Country risk assessment, also known as country risk analysis, is the process of determining a nation's ability to transfer payments. It takes into account political, economic and social factors, and is used to help organisations make strategic decisions when conducting business in a country with excessive risk.

1. KAMAL INSTITUTE OF HIGHER
EDUCATION AND ADVANCE TECHNOLOGY
(AFFILIATED TO GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY,
NEW DELHI)
SUBJECT :INTERNATIONAL BUSSINESS MANAGEMENT
PRESENTATON ON “COUNTRY RISK ANALYSIS”
SUBMITTED BY
ANKISH PASRICHA
BBA SEC A

2. 
 Country risk refer to the risk of investing or lending in a
country , arising from possible change in the business
environment that may adversely affect operating profit or
the value of asset in the country.
 All business transaction involves some degree of risk.
When business transaction occur across international
business, they carry additional risk not present in
domestic transaction.
 These additional risk called country risk, typically include
risks arising from a variety of national differences in
economic structure, political and social institution.
Country RISK

3. 
 Country Risk Analysis is the evaluation of possible risks and
rewards from business experiences in a country. It is used to
survey countries where the firm is engaged in international
business, and avoids countries with excessive risk.
With globalization, country risk analysis has become essential
for the international creditors and investors.
 Country risk analysis identifies imbalances that increase
the risks in a cross-border investments. Country risk
analysis represents the potentially adverse impact of a
country’s environment on the multinational corporation’s cash
flows and is the probability of loss due to exposure to the
political, economic, and social upheavals in a foreign country.
All business dealings involve risks.
Country risk analysis

4. 
 Economic risk
 Political risk
 Transfer risk
 Exchange risk
 Location risk
 Sovereign risk
TYPES OF COUNTRY RISK
ANALYSIS

5. 
 This type of risk is the important change in the economic
structure that produces a change in the expected return of
an investment. Risk arises from the negative changes in
fundamental economic policy goals (fiscal, monetary,
international, or wealth distribution or creation).
 Economic risk encompasses a wide range of potential
issues that could lead a country on its external debt or
that may cause other type of currency crises.
 The major factor here is economic growth – the health of
a nation GDP and the outlook for its future.
ECONOMIC RISK

6. 
 This is the risk of loss that is caused due to change in the
political structure or in the politics of country where the
investment is made. For example, tax laws, expropriation
of assets, tariffs, or restriction in repatriation of profits,
war, corruption and bureaucracy also contribute to the
element of political risk.
 Political risk determine a country’s political stability. either
internally or externally.
 Political risk can affect a country’s attitude to meeting its
obligation and may cause sudden change in the foreign
exchange market
POLTICAL RISK

7. 
 Transfer risk arises from a decision by a foreign
government to restrict capital movements. It is
analyzed as a function of a country’s ability to earn
foreign currency. Therefore, it implies that effort in
earning foreign currency increases the possibility of
capital controls.
 This is where the host government become unwilling
or unable to permit foreign currency transfer out of
the nation .
Transfer risk

8. 
 This risk occurs due to an unfavorable movement in
the exchange rate. Exchange risk can be defined as a
form of risk that arises from the change in price of
one currency against another. Whenever investors or
companies have assets or business operations across
national borders, they face currency risk if their
positions are not hedged.
EXCHANGE RISK

9. 
 This risk is based on a government’s inability to meet
its loan obligations. Sovereign risk is closely linked to
transfer risk in which a government may run out of
foreign exchange due to adverse developments in its
balance of payments. It also relates to political risk in
which a government may decide not to honor its
commitments for political reasons.

10. 
 This type of risk is also referred to as neighborhood
risk. It includes effects caused by problems in a
region or in countries with similar characteristics.
Location risk includes effects caused by troubles in a
region, in trading partner of a country, or in
countries with similar perceived characteristics.
LOCATION RISK