international business management

1. Presented by,
M.HIMABINDU

2. “Country risk is exposure to a loss in
cross-border lending, caused by the events in a
particular country. These events must be, at least to
some extent, under the control of the government
of that country; they are definitely not under the
control 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 components
2. Socio-cultural components
3. 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 awareness
2. Analytical ability
3. In-depth knowledge
4. Specialized expertise
5. Familiarity with economic forecasting
techniques
6. 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 hedging
2. 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