Countryriskanalysispptsecbgroup3 13200613420393 Phpapp02 111031064523 Phpapp02

7/24/2019 Countryriskanalysispptsecbgroup3 13200613420393 Phpapp02 111031064523 Phpapp02

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Country Risk

Ankit KumarAnkur Verma

Anustup SreemaniArpit MangalAshish Dogra

Ashutosh Dubey

Arpit Man


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Defnition

Country Risk Analysis is assessment opotential risks and rewards rom doing

business in country

Country risk represents potentially

ad!erse impact o a country"sen!ironment on the cash #ow o thefrm

Arpit Man


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Defnition

$$%&'%$'Country Risk Analysis (

Country risk represents the potentiallyad!erse impact o a country"s en!ironment onthe M)C"s cash #ows

Country risk can be used*to monitor countries where the M)C ispresently doing business+as a screening de!ice to a!oid conducting

business in countries with e,cessi!e risk+andto impro!e the analysis used in makinglong-term in!estment or fnancing

decisions

Arpit Man


4/27

.mportance

/sed to monitor countries where the frm ispresently engaged in international business

/sed by the frm as a screening de!ice toa!oid countries with e,cessi!e risk

/sed to assess particular orms o risk or aproposed pro0ect considered or a oreigncountry

Arpit Man


5/27

Awareness o Country Risk

Crisis in Me,ico $12& Crisis in China in $121

$113 4ast Asian Currency crisis Crisis in .ra5 Crisis in .ran6 Aghanistan

Recent sub-prime crisis starting in /SA

Arpit Man


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7actors

8olitical

4conomicConditions

Sub0ecti!e

7inancial

$$%&'%$'Country Risk Analysis 9

Ashutosh D


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8olitical Risk 7actors

Attitude o host go!ernment :ar

Currency incon!ertibility ;ureaucracy ;lockage o und transers

Corruption

$$%&'%$'Country Risk Analysis 3

Ashutosh D


8/27

8olitical Risk

) ?>V4R)M4)@ AC@.>)Marketers should consider a number opolitical risks *

Confscation * .s a process o a ?o!ernmenttaking ownership o a property withoutpaying any compensation 4g * Chineseconfscation o American 8roperty atercoming to power in $11

4,propriation * @he ?o!ernment takesownership and oBers some compensation

Ashutosh D


9/27

8olitical Risk

)ationaliation * .n!ol!es go!ernmentownership and it is the ?o!ernment itselthat operates the business being taken o!er

Domestication * 7oreign companies oBer!oluntarily or are asked to oBer control to a)ations" Citiens" 4g * 8epsi6 Coke6 ?M soldstake to locals

?eneral .nstability Risk * .n relate to theuncertainty o the uture !iability o a hostcountry"s political system

Ashutosh D


10/27

8olitical Risk

>wnership % Control Risk * 8ossibility that ahost country"s ?o!ernment might take actionto restrict in!estor"s risk

>peration risk * 8ossibility that a hostcountry"s go!ernment might constraint anin!estor"s business operation in any one orall areas like production6 marketing6 fnance

etc @ranser risk * Any uture act by ago!ernment that might constraint the abilityo a subsidiary to transer payments6 capital6profts out o a host country

Ashutosh D


11/27


Attitude o Consumers in the


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;lockage o 7und @ransers 7unds that are blocked may not be

optimally used Currency .ncon!ertibility

@he M)C parent may need to e,changeearnings or goods

Ankur Ve


13/27

:ar .nternal and e,ternal battles6 or e!en the

threat o war6 can ha!e de!astatingeBects

;ureaucracy ;ureaucracy can complicate businesses

Corruption Corruption can increase the cost o

conducting business or reduce re!enue


Ankur Ve


14/27

7inancial Risk 7actors

Current and potential state o thecountry"s economy

7inancial distress Additional host go!ernment restrictions Moratorium on und transer

.nterest rates6 e,change rates andin#ation

$$%&'%$'Country Risk Analysis $

nkur Verma

ki


15/27

7inancial Risk 7actors

Current and 8otential State o theCountry"s 4conomy

A recession can se!erely reduce demand 7inancial distress can also cause the

go!ernment to restrict M)C operations

.ndicators o 4conomic ?rowth A country"s economic growth is dependent

on se!eral fnancial actors - interest rates6e,change rates6 in#ation6 etc

Ankit Kumar

A kit K


16/27

4conomic Conditions

Di!ersifcation o the economy Degree o reliance on a ew key e,ports

and the eBects o a decline in theworldwide prices o those e,ports

4,change rate de!aluation

7re5uency o go!ernment inter!entionin the money market and the ceilingso interest rates

8ossibility o recession$$%&'%$'Country Risk Analysis $9

Ankit Kumar

A kit K


17/27

Sub0ecti!e actors

Country"s attitude towards pri!ateenterprise

Risk o currency de!aluation Risk o go!ernments income reduction 4,ternal #ows dependence6

