MANAGEMENT OF COUNTRY RISK

INTRODUCTION
Unanticipated changes in business condition Wide variety of risks in country and across the glob Spreading risk by set-up of new projects Financial risks and Political risks

NATURE OF COUNTRY RISK

Macro risks -country level -global level Micro risks

KINDS OF COUNTRY RISK

Political Risk -transfer risk -operational risk -control risk Financial Risk

POLITICAL RISK FACTORS

Political stability Philosophy and ideology of political parties Integration into the world system Ethnic and religious stability Attitude of host country consumers Expropriation Disruptions in operations Blockage of funds

Contd..
Loss of intellectual property right Economic source of political risk Corruption

FINANCIAL RISK FACTORS

Current and potential economic health of the host country Financial state of the host country Monetary and fiscal policies of the host country Splurging by government

ANALYSING COUNTRY RISK

Macro perspective Micro perspective

COUNTRY RISK ASSESSMENT TECHNIQUES

Checklist approach Delphi technique Statistical techniques Spot visits Combination of techniques

MEASURES TO MINIMISE COUNTRY RISK

Pre-investment stage
i. ii. iii. iv. Avoidance Insurance Negotiating the investment environment Structuring the investment

 Operating policies
i. Planned disinvestment ii. Short term profit maximisation iii. Measures to reduce risk of post operation expropriation iv. Adaptation

References
International Business Management, F.L. Bascunan, Global Vision Publishing House, 2011 Multinational Financial Management, R.M. Srivastava, Excel Books, 2008