What is a Sector Risk Analysis?
A sector risk analysis measures the economic and financial condition of a given a sector. The analysis provides information on the risk of non-payment by companies within a specific industry. The sector reports are designed to complement our country risk analysis to help you trade with peace of mind.
How is a Sector Rated?
Our sector risk analyses are based upon a forward-looking evaluation reviewing four key determinants: demand, profitability, liquidity, and business environment. Each sector then receives a grade based on a four-level scale from low to high.
Four Components Analyzed on a Global Scale
- Demand: outlook for companies’ turnovers based on the organic growth, fundamentals, and price competition of the sector.
- Profitability: outlook for companies’ margins and profits depending on the evolution of prices in raw materials/commodities, on labor costs and fluctuations in supply and capacity.
- Liquidity: outlook for companies’ cash positions and financing risk, based on access to financing and payment performance.
- Business Environment: any technological innovations, new government subsidies and changes in legal framework that can alter business models and companies’ strategies.
Four Levels of Risk
- High Risk: imminent or recognized crisis
- Sensitive Risk: structural weakness, unfavorable or fairly bad outlook
- Medium Risk: signs of weaknesses and possible slowdown
- Low Risk: sound fundamentals and very favorable or fairly good outlook