Small and Medium Sized Enterprises and the Risks they Face in an Essay

Small and Medium Sized Enterprises and the Risks they Face in an International Environment - Essay manikinIn proportion to other trends of globalization, small and medium sized Enterprises be increasingly occupied in global backinges. Foreign investments by small and medium scale enterprises have also increased (Feyter 2011). SMEs draw for a major share of exports and imports and go up to international network of production. Small organizations have in truth little, if any, influence over the forces of external environment, and this can be attributed to the limited resource of the small firm (Sha n.d). As SMEs try to internationalize, they frequently come across extensive hurdles. These hurdles are complex, and they can be from the larger, external, business environment of SMEs including barriers of trade policy or from the internal environment of firms. Currency fluctuations are the top business organisation for 49% of UK SMEs (International Trade Confidence Concerns and Risk for UK Smes). The various risks that small businesses face when they engage in the international trade include credit risk, involvement grade risk, country risk, and currency issue. Credit Risk- SMEs regularly croak that their competitiveness and growth are restricted by lack of access to the financing and high address of credit. The high cost of credit remains a major constraint in the development of SMEs, although there is proof that SMEs are more concerned about the access to credit than the cost of credit. Interest rate risk arises when the business depends more on borrowed funds, or revenue generated from savings. Fluctuations in interests rates affect the come in profit of the business through reduction in income from the interest or by increases in the interest expenses. Country Risk The country risks in foreign exchange traffic are connected with the treatment of government in foreign exchange market. Currency Issue- Most of the international trade is carried out in dollars. This has paved authority to considerable exchange risks of currency. While taking SMEs in UK as an example, thirty cardinal percent of SMEs business leaders of UK who carry out international business quote currency fluctuations (Latest foodstuff Research Surveys 2009) as their overruling concern. In spite of fluctuations in currency being their key concern, an astonishing fifty dollar bill six per cent of SME leaders admit that they do not control their financial risk. UK SMEs on trading internationally, consider problems of currency fluctuations, legislation, problems in payment, pricing, language barrier, time limitations, and cultural differences. Aims and Objectives 1. To identify the risks faced by SMEs by way of international trading 2. To provide solutions to lessen the risks aroused from international trade Methodology The entropy for this business report is gathered from secondary sources like journals and articles published, and from different texts. Research methodology is a way to systematically solve the research problem (Research Methodology An Introduction 1978). Primary sources are not used, as selective information collection from the SMEs of different countries as a whole is not possible. Secondary sources include data that are collected and gathered for a further purpose. The secondary sources include not only reports and records that are published, but also unpublished records, including different registers and records kept by organizations and firms like