11. Quantifying Country Risk MH BOUCHET/CERAM-Global Finance 30% 70% Overall Country Risk Rating Political Risk Rating Transfer Risk Rating Political Factors Political factor A Political factor B Political factor C Financial Factors Financial factor A Financial factor B Financial factor C Weights 30% 50 20 Weights 30% 40 30
34. International Country Risk Guide: RCI MH BOUCHET/CERAM-Global Finance Composite Political, Financial and Economic Risk Rating with weighted average Coup d’état FORECAST
35. OECD Credit rating MH BOUCHET/CERAM-Global Finance 1997 Knaepen Package= convergence on the pricing of officially supported medium and long term export credits. One of the key elements of the Knaepen Package is a system for assessing country credit risk and classification of the countries into 7 categories . The Country Risk Classification Method measures the country credit risk, i.e. the likelihood that a country will service its external debt. The Country Risk Classification Method uses an econometric model based on quantitative indicators, e.g. the financial and the economic situation and the payment experience of the countries and takes account of possible qualitative factors, e.g. political and other economic and financial factors not included in the quantitative Econometric Model. The details of the Country Risk Assessment Model are confidential and not published. http://www.oecd.org/document/49/0,2340,fr_2649_34169_1901105_1_1_1_1,00.html
36. OECD Credit rating MH BOUCHET/CERAM-Global Finance The final classification, based only on valid country risk elements, is a consensus decision of the sub-Group of Country Risk Experts that involves the country risk experts of the Participating Export Credit Agencies. The sub-Group of Country Risk Experts meets several times a year. These meetings are organized so as to guarantee that every country is reviewed each time a fundamental change is noticed and at least once a year. The meetings are confidential and no official reports of the deliberations are made. 8 country risk categories from 0 (no risk) to 7 (high risk)
37. OECD Country risk classification in 2008 MH BOUCHET/CERAM-Global Finance 0 1 2 3 4 5 6 7 Greece Austria Czech Rep Chile China Israel Algeria Morocco Albania Bolivia Haiti Cambodia Belgium Canada France HongKong Hungary Poland South Africa Brazil Peru Panama Philippines Indonesia Pakistan Cameroon Niger Nigeria USA UK Trinidad & Tobago Thailand Russia Romania Vietnam Argentina Kuwait Mexico Malaysia Mexico Bulgaria Guatemala Gabon RCI
48. The 9 pillars of global competitiverness MH BOUCHET/CERAM-Global Finance Hard + Soft DATA : Public debt + REER + interest rates + inflation + savings rate + legal and Regulatory framework + infrastructure + Education system and management schools….
65. Fraser Institute’s Index of Economic Freedom MH BOUCHET/CERAM-Global Finance Source: http://www.fraserinstitute.ca/shared/readmore.asp?sNav=pb&id=852
66.
67. UNDP – HDI MH BOUCHET/CERAM-Global Finance 154. Haiti 155. Gambia 156. Senegal 157. Eritrea 158. Rwanda 159. Nigeria 160. Guinea 161. Angola 162. Tanzania, U. Rep. of 163. Benin 164. Côte d'Ivoire 165. Zambia 166. Malawi 167. Congo, Dem. Rep. of the 168. Mozambique 169. Burundi 170. Ethiopia 171. Chad 172. Central African Republic 173. Guinea-Bissau 174. Burkina Faso 175. Mali 176. Sierra Leone 177. Niger 1. Norway 2. Iceland 3. Australia 4. Ireland 5. Sweden 6. Canada 7. Japan 8. United States 9. Switzerland 10. Netherlands 11. Finland 12. Luxembourg 13. Belgium 14. Austria 15. Denmark 16. France 17. Italy 18. United Kingdom 19. Spain 20. New Zealand
68. HDI- Life Expectancy 1970-2005 MH BOUCHET/CERAM-Global Finance 1970-75 2000-05 Norway 74.4 79.3 Iceland 74.3 80.6 Australia 71.7 80.2 Ireland 71.3 77.7 Sweden 74.7 80.1 Canada 73.2 79.9 Japan 73.3 81.9 United States 71.5 77.3 Switzerland 73.8 80.5 Netherlands 74.0 78.3 Finland 70.7 78.4 Luxembourg 70.7 78.4 Belgium 71.4 78.8 Austria 70.6 78.9 Denmark 73.6 77.1 France 72.4 79.4 Italy 72.1 80.0 United Kingdom 72.0 78.3 Spain 72.9 79.5 New Zealand 71.7 79.0
69. HDI- Life Expectancy 1970-2005 MH BOUCHET/CERAM-Global Finance 1970-75 2000-05 Senegal 40.1 55.6 Eritrea 44.3 53.5 Rwanda 44.6 43.6 Nigeria 42.8 43.3 Guinea 39.3 53.6 Angola 37.9 40.7 Tanzania, U. Rep. of 49.5 46.0 Benin 47.0 53.8 Côte d'Ivoire 49.8 46.0 Zambia 50.2 37.4 Malawi 41.8 39.6 Congo, Dem. Rep. of the 46.0 43.1 Mozambique 40.7 41.9 Burundi 44.1 43.5 Ethiopia 43.5 47.6 Chad 40.6 43.6 Central African Republic 43.5 39.4 Guinea-Bissau 36.5 44.6 Burkina Faso 43.8 47.4 Mali 38.0 47.8 Sierra Leone 35.4 40.6 Niger 38.4 44.3
70. COUNTRIES X & Y: A multi-index composite graph MH BOUCHET/CERAM-Global Finance
71.
72.
