Did You Know That NOT Exporting is Actually Riskier Than Exporting?

Did You Know That NOT Exporting is Actually Riskier Than Exporting?

For Canadian businesses today, exporting actually lowers risk. Everybody knows that right? Apparently not.

According to a recent Deloitte report entitled The Future of Productivity: Smart Exporting for Canadian Companies, exporting improves firm performance and decreases overall business risk. But according to Deloitte Canada Vice Chair, Bill Currie, it’s still a tough sell to convince a lot of Canadian companies that this is true.

“For many Canadian companies, there’s a perception of risk when it comes to selling outside our own border,” says Currie. “When the exact opposite is true,” he adds. “Exporting actually lowers business risk.”

In fact, studies have shown that exporters realize higher productivity and revenue per employee than non-exporters and have triple the three-year returns of non-exporters. Triple. Exporting companies also have a lower rate of market exit and—worldwide—exporting companies tend to outlive non-exporting firms. So why are only four per cent of Canadian businesses looking to sell beyond the Canadian border today?

Because this is a risk averse culture, says Currie. “It’s a Canadian thing.”

Invest in R&D and innovate to increase productivity

Canada today is 25 per cent less productive than the US. Currently, Canada ranks 13th among 16 peer countries in productivity, not great for an economy that relies on trade. All told, it stands to reason that this country needs more exporters.

“Obviously, there is a cohort of Canadian businesses that are willing to take risk. And these companies invest in technology and R&D, they export, they’re innovative and they grow internationally. More to the point, they’re willing to risk financial distress, even the possibility of business failure, in order to pursue very large growth opportunities. But the other cohort, the one that is too risk averse, is dragging down Canada’s productivity,” he adds.

Export Development Canada (EDC) CEO, Benoit Daignault agrees. “It’s a soft domestic economy right now so we need to adjust our lens and think beyond the domestic market. Because exports are going to drive the Canadian economy forward.”

“Ultimately, in this economic climate, as a Canadian business, it’s hard to grow without thinking internationally,” says Daignault. “Our (EDC’s) job is to help these companies mitigate some of the risks.”

“For many Canadian companies, there’s a perception of risk when it comes to selling outside our own border. When in fact, the exact opposite is true, exporting actually lowers business risk.” Bill Currie, Deloitte

And right now, market conditions are aligning to make this happen, most notably the declining dollar and new free trade agreements with high-growth, emerging markets,” adds Daignault.

And there are lots of financial tools out there, adds Currie, noting EDC, the Trade Commissioners Service (TCS), and Canadian Commercial Corp (CCC). “We just need to make more Canadian companies aware of the services available to them,” adds Currie.

“We also need to raise awareness among Canadian companies, especially small ones, on the opportunities out there; so they start thinking globally from the get-go,” says Daignault. “Our advice is to focus on your niche market, and keep innovating and developing value. That’s what will take you global.”

The Deloitte Report also outlines what they call “The “Smart Exporting” journey for becoming a successful exporter: essentially how to think like an exporter, how to become an exporter and how to win as an exporter.

“Ultimately, we need to build a natural trade culture in Canada,” says Daignault. “And that means creating more ‘born global’ companies,” he adds. “To do this, we need to equip Canadian businesses with the knowledge and information they need. And they need to think scale from the start, take risks and keep innovating.

“Because standing still, even for a moment, means falling behind.”

Benoit Daignault and Bill Currie discussed the issue on December 5 in Ottawa, as part of the Deloitte 360 Conference Series. To view the full report see: The Future of Productivity: Smart Exporting for Canadian Companies.

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