With negotiations between Canada and the US still unresolved and tariff uncertainty showing no signs of easing, Canadian companies should be assessing their exposure across three distinct areas, according to David Dienesch (pictured), CEO of Allianz Trade in Canada: supplier risk, customer risk, and financial risk.
Dienesch said risk itself isn't the problem, since it's an unavoidable part of running a business. What matters, he said, is whether companies are actively managing it or simply absorbing whatever comes.
"Risk is a natural part of doing business," Dienesch said. "It's a question of Canadian companies asking themselves, how should they be managing this risk?"
The starting point, he said, is understanding how exposed a company's own suppliers are to the US market, since a disruption upstream can affect operations just as much as a direct hit to sales.
"There's the supplier risk," Dienesch said. "They should be looking at their own suppliers. What are their suppliers doing? What's the exposure their suppliers have to the US market?"
The second area, customer risk, requires businesses to take stock of where their buyers are located and how quickly they could diversify that base if conditions require it, Dienesch said. He said the timeline for that kind of shift matters as much as the decision to pursue it, since products built for one market don't always translate easily to another.
"They need to be looking at where their customers are located and what they can do to diversify that risk in the short, medium and long term," Dienesch said. "If you're selling two-by-fours, you can't sell two-by-fours in the European market. They don't have two-by-fours. But there are other measurements."
Diversifying away from US customers is not a simple undertaking, Dienesch said, and Canadian companies have historically been more hesitant than they may need to be when it comes to entering new markets.
"Canadian companies may be a little bit more timid going into different markets," Dienesch said. "They don't understand who their buyers are, the laws, the regulations, all that kind of stuff."
That hesitation, in his view, is exactly where trade credit insurers can add value, given the scale of data and expertise they bring to assessing customers in unfamiliar markets. Dienesch said the industry's reach extends well beyond any single company's own research capacity.
"About 15% of global trade is insured by trade credit insurance companies," Dienesch said. "We monitor over 200 million companies on a regular basis."
Part of that value, he said, includes helping Canadian businesses identify which markets are realistically open to them and what it would take to enter. He described this as central to what the trade credit insurance industry exists to do.
"We have access to markets everywhere around the world," Dienesch said. "We need to find those markets and make sure that we support Canadian businesses as they go into those markets. That's what trade credit insurance does, period, across the globe."
The third area, financial risk, centers on a business's cash position and its ability to access working capital if sales volumes shift, Dienesch said. Trade credit insurance plays a direct role here as well, both by helping businesses avoid bad debts and by strengthening their standing with lenders when they need to borrow.
Diversification does not need to mean looking only beyond Canada's borders, Dienesch said. He pointed out that some Canadian companies remain concentrated in a single province and have been reluctant to expand into other parts of the country for many of the same reasons they hesitate to enter foreign markets.
"You get a lot of Canadian companies that might be Ontario-focused and may be a little bit shy to sell to Quebec or Nova Scotia or BC because they just don't know that ecosystem," Dienesch said. "Roughly half of our portfolio is domestic risk too."
Working through all three areas isn't a one-time exercise, Dienesch said. He expects the current trade environment to remain uncertain for years, which means diversification has to be treated as an ongoing discipline rather than a response to any single event.
"We're heading for a lot of years of uncertainty ahead of us," Dienesch said. "Almost by definition, risk management means spreading your risk. So diversification is so important."
Dienesch said the businesses most likely to come out ahead over the next several years are the ones actively working through all three areas now, modifying their products where needed, understanding the trade agreements available to them, and treating diversification as a growth strategy rather than a defensive one.
"The winners and losers are going to be the ones who take a look and say, okay, it was easy, now it's harder," Dienesch said. "What do I need to do to protect myself in a harder world so that I can grow? That's the key here. I need to grow."
