Risks of Expanding a Business Internationally in 2026 and Beyond

The year 2025 will go down in history as characterized by disruption. With wide-scale geopolitical tensions, record global debt, tariff wars, and the race to create artificial general intelligence, it felt like the world had changed. The question is: Will it be for the better?

For businesses considering global expansion, this is an important question. The remainder of the decade promises to hold increasing challenges as the world redefines well-established institutions and structures. We take a look at what risks you can expect to face in 2026, and beyond, as you decide whether to expand into international markets.

Key Takeaways

• Risks for business expanding internationally include economic, regulatory, financial, socio-cultural, and labor challenges.
• The remainder of the decade will be characterized by geoeconomic vulnerabilities across the globe, uncertainty, and trade competition.1

Geopolitical and geoeconomic risk

The 21st edition of the WEF’s Global Risks Report 2026, which helps decision makers balance immediate challenges with longer-term threats, argues that the world has entered ‘the age of competition’. Marked by trade tensions, strategic rivalry, and institutional fragmentation, the environment heightens geoeconomic risk. This leaves local businesses desiring international growth with a number of challenges.

Geoeconomic confrontation was ranked most likely to trigger a material global crisis in 2026 and beyond. Simply put, new markets are not going to look like what they used to, and instead of integration, you’ll likely face country-focused strategic competition. This means that countries will put themselves first in their trade relationships.

International expansion will be influenced by these factors:

• Highly strategic trade tools (tariffs, sanctions, quotas, and export controls).
• Intensifying foreign investment reviews.
• Resource control, where energy, rare earths, and semiconductors (used for microchip production) will be used to gain leverage.

Strategic trade tools alone will create mountains of regulatory and legal challenges that companies will need to navigate as part of global business expansion. When it comes to market research about which country to enter, trade agreements will be a top priority.

Global operations currently rely on a stable US dollar, but its future dominance isn’t as certain as it used to be. Currency fluctuations will continue to dominate global markets as new co-operation agreements between BRICS countries, Asia, and the Middle East evolve.

Technological risk

According to the WEF report, technological acceleration and risk will remain high in the short-term (2026-2030). Among the challenges are:

• The race to AGI (Artificial General Intelligence) without proper governance.
• Continued cyber insecurity across the globe.
• Adverse and unforeseen outcomes of AI technology.

Cross-border expansion increases digital exposure, and without the proper due diligence, risks will continue to increase for companies. Expanding into a new target market means conforming to cybersecurity regulations for each country and the reporting requirements.

Currently, governments have some legislation to protect their citizens from possible privacy and data breaches that will be committed as a result of AI technologies. But as these threats become clearer and more common, companies that expand globally will find themselves subject to guardrails the local market puts in place. For instance, Europe has published the world’s first AI Act, which aims to protect its citizens from harmful AI practices and developments.

Labor market and workforce risk

Labour market risk is becoming more challenging than companies may realize. While the impact of these challenges varies from country to country, every company looking into new markets should be aware of them.

Market trends are showing that there is a rising gap worldwide for certain critical skills. A Talent Shortage Survey by Manpower Group revealed that 72% of employers are struggling to find the skills they need. This affects the hiring practices of more than 39,000 employers in 41 countries.

The countries with the biggest talent shortages currently are Slovakia, Japan, India, Greece, and Germany. According to the report, the US has a 69% talent shortage. The information industry has the biggest shortage at 75%, with AI skills attracting the most demand.

These factors are causing employers to look across borders for the talent they need, creating new challenges they previously didn’t have to navigate. The biggest of these challenges is foreign labor laws and the different taxation systems. Without local experts helping employers with employment contracts, payroll, taxation, and labor regulations, it is difficult to get all the compliance right. The problem is that if you don’t, you will face large financial risks.

As demand for top skills grows, international teams will become the norm, and that will require employers to contract with local partners that can help them navigate foreign regulations.

Fortunately, there are Employer of Record (EOR) services in most countries that can act as the legal employer and take care of compliance, making it easier for your company to employ top foreign talent. In, ‘How to reduce international compliance risks, ’ you can learn how to avoid the pitfalls of international hiring.

Expert insight: The pros and cons of an Employer of Record (EOR)

Supply chain risk

Global supply chains are heavily affected by the geopolitical situation. What was once about integration and mutual cooperation has now become a vehicle for country-strategic advancement.

