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Mahesh Kumar Sarva, Lovely Professional University Unit 12: Foreign Market Entry and Country Risk Management

Unit 12: Foreign Market Entry and Country Notes
Risk Management

CONTENTS

Objectives
Introduction
12.1 Foreign Market Entry

12.2 Definitions of Country Risk
12.3 Objectives of Country Risk Ratings
12.3.1 Nature of Country Risk Assessment
12.4 Techniques to Assess Country Risk
12.5 Raters of Country Risk

12.6 Model for Country Risk Analysis for India
12.7 Summary
12.8 Keywords

12.9 Review Questions
12.10 Further Readings

Objectives

After studying this unit, you will be able to:
Explain the foreign market entry strategies
Discuss the concept of country risk

Elaborate the objectives of country risk ratings
Describe the techniques to access country risk
Discuss the raters of country risk
Explain the Model for country Risk Analysis for India

Introduction

In recent years, a number of countries have made attempts to rate the creditworthiness of
corporate borrowers. Relative to domestic lending, international banks experience greater
difficulty in assessing the creditworthiness of sovereign borrowers and experience default on
loans for various reasons. Recently, several commercial services have begun to compile and
publish credit rating for countries, so as to estimate the risks involved in lending to them,
specially a country defaulting in its debt service payment obligations. The concepts of country
risk and creditworthiness have become important over the years and despite analytical difficulties
there has been a growth in interest in recent years among private and official lending institutions
in the systematic valuation of country risk. The interest has been generated mainly because
credit rating not only determines whether a country will be able to get loans at reasonable costs
but also whether it will be able to attract other types of capital.

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