Country Risk Definition. Country Risk refers to the probability that changes in the business environment in another country where you are doing business may adversely impact your operations or payment for imports resulting in a financial loss. Country Risk also includes Sovereign Risk, which is a subset of risk specifically related to the government or one of its agencies refusing to comply with the terms of a loan agreement. Causes of Country Risk include political, macroeconomic mismanagement, war or labor unrest resulting in work stoppages. Political changes may come about due to a change in leadership, control by a ruling party, or war. New economic policies may be instituted resulting in expropriation of assets, nationalization of private companies, currency controls, inability to expatriate profits, higher taxes or tariffs, and a host of minor impacts. On a macroeconomic level, countries may pursue unsound monetary policy resulting in inflation, recession, higher interest rates, and shortages in hard currency reserves. The recent debt problems in Europe highlighted sovereign risk issues in Greece and other member states of the Eurozone when loan defaults were a real concern for banks holding the respective loan paper.
Forextraders' Broker of the Month
ForexTime (FXTM) is an award-winning platform that certainly has the feeling of being set up by people who know what they are doing. The firm demonstrates an understanding of what helps traders make better returns, and its success can be measured by the fact that it's doubled the number of clients it supports in recent years. The fact that the broker has grown to have more than two million accounts suggests it is getting things right for clients.