Country-risk analysis - American businessCountry-risk analysis is the assessment of the level of political and economic risk associated with doing business in another country. Risk analysis is used when extending credit to foreign buyers making foreign direct investment decisions. Country-risk analysis includes analysis of
- the level of political stability
- regulation of businesses
- protection for private property
- government wage and price controls
- government budgets and deficits
- interest rates
- exchange rates
Typically, multinational corporations (MNCs) conduct country-risk analyses before making major financial investments in new areas of the world. MNCs also pay consulting services to monitor changes in political and economic conditions around the world. One service provides a weekly update summarizing events in each country and providing analysis of the significance to businesses operating there.
To reduce country risk, companies will hedge against exchange-rate risk, seek assistance from U.S. government agencies, and insure investments through governmentsponsored corporations including the Overseas Private Investment Corporation and Export-Import Bank of the United States.