Country Risk Management

Prof: S.B. Choughule

Country risk
The risk that economic Social, political

condition and events in a foreign country will adversely affect the companys business in foreign country This includes Economic conditions-political & social unrest nationalization of assets exchange control & currency fluctuation

Types of Country risk

Political risk
Legal risk Social risk

Cultural Risk
Economics Risk Competitive Risk Transaction Risk Logistics Risk

Country risk involved in business

Merchandised export-African countries

buyer are not paying Merchandised import-accident in mines Service export including projectscancellation of contract Investment in subsidiaries-no control & return on investment Banking transaction- L/c from China

Political risk
Slow down in Govt decesion due to Political instability 13 days BJP Govt Pakistan no political system Somalia-civil war Opposition to FDI on political ground Example-No entry to D.P.world in US port sector FDI will slow in US due to national security problem Economic report of US president to Congress

Political battle in India for FDI

Chinese Companies can not entred in sensitive area of Indian Economy
Example-Port & telecommunication

India rejected Chinese co in port sector

Opposition to FDI on political ground Example-Wal-Mart Entry into retail

Indian Govt suspended SEZ policy for last 3 month and W.B. Govt banned on SEZ policy

Legal Risk
Legal framework of India is very complicated
Example-Entry in to infrastructure sector

National security-JNPT dredging MCA-Port contract Shipping Trade Practice Act CRZ-Costal regulation zone act USA-Official bankruptcy

Social risk
Social customs- Islamic countries

Pakistan-Bangladesh & Gulf countries Social attitude India Fishermen community opposing to port projects Opposition to SEZ in west Bengal NGO-Medha Patkar Green piece movement opposition by ship On environmental ground

Corruption in the Asia

Philippines
Indonesia Vietnam India

South Korea
China Malaysia Taiwan

Japan
Hongkong Singapore

9.40 8.03 7.54 6.67 6.30 6.29 6.25 6.23 2.10 1.87 1.20

out of 10

Cultural risk
India
Many holidays -Many religious Many

languages Many tradition Mentality of Indian people China new year no work for a week African counties traditional practice Islamic Countries Religious barriers

Economic Risk
External debt of country
Ability to raise the fund from International

market or other country-India 1991 position japan helped to India Assets of forex Reserve Stability of exchange rate Inflation rate