What are the risks of expanding a business globally?

The advantages are clear, the risks—not so much.

The business advantages of global expansion span far and wide. The ability to acquire global talent is an important one—expanding your talent pool to foreign countries will enable you to place the right people in the right roles and access in-demand skills that might be difficult to find locally. Global expansion might also allow your business to reduce costs, as labor expenses may be lower elsewhere. Finally, the switch can help your company enter new markets and boost its overall resilience.

While your company is likely considering all these compelling benefits when deciding whether to expand globally, it’s also important to evaluate the overall risk in international business. People Ops professionals and startup founders should weigh the challenges that come with global expansion against the potential benefits. Here, we’ll shed light on these risks as well as proactive measures you can take to minimize them.

What are the employment laws in Argentina? India? Denmark? Find answers in our global hiring guides!

Potential risks of global expansion

What are the risks of doing business internationally? There’s no short answer. Your company’s unique risk will depend on several factors, including the nature of your business and the countries you’re targeting. With that in mind, here are a few general risks to help inform your decision on global expansion.

Legal and compliance challenges

Each country has its own labor laws, with some having a much stricter legislative framework than others. Complying with foreign employment laws and regulations can be complex at best. At worst, noncompliance can result in fines, legal disputes, and reputational damage, all of which can have a lasting effect on your business. The ability to navigate foreign labor laws calls for a nuanced approach and expertise in local regulations to ensure ongoing compliance.

Cultural and HR differences

The people management strategies you have in place domestically may not support a workforce that is distributed globally. One of the biggest business impacts of global expansion is having to adjust to different cultural norms. From different time zones and working hours to various observed holidays, the work calendar is just one detail that will require ample communication and collaboration. There are also other factors to bear in mind, including the need to adapt to diverse cultural values and workplace practices. Moreover, you may encounter challenges when managing distributed teams with varying expectations and communication styles. 

To encourage alignment across a distributed workforce, you’ll need to reassess your HR strategy and ensure that there are resources in place to make your global employees feel welcome and safe in your company. From providing the proper training to accommodating workstyle preferences where possible, adjusting policies and processes can support a strong foundation for international employees to thrive.

Administrative burden

Managing various HR processes for each country, as well as unique payroll requirements and benefits packages, can quickly become labor-intensive. For many companies, these tedious processes become an administrative burden. Tasking your existing HR team with these new responsibilities can lead to human errors, inefficiencies, and operational bottlenecks. 

To overcome these administrative challenges, you’ll need a sound system in place that efficiently manages HR-related tasks without overburdening your existing workforce.

Talent acquisition and retention

Failing to attract or retain top-performing talent is one of the greatest risks of expanding a business internationally. When recruiting talent in international markets, you’re competing not only with other global organizations, but also local employers. Attracting the most qualified and skilled workforce demands a unique and innovative approach, including local expertise. 

A strong employer brand can help your business succeed in winning over talented international workers. For example, you’ll want to clearly communicate your business’s core values and all the reasons why you’re a great employer to work for, whether that’s flexible schedules, competitive pay, growth opportunities, or another unique quality that sets you apart. Beyond pay alone, consider how you might structure your compensation package to make it as competitive as possible, with perks that will be attractive to your target market. 

Proactive measures for successful global expansion

While the risks of expanding globally may seem daunting, it’s certainly possible to achieve international growth successfully. Here are some approaches that can help.

Thorough research and planning

Which is the most low-risk strategy for global market expansion in your line of business? The only way to find out is to conduct plenty of research and create detailed plans. For example, some companies may benefit from setting up a foreign subsidiary, while for others, having an employer of record may be a better approach. Others still may benefit from forgoing both these options and working instead with a global employment platform and enlisting the help of local experts.

Start by researching your target market to identify the legal requirements and cultural nuances within these regions. The details you uncover can help to frame an organized and thoughtful approach to business expansion. 

Importantly, make sure that all key stakeholders are involved in the planning process. Advocate for comprehensive business and HR planning to anticipate challenges and devise effective strategies. Everyone involved in the expansion should have a clear idea of overall goals, smaller milestones, and timelines by which each segment of the project is to be completed. Communicate consistently to keep all parties focused and on track.

Partnering with a global employment platform

The risks of global expansion can be mitigated in part by recruiting the right resources. A global employment platform is an attractive option for companies looking to streamline HR operations and compliance.

An effective global employment platform will have localized knowledge about the employment market you’re targeting, including details about labor laws and regulations to help you maintain ongoing compliance. They can also help you offer appropriate compensation packages to attract in-demand talent, and leverage technology solutions that simplify processes like payroll and other administrative tasks. Finally, the right platform will be able to scale with your business as you expand into other territories.

Consulting legal and HR experts

Even with a strong domestic legal team, the nuances of international labor law should be handled by local legal and HR experts. Build a network of professionals who understand local regulations and how they apply to your business. Enlist the help of firms located in your target territory to develop employment contracts and develop strategies that ensure compliance and mitigate risks. 

Effective communication and training

Effective communication ensures that new international employees have clear expectations and goals, while also keeping your domestic teams in the loop about progress and contributions. To facilitate strong ongoing communication, encourage transparency. Establish a cadence for communications, which might include scheduled check-ins, chats, or video conferencing on a monthly basis. Additionally, select designated communication platforms and be sure to stick with those methods for sharing updates.

To promote a cohesive work environment, provide cross-cultural training to your domestic and international teams. Provide education and resources that aim to bridge communication gaps and support a cohesive work environment. 

How Oyster can help

Global expansion is a promising path for startups, but it comes with inherent risks that should not be underestimated. By recognizing and addressing these risks, People Ops professionals and startup founders can take proactive steps to minimize challenges and set the stage for a successful global journey. Partnering with a reputable global employment platform, along with thorough research, expert consultation, and effective communication, will empower startups to navigate the complexities of global expansion with confidence and ensure a thriving international presence.

If you’re considering global expansion for your business, turn to Oyster to streamline compliance, payroll, and benefits. Offering end-to-end employee management in more than 180 countries, our platform helps companies build a strong global workforce and expand internationally with minimal hassle. Find out more about how it works

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