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4 Tips For Low-risk Clients In High-risk Environments

Blog post by Emils Kragis, Business Development Officer at PayPugs

De-risking is how banks reduce their banking relationships with high-risk jurisdictions in an effort to stay compliant with the regulations. The potential of jurisdictions such as Ukraine, Ghana, and Nigeria have been dismissed by many other low-risk jurisdictions, as they are considered too high-risk to develop any kind of financial relationship.

Even though those countries have been showing impressive business growth over the last few years, still doing business internationally is tremendously difficult for them. Many retail or online businesses, that are considered high-risk sectors, cannot reach their potential, as accessing new markets is tough even before taking into account the external factors of doing business in high-risk jurisdictions.

Here are four things that low-risk businesses should consider when wanting to establish international relationships with partners and attract customers, while operating in a high-risk jurisdiction.

1. Understand your position

To do business in a high-risk jurisdiction can be frustrating as limitations, such as doing business internationally, affects your business growth. Even though you might be a low-risk business, you are faced with the same problem as high-risk businesses because you are trading internationally. While it may seem unfair, that is international business.

According to the World Bank, an extra 10% is added to the cost of doing business internationally when trading in a high-risk country. This number is significant, particularly as many low-risk businesses have to add it into the cost of doing business. However, not all hope is lost, as understanding your business in the market is only the starting point of mitigating your international business risk. Which means that with time you will be able to get rid of the “high-risk” label.


2. Enhanced Due Diligence

The biggest problems of high-risk jurisdictions are money laundering, tax evasion, corruption, and bribery. While the system might be rigged and working against you, there are certain actions that you can take to ensure the safety of your business operations in the eyes of international business.

Applying similar AML (Anti-Money-Laundering) operations to your business, to that which is used in low-risk countries, can prevent fraudulent businesses and customers from interacting with your company. Performing thorough compliance checks indicates to international partners and institutions that your business is doing the most to stay safe and transparent. If done correctly, many international entities will be more forthcoming in developing a relationship with your business.

3. Do your homework

Another way to ensure doing business as a low-risk business in a high-risk jurisdiction is to act as if you are operating in a low-risk country. By researching low-risk jurisdictions such as Netherlands or Germany, you will be able see what type of documentation they hold to stay compliant and solvent. Applying the same measures to your business internally can help prove your business legitimacy to international partners and customers.

4. Establish a meaningful relationship

As much as it would be needed or wanted, your business will struggle to obtain the necessary solution, even though your business model is low-risk.

Many times fraudulent activity is short-term, meaning that corrupt businesses might be reaching out for a solution for a one-time activity such as sending illegal funds.

Thus, developing a solid and trusting relationship that facilitates commercial exchange is important. It will take time to establish such a relationship, as many risks will need to be considered. However, once trust is established, many opportunities arise, as the partner might provide access to different markets or connections.

Risk management is an essential part of business operations supporting decision-makers who are venturing out on international markets. While the whole world might seem to be against your business due to external factors, it is important to tackle such issues thoroughly to ensure business continuity and long-term growth.

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