Country Risk

Country risk is the risk of investing in a foreign country. It is the risk that a foreign government will take actions that will negatively affect the value of investments in that country. Country risk can include political risk, economic risk, and currency risk. Political risk is the risk that a foreign government will take actions that will negatively affect the value of investments in that country. Economic risk is the risk that a foreign country’s economy will suffer from a downturn or recession. Currency risk is the risk that a foreign currency will depreciate in value relative to the investor’s home currency.

History of Country Risk

Country risk has been a concern for investors since the early days of international trade. In the 19th century, investors were concerned about the risk of investing in countries with unstable governments or economies. As international trade and investment increased in the 20th century, so did the need to understand and manage country risk. In the 1970s, the World Bank developed a system to measure and manage country risk. This system, known as the Country Risk Classification System, is still used today to measure and manage country risk.

Table of Comparisons

Summary

Country risk is the risk of investing in a foreign country. It is the risk that a foreign government will take actions that will negatively affect the value of investments in that country. Country risk can include political risk, economic risk, and currency risk. Investors must understand and manage country risk in order to make informed investment decisions. For more information about country risk, investors can consult the World Bank’s Country Risk Classification System or other websites such as Investopedia and The Balance.

See Also

• Political Risk
• Economic Risk
• Currency Risk
• Exchange Rate Risk
• Interest Rate Risk
• Inflation Risk
• Default Risk
• Liquidity Risk
• Market Risk
• Credit Risk

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