Country risk

Country risk refers to the risk of investing or lending in a country, arising from possible changes in the business environment that may adversely affect operating profits or the value of assets in the 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 or involved with a particular country.

Mean Country Risk, March 2000 - March 2011
Categories of
Financial risk
Credit risk
Market risk
Liquidity risk
Operational risk
Reputational risk
Volatility risk
Settlement risk
Profit risk
Systemic risk
Non-financial risk

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.

Ratings
Country risk rankings Q4 2017 The least-risky countries for investment
RankRank changeCountryOverall score
1 — Singapore88.6
2 — Norway87.66
3 — Switzerland87.64
4 — Denmark85.67
5 ▲2 Sweden85.59
6 ▼1 Luxembourg83.85
7 ▼1 Netherlands83.76
8 ▲4 Finland83.1
9 — Canada82.98
10 ▲1 Australia82.18
Score out of 100. Rank change to previous quarter.

Source: Euromoney Country Risk - published January 2018. [1]

Annual Trend in Euromoney Country Risk, March 2000 - March 2011

The least-risky countries for investment. Ratings are further broken down into components including political risk, economic risk. Euromoney's quarterly 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).

Partial list of credit risk rating agencies
  • Fitch Ratings (U.S.)
  • Moody's (U.S.)
  • Standard & Poor's (U.S)
  • CTRISKS (Greater China)

Partial list of political risk analysis organizations
  • Euromoney Country Risk, ECR
  • IHS Country Risk
  • BMI Research
  • Country Risk Solutions
  • Economist Intelligence Unit
  • Eurasia Group
  • Maplecroft
  • Oxford Analytica
  • The PRS Group, Inc.

References
  1. : Survey which monitors the political and economic stability of 185 sovereign countries, according to ratings agencies and market experts. The information is compiled from Risk analysts; poll of economic projections; on GNI; World Bank’s Global Development Finance data; Moody’s Investors Service, Standard & Poor’s and Fitch IBCA; OECD consensus groups (source: ECGD); the US Exim Bank and Atradius UK; heads of debt syndicate and loan syndications; Atradius, London Forfaiting, Mezra Forfaiting and WestLB.

Downloadable country analysis and reports


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