Question

Why should the international companies emphasize the list of country risk? Details about the coutry risk.

Answer 1

ANSWER:

MEANING:

Country risk refers to the collection of risk which are associated with foreign investment instead of investing in domestic country.This risk include various type of risk like exchange rate risk,economic risk,political risk,transfer risk etc.Each country have their own rules and regulations and carry different country risk some have higher risk that didn't attract any foreign investment.

There are several risk which causes country risk i.e. mismanagement and unrest of labour,o overall economy and political unrest and many more that may affects it's businesses and result in huge investment losses.Emphasize to invest in an international companies is a great way to diversify any stock portfolio. For this investor always have to monitor risk before investing internationally because a slite change in exchange rate or interest rate may cause huge losses.Generally we can divide country risk into two group which are economic risk and political risk.In economic risk which associated with a country's financial condition because a country with a high debt to GDP ratio may not be able to raise money as easily to support itself and it puts it's domestic economy at risk.In political risk which associated with country politician impact to their investment decision.

International investors can determine country risk by check sovereign ratings , read the latest news and crises which are going on, check the asset's risk by looking at quantitative factors.If investors ignore some points so its increase country risk in international investment.