Country risk
Encyclopedia
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.
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).
Political risk
Political risk is a type of risk faced by investors, corporations, and governments. It is a risk that can be understood and managed with reasoned foresight and investment....
; 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.
Country risk ratings
| Rank | Previous | Country | Overall score |
|---|---|---|---|
| 1 | 1 | Norway Norway Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million... |
94.05 |
| 2 | 2 | Luxembourg Luxembourg Luxembourg , officially the Grand Duchy of Luxembourg , is a landlocked country in western Europe, bordered by Belgium, France, and Germany. It has two principal regions: the Oesling in the North as part of the Ardennes massif, and the Gutland in the south... |
92.35 |
| 3 | 3 | Switzerland Switzerland Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition.... |
90.65 |
| 4 | 4 | Denmark Denmark Denmark is a Scandinavian country in Northern Europe. The countries of Denmark and Greenland, as well as the Faroe Islands, constitute the Kingdom of Denmark . It is the southernmost of the Nordic countries, southwest of Sweden and south of Norway, and bordered to the south by Germany. Denmark... |
88.55 |
| 5 | 6 | Finland Finland Finland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside... |
87.81 |
| 6 | 5 | Sweden Sweden Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund.... |
86.81 |
| 7 | 7 | Austria Austria Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the... |
86.50 |
| 8 | 11 | Canada Canada Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean... |
86.09 |
| 9 | 8 | Netherlands Netherlands The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders... |
84.86 |
| 10 | 9 | Australia Australia Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area... |
84.16 |
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
Sovereign default
A sovereign default is the failure or refusal of the government of a sovereign state to pay back its debt in full. It may be accompanied by a formal declaration of a government not to pay or only partially pay its debts , or the de facto cessation of due payments...
risk and/or payment default risk for exporters (a.k.a. "trade credit" risk).
Partial list of country risk premium
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)
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.The PRS Group, Inc.The PRS Group, Inc., headquartered near Syracuse, New York, was established in 1979, placing it among the earliest commercial providers of political and country risk forecasts. In 2010, The PRS Group, Inc. was purchased by Chair/CEO Christopher McKee, Ph.D., who maintains operations for the company...