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Country Risk Management Strategies

This document discusses country risk and its management. It defines country risk as sudden, unanticipated political changes in a host country that disrupt business operations by altering the business environment. Country risk can take various forms, including expropriation, currency inconvertibility, credit risk, and risks from internal/external wars or conflicts of interest. Country risk is evaluated both qualitatively through expert research and contacts, and quantitatively using probability models. The document outlines different approaches to managing country risk prior to investment, during operations, and following nationalization events.

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Avayant Kumar Singh
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29 views9 pages

Country Risk Management Strategies

This document discusses country risk and its management. It defines country risk as sudden, unanticipated political changes in a host country that disrupt business operations by altering the business environment. Country risk can take various forms, including expropriation, currency inconvertibility, credit risk, and risks from internal/external wars or conflicts of interest. Country risk is evaluated both qualitatively through expert research and contacts, and quantitatively using probability models. The document outlines different approaches to managing country risk prior to investment, during operations, and following nationalization events.

Uploaded by

Avayant Kumar Singh
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

UNIT II

Country Risk & Its Management


Country Risk or Political Risk

 Said to be exist when –

 Sudden and unanticipated changes in political


set-up in the host country

 Lead to unexpected discontinuities in business


by changing the business environment.
Country Risk or Political Risk
Different Forms
 Expropriation & Confiscation

 Currency Inconvertibility

 Credit Risk

 Risk from (Internal & External) Wars

 Conflict of Interest

 Corruption
Country Risk or Political Risk
Evaluation
 Qualitative Approach
 ThroughInterpersonal Contacts
 Research by Experts

 Quantitative Model
 Probability of Change in Govt. – 50%
 Probability of Nationalization – 40%
 Probability of Inadequate Compensation – 40%
 With these, probability of Nationalization without
adequate compensation is
0.5 x 0.4 x 0.4 = 0.08
Country Risk or Political Risk
Management

 Management prior to Investment

 Management during Lifetime

 Management following Nationalization


Country Risk or Political Risk
Management
 Management prior to Investment

 Integration of risk in Capital Budgeting

 Negotiating agreements with the Host Government

 Insurance of Risk
Country Risk or Political Risk
Management
 Management during Lifetime

 Joint Ventures

 Political Support

 Structured Operating Environment (Dependency)

 Anticipatory Planning
Country Risk or Political Risk
Management
 Management after Nationalization

 Negotiation

 Political and Economic Pressure

 Arbitration (Third Party Involvement)

 Legal Course of Action


International Trade Theories

Why does Nations Trade?

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