What is a Country Risk Analysis?
A country risk rating measures the risk of non-payment by companies in a given country. This risk is due to conditions or events outside any company's control. Knowing a country's risk, can help you make better decisions when trading internationally.
The overall country analysis is based on two elements:
Medium-Term Rating (Country Grade)
The country grade measures economic imbalances, the quality of the business climate, and the likelihood of political hazards. It is based on a six-level scale, AA (lowest risk) to D (highest risk). The rating is a combination of:
- The Macroeconomic Rating
- The Structural Business Envrionment Rating
- The Political Risk Rating
Short-Term Rating (Country Risk Level)
The country risk level identifies more immediate threats by focusing on the direction of economic output in the next 6-12 months by using macroeconomic indicators that can signal finanical crisis as a result of a disruption to finanical flows. It is based on a scale ranging from 1 to 4, with 1 being the lowest risk level and 4 being the highest risk level.
- The Financial Flows Indicator
- The Cyclical Risk Indicator