StudentShare solutions
Triangle menu

Evalutating country risk analysis - Essay Example

Nobody downloaded yet

Extract of sample
Evalutating country risk analysis

This inter mix of factors creates a complexity in understanding and application of CRA. (Meldrum: 2000).
The measures used for risk evaluation may differ based on the experience and judgement of analysts. These may employ a number of common points initially and then lead to detailed discussion of specific issues affecting a specific sphere of interest. Thus a combination of actual and potential imbalances are calculated to apply to a broad investment category.These decisions are judgemental and hence may have limited universal application across the board. (Meldrum: 2000).
Broadly the measures applied by the Political Risk Services' International Country Risk Guide (ICRG) for CRA include political, economic and financial risk. The ICRG also calculates a composite risk which is generally evolved from these base indices. A final measure which some analysts examine with reference to CRA is Institutional Investor's country credit ratings. Thus it would be seen that information is defined in a number of ways. (Erb.Harvey.Tadas:1996). Another problem in CRA is limited availability of historical data in emerging economies. This increases the uncertainty of future prediction. (Damodaran: 2004). Since risk implies identification of a well defined event from a large number of observations which is amenable to probability analysis, lack of the same results in basing CRA on uncertainy. (Meldrum: 2000). Thus analysts tend to construct the risk based on judgmental factors rather than probabilistic criteria. CRA ratings which are easily accessible are by ratings agencies which measure default risk and equity risk which is generally derived. (Damodaran: 2003). These differing perspectives necessitate the need to evolve systematic methodologies for CRA.
Impact of Differing Geographical and Time Perspectives
Risks between countries can vary due to national differences in economy, policy, geography, currency and a host of socio-political factors. For example comparing the period in Romania in the pre and post Cold War era uniformly is likely to result in totally varied results. However many times risk analysts tend to use uniform criteria to assess country risks beyond time as well as situations differential faced in making such an assessment. While inclusive country risk measures are correlated with each other, for higher returns risk analysts recommend value-oriented strategies across the board which may create anomalies. (Erb.Harvey.Tadas:1996). Thus factors which are common for all countries need to be identified.
Application of financial risk measures is likely to be done uniformly evolving information of future expected returns and political risk criteria are likely to be ignored. (Erb.Harvey.Tadas:1996). This is supported by evidence from ICRG composite, financial and economic ratings, which appear standardised. (Erb.Harvey.Tadas:1996). While economic factors are also evolving the real challenge is to assess the political risk particularly in emerging economies as Romania.
Problems of Quantitative and Qualitative Methods
CRA include a mix of qualitative and quantitative analysis. Some as the Bank of America World Information Services is based exclusively on quantitative information while the Institutional Investor is a qualitative survey based on opinions of banking professionals taking a number of non quantitative factors ...Show more


Globalisation has led to investment in new and emerging markets. Developing countries as China and India are also increasingly investing in the field of energy and manufacturing across the globe. International financial institutions and investors need to assess the risk of investing in greenfield areas…
Author : floydkling
Evalutating country risk analysis essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Evalutating country risk analysis"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Morocco Country Risk Assessment
According to the paper Morocco has taken initiatives to attract more investors by establishing conducive business environment and political stability. In addition to development of effective infrastructure system, the government has embarked on privatization of essential services thus attracting foreign direct investment resulting to reduced level of unemployment. To ensure growth of trade and business in Morocco the government has also formed trade partnership thus creating ready market for finished goods.
4 pages (1000 words) Essay
Country Risk Assessment: Romania
These benefits from the whole process make the governments of countries to provide special incentives for FDI. The growth of the global economy has given rise to the importance of notion of FDI. With the increasing globalization the importance country risk evaluation is also increasing, especially if an investment is to be undertaken.
4 pages (1000 words) Essay
Country Risk Analysis Essay
Country risk analysis tries to identify the possibility for these risks which may decrease the expected return (Sergey Krivovichev, Peter Burns, Ivan Tananaev, 2007). Risk aids an analyst to identify an event drawn from large samples of observations. These samples of observations help analysts to develop a statistical function which is open to probability analysis.
10 pages (2500 words) Essay
Country Risk Analysis
Country risk analysis (CRA) is used to find out how these potential risks may influence the return of internationally placed investments. This paper attempts at establishing the main categories of country risks as well as difficulties encountered in country risk analysis.
4 pages (1000 words) Essay
Reflections on possible difficulties encountered in carrying out a country risk analysis
Country risk analysis (CRA) is used to find out how these potential risks may influence the return of internationally placed investments. This paper attempts at
4 pages (1000 words) Essay
Country Risk and Strategic Planning Analysis Paper
Therefore, certain risks are involved. Product: Since a Coffee Café shares some of the characteristics of a bar, and some of the characteristics of a restaurant,
2 pages (500 words) Essay
Can country risk analysis be quantifiedShould CRA be quantified
Country risk analysis tries to identify the possibility for these risks which may decrease the expected return (Sergey Krivovichev, Peter Burns, Ivan Tananaev, 2007). Risk aids an analyst to
10 pages (2500 words) Essay
Japan Country risk analysis
This will impact the price and also the sustainability of the manufacturing process. Each employee that will create the products will have to be
3 pages (750 words) Essay
Country Risk Premium
There is often a great challenge in estimating the cost of capital in both developed and emerging markets. The main argument in this paper is on the perspective that country risk and uncertainty is basically a non-diversifiable, as it is an integral aspect of the estimation models for the capital costs.
12 pages (3000 words) Essay
Country Risk / Denmark
As such, the nation has very low political risks as far as business environment is concerned. The financial system risk is rated very low. Experts credit the Danish Financial Supervisory Authority (DFSA) for this success. The body regulates the all
1 pages (250 words) Essay
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Click to create a comment
Contact Us