What is the Country Risk?
Many significant corporations have global commercial interests and are willing to invest in multiple countries. Country risk is the risk of investing in one country by foreign residents. When a foreign investor invests in a country, factors like corruption, politics, etc., make it difficult for the investor to operate in the country.
Example of Country Risk:
There are numerous components of country risk. One such component is political risk. For example, a change in government might lead to a less welcoming regulatory environment for foreign companies. In some extreme cases, there is the risk that a firm's assets in a foreign country will be seized after a political coup. Other risks may be concerned with the inadequacies of a country's legal system, the level of corruption, and the potential for violence.
Why is Country Risk important?
A country risk assessment can assist a company in identifying and evaluating hazards particular to that country. Businesses can then assess how much such risks may affect their operations and what steps they might take to control or reduce them. This type of country risk analysis is critical and cannot be stressed.