73.
74.
75. Nord Sud Export: export country risk MH BOUCHET/CERAM-Global Finance Risk classes Type of risk rate 7 Very low risk (eg: OCDE) From 541 to 700 6 Low risk From 431 to 540 5 Moderate risk From 381 to 430 4 Rather high risk From 321 to 380 3 High risk From 271 to 320 2 Very high risk From 161 to 270 1 Dangerous risk From 1 to 160
76. Nord Sud Export: investment country risk MH BOUCHET/CERAM-Global Finance Export Investments Sovereign risks (15 criteria) 30% 10% Market risks (15 criteria) 40% 30% Political risks (15 criteria) 10% 30% Business environment (15 criteria) 20% 30%
79. MH BOUCHET/CERAM-Global Finance Heritage Foundation established since 1985, in partnership with the WSJ, an economic freedom index for some 160 countries, both industrialized and developing. The ranking is based on ten socio-political and economic criteria, including political stability, state interference, investment codes, regulatory framework, institutional strength, and corruption scope. www.heritage.org PricewaterhouseCoopers’s Opacity Index measures the lack of clear, accurate, formal and widely accepted practices in a country’s business environment. As such, it focuses on the relative state of corrupt business practices, the transparence of the legal system and the quality of the regulatory framework. It measures the resulting extra risk premium that stems from additional business and economic costs. www.opacityindex.com/ The Institute for Management Development’s World Competitiveness Report analyses 49 industrialized and emerging economies around the world based on a far-reaching survey since 1989. Its analysis of the institutional framework addresses issues such as state efficiency, transparency of government policy, public service’s independence from political interference, bureaucracy as well as bribery and corruption. www.imd.ch
80. MH BOUCHET/CERAM-Global Finance Freedom House since 1972 monitors the progress and decline of political rights and civil liberties in 192 countries. FH publishes an annual survey of the Progress of Freedom in the world. The ranking is based on a wide survey of regional experts, consultants, and human rights specialists. Political stability and civil liberties are ranked on a scale of 1 (best) to 7 (worst). www.freedomhouse.org/ratings/index.htm The Political and Economic Stability Index of Lehman Brothers and Eurasia measures relative stability in around 20 EMCs by integrating political science theories with financial markets developments. The monthly evaluation uses both quantitative and qualitative criteria, including institutional efficiency, political legitimacy, economic performance, and government effectiveness. www.legsi.com Political and Economic Risk Consultancy (PERC) specializes in strategic business information and analysis in East and Southeast Asia, with emphasis on corruption and business costs. Annual risk reports survey over 1,000 senior expatriates living in to obtain their perceptions of corruption, labor quality, intellectual property rights risks and other systemic shortcomings. www.asiarisk.com
81. MH BOUCHET/CERAM-Global Finance Business Environment Risk Intelligence (BERI) provides a Political Risk Index assessing the social and political environment of a country. It is built on the opinion and scores provided by a hundred experts with a diplomatic or political science background. Governance quality is included into political risk analysis along with government effectiveness and social indicators. http://www.beri.com Political Risk Service’s risk analyses cover a hundred countries and are updated on a quarterly basis. International Country Risk Guide measures and tracks corruption perception in government, law and order, expropriation risk, as well as the quality of bureaucracy. These measures stem from the subjective assessment of experts around the world. http://www.prsgroup.com WORLD BANK: Given its unique policy dialogue with more than 180 countries, the Bank has developed a comprehensive database of composite governance indicators, measuring perceptions of voice and accountability, political stability, government effectiveness, regulatory quality, rule of law, and corruption. www.worldbank.org/wbi/governance/
82. MH BOUCHET/CERAM-Global Finance The London-based Economist Intelligence Unit (EIU) provides a comprehensive é-year forecasting country risk analysis on some 100 EMCs., on a quarterly basis. The EIU method flows from expert’s answers to a series of 77 predetermined qualitative and quantitative questions. http://www.eiu.com To look upon governance and corruption, Moody’s takes into consideration the structures of social interaction, social and political dynamics, as well as the economic fundamentals. Moody’s relies on the judgment of a group of credit risk professionals to weigh the various risk factors as well as the impact of each of these factors upon business prospects. http://www.moodys.com Standard and Poor’s rating approach is both quantitative and qualitative. It is based on a checklist of 10 categories, including governance and political risk. The political risk factors gauge the impact of politics on economic conditions, as well as the quality of governance and the degree of government support in the population. S&P assigns short term and long-term ratings. http://www.standardandpoors.com
83. MH BOUCHET/CERAM-Global Finance Euromoney publishes ratings of some 180 countries since 1982 on a semi-annual basis. The methodology is built from a blend of quantitative criteria and qualitative factors coming from surveys with about 40 political analysts and economists. Political risk receives a 25% weighting, as much as economic performance. Countries are graded on scale from 0 (worst) to 100 ( best). www.euromoney.com Institutional Investor ’s ratings are published twice a year since 1979 to assess the creditworthiness of about 150 countries, based on a survey of some 100 international bankers’ perception of creditworthiness, including economic, financial and socio-political stability criteria. The resulting score scales from zero (very high chance of default) to 100 (least chance of default). www.institutionalinvestor.com Transparency International , a non-profit non-governmental organization in Berlin, provides an annual survey of corruption practices in nearly 90 countries since 1995. The Corruption Perception Index is based on a wide network of information sources with local NGOs, domestic and foreign corporations, investors, and business contacts. www.transparency.org
![Various approaches to country risk assessment ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],MH BOUCHET/CERAM-Global Finance](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)