William Shakespeare imparts timeless advice to any merchant or importer in his play, The Merchant of Venice.
The play opens with Antonio, the “Merchant of Venice,” expressing a sense of profound depression. The first line of the play hears Antonio confess, “In sooth, I know not why I am so sad.”
His companion, Salerio, thinking of his friend’s vocation, ventures a guess as to what afflicts Antonio. “Your mind is tossing on the ocean,” Salerio guesses. “I know, Antonio / Is sad to think upon his merchandise.”
Now every importer worries about his or her merchandise from time to time, but worry has practical limits. You cannot worry day in and day out without it having a negative impact on your business.
The solution to such anxiety is to put in place risk management strategies that will give you the peace of mind necessary to get on with your affairs. Any merchant worth his salt would naturally take such precautions.
Thus we hear Antonio refute Salerio’s conjecture:
Believe me, no: I thank my fortune for it,
My ventures are not in one bottom trusted,
Nor to one place; nor is my whole estate
Upon the fortune of this present year:
Therefore my merchandise makes me not sad.
There are 3 risk management tips encapsulated in this one verse, so let me break down these little nuggets of wisdom one by one:
“My ventures are not in one bottom trusted”
Here we have the classic strategy of not putting all your eggs in one basket. An importer should never have all of his or her working capital tied up in one shipment.
Rather than placing large orders, it is far safer to break your order into a series of smaller shipments spread out over a period of time. By doing so, you are not only mitigating against catastrophic risks such as damage due to rough handling, you are also better managing your inventory turnover and cash flow.
“Nor to one place”
Do not entrust all your working capital with one supplier, for if they fail to deliver in a timely manner, your business will be greatly impacted for that season. Far wiser is the importer who works with a handful of suppliers rather than relying on just one.
Spreading your orders out across multiple suppliers splits your risk and wards against the adverse effects of a supplier’s non-performance. At the same time, using multiple suppliers enables you to shift production away from one factory toward another should quality problems emerge.
“nor is my whole estate / Upon the fortune of this present year”
This point is more subtle but equally important. Ask yourself: What would happen if my business this year was a complete failure? Would I be able to survive until things picked up again?
As an importer, you would ideally have a reserve set aside capable of keeping you afloat for at least 12 months. In the event of a severe downturn, a twelve-month buffer will give you the time necessary to reformulate your product line and marketing strategy.
So there are 3 risk management tips for any importer – straight from the Bard himself. Take these tips from the Merchant of Venice and be not sad to think upon your merchandise.