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Vietnam: The importance of risk management

Wednesday 18, 09 2019
Due to multiple factors, foreign investors are choosing Vietnam as their destination to establish their business, increasing the importance of risk management.
Vietnam: The importance of risk management

Globalization, the integration of Vietnam, and the developments of the America-China trade war are some of the reasons that turn Vietnam into a major target for many investors. For these investments to work effectively, both the potential investors and investees must accurately evaluate the possibility and the potential results of the deals to make the correct business calls, and this could be carried out successfully if they rely on careful risk management. 

Due to the trade conflict between America and China, a majority of foreign companies in China, most of whom are American ones, are leaving China to pick a more stable market. According to Fox Business, Vietnam is among their most picked destinations as “product costs less there (in Vietnam) than it does in China” – said CEO Shawn Nelson of the furniture retailer Lovesac. After a survey of Japanese businesses, vice president Vo Tan Thanh of the VCCI said that “Vietnam ensures stability and a safe investment environment for foreign companies, …, amid an escalating trade war.” 

Vietnam: The importance of risk management

However, similar to any other part of the world, the Vietnam market can also be exposed to business risk, some of the most common of which the policy and the credit risks, inadequate infrastructure, corruption, language barrier, and scams. Moreover, not all of these issues are solvable, as the roots of the issue may lie far beyond our reach. Therefore, if foreign investors want to operate effectively in this country, they must be able to have proper risk management process to identify the risks accurately and take up measures to address them, thus at least mitigating the potential damages or, in some cases, even take advantage of the risk.

This is not always an easy process, however, for multiple reasons. One of them could be the lack of experience of the risk management team, affecting their information gathering and evaluating skills, resulting in them making the wrong decisions. Moreover, the lack of skills may also lead the team to select the outdated business information to use as their background, resulting in inaccurate evaluation and decisions. In this case, it is probably the best option to ask for the help of firms which are specialized in risk identification and evaluation, including Vietnam Credit. Thanks to their highly-experienced experts, these firms could accurately help foreign investors in determining whether their potential partner is reliable and whether their cooperation is going to bear fruit. Moreover, since they have already had their groups of experts, it would save foreign investors a lot of time and money which they could have spent if they had chosen to perform the deed themselves. 

It could be a common mistake for business leaders to focus too much on other factors, including the operation, business activity, revenue, etc. while neglecting risk management, which is a crucial process. However, as experience has shown, businesses which refuse to improve their risk management are likely to fail, since they cannot foresee the threats that are approaching them, hindering their ability to deal with it on time. Having proper risk management, foreign investors in Vietnam may learn all the details they need to know before the investment, allowing themselves to make the correct call regarding their cooperation.  

However, risk management without taking clear steps could be suicidal. To manage the risk effectively, the risk management team should first consider the principles of risk management to understand the process, then they can carry out the various risk management methods following the risk management procedures.
 

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