8roducti!ity restrictions Social pressures Attitude o consumers in the host

country $$%&'%$'Country Risk Analysis $3

Ankit Kumar

A kit K


18/27

@ypes o Country RiskAssessment

Macro-assessment o country risk

Country characteristics that aBect profts

Micro-assessment o country risk

$$%&'%$'Country Risk Analysis $2

Ankit Kumar

A hi h D


19/27

@ypes o Country Risk

Assessment A macro-assessmento country risk is

an o!erall risk assessment o a country

without consideration o the M)C"sbusiness A micro-assessmento country risk is

the risk assessment o a country as

related to the M)C"s type o business

Ashish Dogra

Ashish Dogra


20/27

@ypes o Country Risk

Assessment @he o!erall assessment o country risk

thus consists o *

Macro-political riskMacro-fnancial riskMicro-political riskMicro-fnancial risk

Ashish Dogra

Ashish Dogra


21/27

@echni5ues o

Assessing Country Risk A checklist approachin!ol!es rating

and weighting all the identifed actors6

and then consolidating the rates andweights to produce an o!erallassessment

@he Delphi techniquein!ol!es

collecting !arious independent opinionsand then a!eraging and measuring thedispersion o those opinions

Ashish Dogra

Ashish Dogra


22/27

@echni5ues o

Assessing Country Risk Quantitative analysistechni5ues like

regression analysis can be applied to

historical data to assess the sensiti!ityo a business to !arious risk actors Inspection visitsin!ol!e tra!eling to a

country and meeting with go!ernment

oEcials6 frm e,ecuti!es6 and%orconsumers to clariy uncertainties

Ashish Dogra

Ashish Dogra


23/27

Applications oCountry Risk Analysis

.ra5"s in!asion o Kuwait was diEcult toorecast6 or e,ample )e!ertheless6

many M)Cs promptly reassessed theire,posure to country risk and re!isedtheir operations

@he $113-12 Asian crisis also showed

that M)Cs had underestimated thepotential fnancial problems that couldoccur in the high-growth Asian

countries

Ashish Dogra

nustup Sreemani


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.ndicators o high countryrisk

Farge go!ernment defcit relati!e to ?)8


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$$%&'%$'Country Risk Analysis &'

Country risk rankings Least risky countries,Score out of 100Source: EuromoneyCountry risk March 2010[1]

Rank Preious Country!era""score

1 1 #or$ay %&'0(

2 2 Lu)em*ourg

%2'+(

+ + S$iter"an-

%0'.(

& & /enmark '((

( . in"an- '1

. ( S$e-en .'1

3ustria .'(0 11 Cana-a .'0%

% #ether"an-s

&'.

10 % 3ustra"ia &'1.

Country risk rankingsLeast risky

countries,

Score out of 100Source: Euromoney

Country risk March 20101

nustup Sreemani

nustup Sreemani
http://en.wikipedia.org/wiki/Norwayhttp://en.wikipedia.org/wiki/Luxembourghttp://en.wikipedia.org/wiki/Luxembourghttp://en.wikipedia.org/wiki/Switzerlandhttp://en.wikipedia.org/wiki/Denmarkhttp://en.wikipedia.org/wiki/Denmarkhttp://en.wikipedia.org/wiki/Finlandhttp://en.wikipedia.org/wiki/Swedenhttp://en.wikipedia.org/wiki/Austriahttp://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/Netherlandshttp://en.wikipedia.org/wiki/Netherlandshttp://en.wikipedia.org/wiki/Australiahttp://var/www/apps/conversion/tmp/scratch_4/%23cite_note-0http://var/www/apps/conversion/tmp/scratch_4/%23cite_note-0http://en.wikipedia.org/wiki/Australiahttp://en.wikipedia.org/wiki/Netherlandshttp://en.wikipedia.org/wiki/Netherlandshttp://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/Austriahttp://en.wikipedia.org/wiki/Swedenhttp://en.wikipedia.org/wiki/Finlandhttp://en.wikipedia.org/wiki/Denmarkhttp://en.wikipedia.org/wiki/Switzerlandhttp://en.wikipedia.org/wiki/Switzerlandhttp://en.wikipedia.org/wiki/Luxembourghttp://en.wikipedia.org/wiki/Luxembourghttp://en.wikipedia.org/wiki/Norway


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Summary

Potentia" risk 4 re$ar-s of -oing *usiness in acountry

actors

8olitical

7inancial

4conomic Risk 3ssessment

Measurement 4 com5arison of country risk

6errorism

$$%&'%$'Country Risk Analysis &9

nustup Sreemani

nustup Sreemani


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@/

C t Ri k A l i

nustup Sreemani

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