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How to Find—and Vet—Foreign Business Partners

By Tim Moran

International trade can offer exciting opportunities for business expansion, but often requires a company to look for reliable and trustworthy business partners in foreign countries. There’s usually no getting around the work involved: due diligence is important both to ensure smooth business expansion and regulatory compliance.

There can be a myriad of challenges when it comes to looking for international trading partners. It is commonplace for issues such as differences in expectations, language barriers, mistrust, and other factors to make it difficult to foster successful relationships with international business partners. There’s also an inherent risk of fraudulent individuals and companies posing as reputable international trade partners. All of which is justification to conduct a thorough investigation before engaging with foreign business partners.1

 

Experts suggest separating the process into two levels:

 

  • Finding potential international business partners, and
  • Vetting those possible partners.

How to Find an International Trading Partner

 

The first step, simply finding legitimate international trade partners, can bring additional value to an import-export company. Initial exploratory meetings with potential partners can often lead to better insight into market dynamics, segments, and competitors. Even early meetings with foreign market insiders are often a source of valuable information.2

 

Overall, observers suggest that five basic avenues through which to start the search:3

 

  • Governments—Trade departments will offer advice on exporting and other market entry strategies and will have databases of trade, investment and technology counsellors abroad.
  • Embassies and trade commissioners in foreign markets—Many countries have trade counsellors attached to their diplomatic posts overseas, including embassies, consulates and high commissions.
  • Business associations—This includes chambers of commerce, boards of trade, industry associations and bilateral business councils set up to develop trade with specific target countries.
  • Expos and trade shows—These venues can be used to connect with potential foreign business partners as well as determine the market potential for goods and services.
  • Published studies and books—A variety of research institutions and government agencies conduct economic and market research and publish the results.

Vetting International Trading Partners

 

The next step is to properly vet the potential partners you identified. Clearly, it can be much harder to vet business partners when they are on the other side of the globe. The importance of this, note observers, cannot be overstated.

 

In fact, a recent Deloitte report pointed out that: “Enforcement actions by the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) for insufficient due diligence on international business partners are underscoring the point that a cursory approach no longer suffices.”4

 

So, after performing an initial search, you need to be sure that your potential foreign trading partners are aligned with all aspects of your business before you commit to any arrangement. How does this vetting process for international trade partners work? Some experts suggest four main components:5

 

  • Start with a questionnaire—Not only will a questionnaire help you get the answers to your most important questions, it can also provide you with a standard template against which to qualify all of your future potential business partners.
  • Do your own research—You’ll want to do your own investigating to see what you can find out about the company you’re looking to partner with, and the market they operate in.
  • Verify your findings—Many companies err by stopping after the initial questionnaire and research stage, but it’s key to verify all information potential partners provide.
  • Establish trust—No matter how the potential partner fares in the screening process, you have to feel you can trust them to hold up their end of the arrangement.

Government Resources Can Help

 

There are any number of ways to accomplish all this, and one of them is to take advantage of government resources. The U.S. Commercial Service’s International Partner Search offers to put trade specialists in over 80 countries to work finding suitable strategic partners. After providing marketing materials and background on your company, they can provide a list of up to five pre-qualified partners.6

 

Further, the agency’s International Company Profile site can serve up financial reports on companies in over 80 countries. These reports, required by many export financing organizations, include a listing of a company's key officers and senior management, banking and other financial information about the company, and market information, including sales and profit figures, and potential liabilities.7

 

Beware Mistakes When Looking for an International Partner

 

In the end, experts agree that conducting a deep, systemic investigation of potential international business partners is essential for companies that want to maintain their reputation and stock value.8 But there are mistakes to be avoided. For one thing, engaging with a new business partner before conducting proper due diligence is not wise. Don’t jump into a relationship you might come to regret later.

 

Another business blunder is to be too informal in your due diligence. With cultural differences, the interpretation of basic business concepts can vary from country to country, so it’s critical to keep the investigative procedures formal.9

 

Finally, observers emphasize the verification step listed above. What’s more, they say, any red flags call for immediate action: There are some red flags that could prompt a request for more information, while others could signal the need to abort the relationship.

The
Takeaway:

Doing business internationally can be a boon and having the right partners globally can do much to ensure success. But without proper vetting and due diligence, international trading partnerships could turn problematic. Also, recent enforcement action by the DOJ and the SEC make it clear that a cursory approach to vetting is no longer enough. Start with finding the right partners, then make sure they are legitimate and tuned into all aspects of your business before you commit to any arrangement.

Tim Moran - The Author

The Author

Tim Moran

Tim Moran is a veteran business-technology journalist. He has most recently been involved in brand publishing startups, including creating CMO.com for Adobe.

Sources

1. “4 Things you must do before Taking-On International Business Partners,” HuffPost; https://www.huffpost.com/entry/4-things-you-must-do-befo_b_12128198
2. “5 valuable sources for finding your next international business partner,” Trade Ready; http://www.tradeready.ca/2017/fittskills-refresher/5-valuable-sources-finding-next-international-business-partner/
3. Ibid.
4. “The case for vetting global business partners,” Deloitte; https://www2.deloitte.com/us/en/pages/finance/articles/cfo-insights-business-partners-due-diligence-international-compliance.html
5. “5 valuable sources for finding your next international business partner,” Trade Ready; http://www.tradeready.ca/2018/topics/market-entry-strategies/4-steps-find-international-business-partner/
6. International Partner Search, Export.gov; https://2016.export.gov/salesandmarketing/eg_main_018197.asp
7. International Company Profile, Export.gov; https://2016.export.gov/salesandmarketing/eg_main_018198.asp
8. “4 Things you must do before Taking-On International Business Partners,” HuffPost; https://www.huffpost.com/entry/4-things-you-must-do-befo_b_12128198
9. Ibid.

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