Country risk
Country risk refers to the risk of investing in a country, dependent on changes in the business environment that may adversely affect operating profits or the value of assets in a specific country. For example, financial factors such as currency controls, devaluation or regulatory changes, or stability factors such as mass riots, civil war and other potential events contribute to companies' operational risks. This term is also sometimes referred to as political risk; however, country risk is a more general term that generally refers only to risks affecting all companies operating within a particular country.
Political risk analysis providers and credit rating agencies use different methodologies to assess and rate countries' comparative risk exposure. Credit rating agencies tend to use quantitative econometric models and focus on financial analysis, whereas political risk providers tend to use qualitative methods, focusing on political analysis. However, there is no consensus on methodology in assessing credit and political risks.
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[edit] Country risk ratings
| Rank | Country | Pre-crisis score | Sept 2011 score |
|---|---|---|---|
| 1 | Indonesia | 73.2 | 58.2 |
| 2 | Greece | 82.7 | 40.6 |
| 3 | Malaysia | 84.5 | 66.6 |
| 4 | Russia | 50.7 | 56.9 |
| 5 | Ireland | 92.4 | 60.8 |
| 6 | Argentina | 53.8 | 43.7 |
| 7 | Thailand | 82.1 | 61.7 |
| 8 | South Korea | 85.0 | 73.3 |
| 9 | Portugal | 83.0 | 55.9 |
| 10 | Spain | 86.6 | 66.0 |
The least-risky countries for investment. Ratings are further broken down into components including political risk, economic risk. Euromoney's bi-annual country risk index "Country risk survey" monitors the political and economic stability of 185 sovereign countries. Results focus foremost on economics, specifically sovereign default risk and/or payment default risk for exporters (a.k.a. "trade credit" risk).
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[edit] Partial list of credit risk rating agencies
- Fitch Ratings (U.S.)
- Moody's (U.S.)
- Standard & Poor's (U.S)
- Business Monitor International
- CTRISKS (Greater China)
[edit] Partial list of political risk analysis organizations
- Oxford Analytica
- Maplecroft
- Business Monitor International
- Country Risk Solutions
- Economist Intelligence Unit
- Eurasia Group
- The Legion Group
- The PRS Group, Inc.
[edit] Downloadable Country Analysis and Reports
[edit] References
- ^ [1]: Survey which monitors the political and economic stability of 185 sovereign countries, according to ratings agencies and market experts. The information is compiled from Risk analysts; poll of economic projections; on GNI; World Bank’s Global Development Finance data; Moody’s Investors Service, Standard & Poor’s and Fitch IBCA; OECD consensus groups (source: ECGD); the US Exim Bank and Atradius UK; heads of debt syndicate and loan syndications; Atradius, London Forfaiting, Mezra Forfaiting and WestLB.
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