2. “Country risk is exposure to a loss incross-border lending, caused by the events in aparticular country. These events must be, at least tosome extent, under the control of the governmentof that country; they are definitely not under thecontrol of a private enterprise or individual.”
3.  All cross border lending in a country whether to the government, a bank, a private enterprise or an individual is exposed to country risk. In case of natural calamities if they are unforeseeable they can not be considered as country risks.
4.  The most frequent events that can lead to the materialization of country risk can be classified as:1. Political components2. Socio-cultural components3. Economic components
5.  Once a particular risk has been identified there are considerable differences in the options of a lender and direct investor. If there is a risk that the government of the host country will introduce legislation to prevent temporary redundancies, the project can be re- designed to sub-contract part of the work.
6. 1. Conceptual awareness2. Analytical ability3. In-depth knowledge4. Specialized expertise5. Familiarity with economic forecasting techniques6. Experience and skills
7.  Balance sheet Assets Geographically Within each country Regarding country risk Each type of borrower Degree of risk
8.  Repudiation or default Renegotiation Rescheduling or moratorium Technical default Transfer risk Geographical location of risk
9.  Political risk analysis can be done through hedging strategies; Hedging strategies are sub-divided into two:1. Before investing internal hedging external hedging2. After investing internal hedging external hedging
10.  Before investing: 1. Internal hedging:- A. Minimization of local equity -- Local borrowing -- Local equity -- Management contract B. International integration: ---Production integration ---Marketing integration ---International supply sourcing
11. 2. External hedging: --- Government insurance ----Private insurance --- Host government guarantees After investing: ( A. ) Internal hedging:- 1. Good citizen policy * Prompt response to both the letter and spirit of host government * Contribution to national goals
12. * Contribution to national welfare * Developing a corporate image 2. Increase in technical contribution 3. Negotiation and arbitration AFTER INVESTING:- (B.) External hedging:- 1. Private insurance 2. International investment codes 3. Divestment