Canada is one of the world’s top destinations for foreign direct investment. With its famously stable economy, one of the most educated workforces in the world, a multicultural population, high quality of life, and favourable corporate income tax rates – which are, by the way – among the lowest in the G7, it is an enticing destination for entrepreneurs!
Nonetheless, as is the case in any marketplace, any business expansion, especially across borders, can come with its fair share of challenges.
In this blog post, we dive into some tips on ways to reduce risks and make the transition smoother when expanding to Canada!
Why Risk Mitigation is Important for Startups
Much like not carrying an umbrella on a rainy day can lead to getting drenched, businesses that aren’t prepared for risks can encounter various challenges.
Enter- Risk Mitigation – the process of identifying risks and developing a plan to manage or eliminate them proactively. In taking steps to tackle future risks, startups can avoid expensive setbacks, protect their reputation, and boost investor confidence! It’s a win-win situation.
Risks when expanding to a different country can take many different forms, with the most common ones including:
- Project risks
- Financial risks
- Economic risks
- Cybersecurity risks
- Reputation risks
- Human risks
- Operational risks
Tips for Risk Mitigation for Startups Before Expanding to Canada:
Below are important exercises to include in your prep before you enter the Canadian business landscape, that can help you identify potential risks and plan for them ahead of time.
- Start Slow and Conduct Comprehensive Research:
When considering the Canadian market, start by researching growth opportunities in your industry. If you already have clients, suppliers, and customers in Canada, your contacts can provide information on market trends, customer preferences, and emerging opportunities, helping you make strategic decisions that minimize market-related risks. This market intelligence can be a powerful tool for risk mitigation, as it enables you to align your expansion efforts with the current demands of the Canadian market. Click here to read our resource on how to conduct market research in a foreign market.
Brainstorm various opportunities for growth, analyze them carefully, and build business cases that include financial projections. Study how diversification of geography, or your customer base will affect your existing product or service. The good news is, BDC’s report says diversified firms are likely to outperform those that are undiversified!
2. Leverage Government Support and Get Local Expertise
Take advantage of business support programs, designated startup incubators and accelerators with mentorship, and funding opportunities extended by the Canadian government to international entrepreneurs to open a channel of reliable knowledge and communication. These resources can help address financial risks and provide valuable expertise in the form of understanding local regulations, cultural nuances, and market dynamics to mitigate the associated risks.
3. Effective Risk Management Strategies:
Depending on the situation, you can choose to implement various degrees of risk management strategies including the ones listed below:
- Risk Avoidance: Avoid actions that may lead to significant risks. For instance, if a potential risk could severely impact your company’s financial standing, consider postponing actions that could lead to such risks until conditions are more favourable.
- Risk Reduction or Control: Take proactive measures to reduce the likelihood of risks or limit their impact. This may involve process adjustments or updates to mitigate identified risks.
- Risk Transference: Shift potential risks to third parties, such as insurance companies or contractors, to protect your business from financial liabilities.
- Risk Acceptance: Acknowledge and accept certain risks if they are deemed acceptable in terms of impact or likelihood, especially when mitigation costs outweigh potential losses.
Tips for Risk Mitigation for Startups After Expanding to Canada:
Let’s say you’ve decided to enter the Canadian market, here’s what you can do to ensure successful ongoing operations:
- Local Compliance and Regulations:
Familiarize yourself with Canadian laws, regulations, and compliance requirements specific to your industry. Reach out to legal counsel if needed to ensure your business operations adhere to local standards. Non-compliance can lead to serious legal troubles and reputational damage.
- Market Research and Adaptation:
Continuously monitor the Canadian market to stay updated on changing trends, customer preferences, and competitive landscape. Be prepared to adapt your business strategies and offerings accordingly to remain relevant and competitive. Check out this resource we’ve put together for new Canadian entrepreneurs in order to stay on top of industry news for your startup.
- Financial Management:
Maintain a robust financial management system. Keeping a close eye on cash flow, budgeting, and financial projections will help you navigate potential financial risks and ensure your startup remains financially stable. Bookmark our Accounting 101 for Startups in Canada blog here!
- Insurance Coverage:
Explore insurance options tailored to your business needs in Canada. Consider business liability insurance, property insurance, and any industry-specific coverage to protect your assets and mitigate financial risks. Here is a list of business insurance you can keep handy for your Canadian startup.
- Cybersecurity Measures:
Invest in cybersecurity measures to safeguard your startup against data breaches and cyber threats. Protecting sensitive customer information is essential to maintain trust and avoid legal and financial repercussions.
- Establish Meaningful Relationships
Foster meaningful relationships with the local business community, clients, customers, and suppliers. Collaborating with local partners, sharing market insights, and helping each other out during crises all contribute to reducing various risks and ensuring long-term success. Ultimately, meaningful relationships serve as a great foundation for navigating uncertainties in a new country!
- Contingency Planning:
Whether you’re in Canada, or anywhere else in the world, as a business owner, a contingency plan must always be in place to combat scenarios like economic downturns, natural disasters, or market fluctuations.
- Government Resources:
Continue to take advantage of government resources and support programs available to businesses in Canada. These initiatives can provide financial assistance, guidance, and resources to help you navigate risks effectively.
Canadian Government Support for Risk Mitigation
The Canadian government is committed to creating a safe and secure business environment for startups expanding from other countries:
- Canada’s Open Data Government Portal allows you to have transparent access to economic, demographic, and business intelligence-related data and directories, no matter where you are located, making market research incredibly easy.
- Canada’s business grants, tax credits, and financing programs reduce barriers and help new businesses start and expand in the country. Here is a starting point for you to dive into the available government funding support for your startup.
- Canada wants entrepreneurs, and it has set up dedicated programs like the Start-Up Visa program that open up the gates for qualified entrepreneurs to begin their startup journey in Canada.
- The government has also enlisted designated start-up incubators and accelerators like BHive and TBDC to create a bridge to identify and support qualified entrepreneurs from around the world with tools and mentorship to expedite the startup creation and expansion process in Canada.
- Government agencies like the Business Development Bank of Canada (BDC) and Export Development Canada (EDC) also provide financial solutions and risk management support to businesses looking to expand domestically and internationally.
- Regulatory bodies such as the Competition Bureau and the Canadian Anti-Fraud Centre are always working diligently to prevent fraudulent activities and protect consumers.
The Canadian marketplace presents a wealth of opportunities for startups. By understanding the process of risk mitigation and with the support of the Canadian government, businesses can thrive and grow in this dynamic and promising environment.
Want to Launch or Expand Your Business in Canada?
We are BHive, a startup incubator located in Brampton, Ontario. We offer international startups the tools, resources, and space to establish – and quickly scale – their businesses in Canada and North America. To apply to our Global Entrepreneur Incubation Program, click here!