As governments increasingly use trade tools, businesses will feel the effects in their supply chain. With challenges like tariff increases, restricted access to resources, export bans, and forced supply rerouting, the financial implications can be substantial.

For example, you expand your business into a territory that provides you with a scarce resource you need for your product. Expansion costs have been high, and months into the venture, the government introduces higher taxes on the resource, a review of foreign ownership and limits export quotas. The long-term success of the supply chain is now at risk.

The potential for this kind of disruption has always been, but is now becoming more frequent as strikes, critical corridor disruption, wars, and natural disasters affect supply chains. [2,3]

Social and cultural risk

Social and cultural norms are not always high on the list of priorities when expanding into new territories, but they can undermine your expansion strategies and even cause reputational damage.

While planning different revenue streams, ensuring compliance with local regulations, and setting up contingency plans all have their place, they don’t inform you about local business etiquette or cultural differences that will either get you in the door or have it shut in your face.

In addition to this, many countries around the world are currently experiencing social tensions that can affect their views of certain brands, countries, and ideologies. Recognizing this can help guide your expansion strategy.

When putting together a remote working team, these cultural norms are important and may even require cross-cultural training to be part of your business expansion plans.

Expert insight: Can a US company hire a foreign employee?

Conclusion

The risks for businesses expanding internationally in 2026 and beyond center around political changes in some of the world’s most powerful nations. Companies can expect the following factors to dominate expansion decisions:

• Geopolitical and geoeconomic power plays revolve around trade and alliance-building.
• The rapid acceleration of AI technology, with countries racing to reach artificial general intelligence first.
• Governance and regulatory burdens are increasingly focused on privacy and data protection, as well as financial regulation and resource protection.
• Supply chain risk is perpetuated by sanctions, tariffs, and threats to critical supply corridors.
• Social and cultural risks associated with mass migration trends, social unrest, and changing demographics in countries.

Expanding into foreign territories isn’t just all about risk; it can also be very rewarding, as Nataly Kelly points out in her book, ‘Take your company global: The new rules to international expansion’. She says: “It’s a beautiful thing to see a company become a well-known, trusted brand in the most distant locations and in languages the founders and executives themselves do not speak.”

The main point is that you find ways to mitigate the risks and highlight everything you do really well, increasing your influence in places where people deserve your product or services.

No matter what research is done, where it comes from, or what book you read about international markets, it comes down to one thing. The people. Not just your customers but the people who work for you. Hiring local expertise will help you cut through the noise that some of these risks create because they already have a presence in the country. The simplest way to achieve this is through an Employer of Record or Contractor of Record, such as Rivermate.

Contact a Rivermate EOR expert to discuss your hiring needs.

FAQs

1. What are the four major risks in international business?

The four major risks when expanding your business internationally are political risk, economic challenges, legal and regulatory compliance, and operational and labor risk.

• Political risk: Government instability, trade restrictions, sanctions, and regulatory shifts that disrupt business.
• Economic challenges: Currency volatility, inflation, debt crisis, and recession, which affect profitability.
• Legal and regulatory compliance: Differences in employment law, tax systems, and foreign investment restrictions.
• Operational and labor risk: Talent shortages, wage inflation, cultural misalignment, and supply chain disruptions.

2. What are the disadvantages of expanding a business internationally?

The main disadvantage of expanding a business internationally is the increased operational complexity. Businesses that expand into foreign markets must deal with multiple currencies, different tax systems, diverse supply chains, and time-zone management. Doing this effectively requires a new level of expertise, additional resources, and new processes to accommodate international methods. These elements can tax the resources of a business unless capacity has been built for it over time.

3. What risks does a business face when expanding rapidly in overseas markets?

Businesses that expand rapidly in a foreign market may find themselves overwhelmed by the strain on cash flow, management overextension, and compliance failures.

• Cash flow strain: Rapid expansion puts a strain on cash flow due to upfront costs, delayed customer payments, higher borrowing costs, and unexpected compliance expenses.
• Management overextension: Each market puts strain on compliance and oversight. If multiple markets are entered, this weakens internal controls and slows down response times for each market.
• Compliance failures: Each jurisdiction has its own regulations requiring a wide knowledge base, which may not be available, or only secured by paying local contractors high fees to do the job.

Sources:

1. https://reports.weforum.org/docs/WEF_Global_Risks_Report_2026.pdf
2. AI to protect global supply chain
3. Supply chain trends in 2026 | Marsh