what are the factors that can affect country risk?

Expert Solution

Country risk is that risk that is associated with the uncertainty related to investing in a particular country. This uncertainty will lead to loss for investors.

There are several factors that can affect country risk. These factors are political factors, economic factors, exchange rate factors, and technological factors. For instance a country may experience political and economic unrests and this will increase the chances of risk of loss for the investors. Countries that have unstable governments will have higher degree of country risk associated with it when compared to a country which has stable government and hence will have negligible political risks. Economic risk refers to the ability of a country to pay back its debts. Sovereign risks are also one of the important risks. Sovereign risk is the risk that a foreign central bank will make changes to its foreign exchange regulations. These changes can either reduce or nullify the value of its foreign exchange contracts.

jeff jeffy answered 1 year ago

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