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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/Norway7/24/2019 Countryriskanalysispptsecbgroup3 13200613420393 Phpapp02 111031064523 Phpapp02
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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