general suggestions below, investigate the services of a reliable professional – then all this busyness will fall into place.

The all risks know-how

Political and regulatory
Chief disrupters to stability are politics, changes in government policies, and regulatory uncertainties. Any one of these can significantly impact international investments, so you need to conduct thorough political risk assessments before investing; stay informed about the political climate and regulatory changes in other countries; and diversify investments across multiple regions to spread political risk.

Geopolitical events
Geopolitical tensions, trade disputes, and international conflicts can negatively impact investments. Ensure that you stay informed about geopolitical developments that may affect the regions of investment, and diversify investments across geopolitically stable regions. You should also develop contingency plans to address potential disruptions caused by geopolitical events.

Currency exchange rates
There are always fluctuations in currency exchange rates, and these can affect the value of investments and returns. So you need to apply a focused response and regular checks to keep abreast of the volatility. Monitor, hedge, and diversify are the key words here.

Economic, financial and social conditions
Economic downturns, financial crises, or economic imbalances can impact investment performance. In addition, also be aware that differences in culture and business practices can lead to misunderstandings in international business operations, which in turn may affect your investments. Your best route through these minefields is to conduct thorough economic analyses of potential investment destinations, and diversify investments across industries and sectors to spread economic risk. Ensure that you stay informed about the global economic climate and make time to understand the business culture in the host country.

Legal systems in countries can be very different. You will have look at these differences with regard to business operations, contract enforcement, and property rights, all of which can pose major challenges to international investors. Make the effort to contact local legal experts, and stay informed about changes in local laws and regulations.

An astute eye and daily agility

Market: Remember that changes in market conditions, consumer preferences, and competitive landscapes can affect the performance of international investments. That’s why you have to remain aware, and keep a beady eye on your investment performance by staying informed about market trends and conducting regular market analyses.

Cybersecurity: It’s an unfortunate reality that increasing reliance on digital infrastructure exposes international investments to cybersecurity threats. Ensure your fund managers are implementing the latest technologies to mitigate vulnerabilities, and that these are regularly updated.

Due diligence: Thorough due diligence is crucial before making international investments. This includes researching the political, economic, legal, and cultural aspects of the host country, and regularly updating risk assessment.

Flexibility and adaptability: Keep on your toes. Be flexible. Learn to adapt quickly to changes in the international landscape. This means continually monitoring key performance indicators (KPIs) and being prepared to adjust strategies based on evolving market conditions.

Regular monitoring and evaluation: It’s the same old story of whatever investments you have, near or far. Establish a system for continuous monitoring and evaluation, regularly reviewing financial performance, market conditions, and risk factors. With the helpful of an astute financial advisor, you can use key performance indicators to assess the effectiveness of risk mitigation strategies and make adjustments as needed. Stay informed, stay adaptable, leverage expertise.

Find the top-class professionals who can meet your expectations

Complete Financial & Business Solutions (CFBS) comprises a group of top-class professional financial advisors and business analysts committed to sound financial and business solutions based on a highly personalised approach. Passionate about ensuring peace of mind through the in-depth analysis of individual financial and business circumstances of our clients, we are able to create unique solutions, and regularly review these solutions to consistently meet service expectations and lifestyle goals.

Find us at: www.cfbs.co.za

Risks of international investment and how to mitigate them