Today's global economic realities are creating tremendous new opportunities worldwide. They also are revealing new risks. As a result, whether you are exporting, importing or investing abroad, it is essential to understand how country risk has changed—and how to protect your international business.

Traditional Risk Factors

Country risk has been traditionally viewed in terms of political, economic and social factors. Political risks are often assessed in terms of country stability and sometimes measured by the level of confidence in a government. Economic risks are reflected in levels of national growth, inflation, unemployment, balance of trade and taxes. Social risks are traditionally viewed in terms of social unrest.

It’s often regarded as an invisible crime: Cargo theft costs the U.S. billions of dollars a year, yet no one knows the extent of the problem. Logistics providers are often reluctant to report thefts, and law enforcement agencies have few hard statistics.

Tighter security since 9/11 is having a positive impact, however, and new laws promise to shed light on the problem. Meanwhile, there are several steps your business can take to ensure you aren’t a victim.

A Billion-Dollar Issue

The annual cost of cargo theft in the U.S. runs as high as $30 billion, according to FBI estimates, although most logistics experts believe the actual figure could be much higher due to under-reporting of thefts and the fact that cargo theft has never had its own classification in federal crime data.

That’s changing. The reauthorization of the Patriot Act signed into law in March requires the addition of cargo theft to the FBI’s Uniform Crime Reporting system by year’s end. More accurate statistics will help agencies see the extent of the problem and allocate their resources accordingly. The law also increases penalties for cargo theft.

Over the past five years, industry participation in such security initiatives as the Customs-Trade Partnership Against Terrorism (C-TPAT) is generally thought to have had a positive effect on theft and pilferage at crucial points in the pipeline. Best practices like container seals, increased facility lighting and fencing, and more security personnel have contributed to tighter security at port facilities and distribution centers, for example. But what about containers that have moved outside these secure areas?

Protect Yourself

It’s generally believed that motor carriers experience the vast majority of cargo theft. The California Highway Patrol reports that incidents range from armed hijackings at the side of the road to burglaries at common stops en route. In many cases, company employees or the truck drivers themselves are conspirators in the thefts.How can you protect your company and supply chains? Consider these suggestions:

• Follow the standards. Enroll in C-TPAT and apply industry best practices for security. Expect the same from your vendors.
• Tighten security at home. Limit access to loading and unloading facilities, and beef up security with technology and personnel.
• Secure all shipments. Use industry-standard locks or seals on all container shipments.
• Consider the future. Electronic container seals and Radio Frequency Identification tags are the way of the future, though currently they are too expensive and not yet standardized. Get ready for them.
• Know your employees. Conduct thorough background screening of employees. Limit the number of employees who have access to shipping information.
• Hold drivers accountable. Prepare a list of rules for drivers that will help them avoid unsecured areas and anticipate possible incidents.

In October 2006, the U.S. population reached 300 million: 4.57 percent of world population — about the same percentage as in 1900. Demographic shifts in other countries are more sweeping.

By studying shifts in world demographics, you can pinpoint where tomorrow’s major populations will live, identify fastest-growing age groups — an important indicator of tastes and needs — and predict demand for your products or services.

Tomorrow’s Markets

Almost all net global population growth — the difference between births and deaths — will occur in developing countries located in Africa, Asia, and Latin America. By 2015, China's and India's populations are expected to reach almost 1.39 billion and 1.27 billion, respectively.

The United States will reach 323 million, with the next leading countries located in Asia and South America. As a result of low birth rates, Europe’s share of world population has fallen by half since 1990, according to the Progressive Policy Institute, a Washington, D.C., think tank.

In terms of buying power, low annual per-capita income figures can be misleading. For instance, India's per-capita income is only $620. However, the country is estimated to have a middle class of more than 200 million people with the same purchasing power as the U.S. middle class — a growing market well worth pursuing.

The Age Factor

Average life span throughout the world is projected to increase from 64 years in 2002 to 69 years by 2025, and to 77 years by 2050, according to the U.S. Census Bureau. This increased longevity has contributed to world population growth. But that is not all.

The elderly population in the United States and the rest of the developed world will increase by more than 50 percent. The greatest relative increase will occur in developing countries, while the largest absolute change will take place in Asia.

Demand for products and services designed to satisfy the needs of this group, especially health-related products and home care, is anticipated to rise dramatically.

Follow the Median

As the elderly population increases, the world's median age also continues to rise. In 1998, the median age was 24 in less developed nations and 37 in more developed countries. However, by 2025, median ages will rise to 30 and 43, respectively. This significantly affects consumer spending.

According to Harry Dent, Jr., author of The Roaring 2000s Investor, as the average American reaches peak spending, the children begin to leave home. Empty-nest couples spend more on vacation homes, travel, and leisure. Spending patterns in other developed nations are similar to those in the United States.

As the median age rises in both developed and developing countries, consumer spending also will rise. Consequently, closely monitoring shifting demographics and better identifying your target market is a sound strategic decision.

In just five years, a single Asian port—Singapore—will have more container capacity than the current throughput of all U.S. ports combined. This one startling projection, part of a recent U.S. Department of Transportation (DOT) report to Congress, reveals the severity of the problem facing American supply chains.

Increased Traffic Ahead

Like their West Coast brethren, Atlantic ports, with their increasing share of Asian imports, are bracing for cargo volume expected to double by 2020, if not sooner. Many East Coast ports of all sizes—including New York/New Jersey, Charleston (S.C.), the Port of Virginia, Jacksonville (Fla.), Port Everglades (Fla.), Baltimore, Philadelphia, and Camden (N.J.)—have experienced either double-digit growth or record cargo during the past two years.

And while cargo levels do fluctuate somewhat due to economic conditions (as illustrated by frequent bottlenecks in 2004 vs. relatively smooth operation in 2005), no one disputes the long-term trend of substantial growth. According to the DOT, in the next decade all major Atlantic ports are likely to see an increase of at least one-third over current cargo volumes. At today’s growth rates, every region of the country will experience shortfalls in port capacity by 2010.

Infrastructure Issues

Among the ports’ chief concerns are the adequacy of cargo staging areas, road and rail access to ports and channel dredging. Increasing staging capacity is difficult because of the scarcity, expense and environmental constraints of waterfront real estate. Congestion on antiquated road and rail connections is a serious problem in the metropolitan areas of the busiest ports. And channel dredging has lagged in recent years, despite the fact that a new generation of deep-draft container ships looms on the horizon.

While some ports are undertaking ambitious capital improvements, four years of security mandates (with limited federal funding) have diverted millions of dollars from capacity and modernization projects.

Cargo Congestion Requires New Strategies

Without proactive measures, supply chain managers face almost certain bottlenecks and shipment delays down the road. Cargo congestion is not an issue that resonates with lawmakers, so businesses and associations must lobby hard for more federal funding, especially for port security, dredging and connectivity upgrades. (The transportation bill passed in August devotes less than 1 percent of its $286 billion to projects related to ports and trade corridors.) The U.S. intermodal system also must take a fresh look at short sea shipping, which presents many advantages for cargo mobility.

Importers and exporters can mitigate delays by investing in improved cargo tracking technology and implementing greater lead times. As imports begin to outstrip capacity at preferred ports, supply chain managers may even consider directing shipments through lesser-used ports farther from markets, including some in Canada and Mexico. While each option carries its own cost, so does the prospect of ships anchored at sea, waiting for space at the docks.