Country Risk Definitions

Here are some basic country risk definitions for one’s edification.

Country risk: A collection of risks associated with investing in a foreign country.

Political risk: The risk that an investment’s returns could suffer as a result of political changes or instability in a country.

Sovereign risk: The risk that a foreign central bank will alter its foreign-exchange regulations thereby significantly reducing or completely nulling the value of foreign-exchange contracts.

Credit risk: The risk of a government becoming unwilling or unable to meet its loan obligations.

Economic risk: The risk that macroeconomic conditions will affect an investment.

Geostrategic risk: The risk that international events, such as wars or diplomatic initiatives, will damage business or financial interests.

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