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Feb 20, 2018

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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

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    .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

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    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

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    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

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    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

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    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

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    8olitical Risk 7actors

    Attitude o Consumers in the

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    8olitical Risk 7actors

    ;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

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    :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

    8olitical Risk 7actors

    Ankur Ve

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    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

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    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

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    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

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    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

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    @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

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    @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

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    @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

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    @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

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    @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

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    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