COUNTRY RISK MANAGEMENT

By Prof. K. RAJASEKARAN ExEx-AGM: Global Trust Bank Ltd. ExEx-Trainer: State Bank of Travancore

It can also be called sovereign risk These risks may be caused by economic or political changes in a foreign country .MEANING     Country Risk refers to the risk associated with investing in a particular country. or providing funds to its government.COUNTRY RISK .

. or Repudiation of debt by Foreign Govt Lack of adequate foreign exchange reserves (which will cause delays in loan payments to creditor banks) Country Risk can include any event causing non-payment by borrowers due to nonmacroeconomic developments beyond their control.Country Risk .Examples     Exchange controls by monetary authorities.

Country Rating       Country Rating or Sovereign Rating is done by : Euromoney Institutional Investor Standard & Poor Moody¶s ECGC .

Factors  Economic Factors ‡ Resource Base ‡ Macro-economic factors like GDP growth Macroand per capita income ‡ External Position of the country:     Current Account Balance Debt to GDP Ratio Debt Service Ratio Ratio of Forex Reserves to Imports .Country Rating .

) Political Risks ‡ Stability of Political Climate ‡ Frequent revolutions/ coups ‡ Change of economic policies by political regimes  .Country Rating ± Factors (Contd.

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