Ch16CountryRiskAnalysis国际金融管理山东大学-秦

Ch16CountryRiskAnalysis(国际金融管理-山东大学,秦2024/3/26Ch16CountryRiskAnalysis(国际金融管理山东大学,秦ChapterObjectivesToidentifythecommonfactors usedbyMNCstomeasureacountry’spoliticalriskandfinancialrisk;Toexplainthetechniquesusedtomeasurecountryrisk;andToexplainhowtheassessmentofcountryriskisusedbyMNCswhenmakingfinancialdecisions.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦CountryRiskAnalysisCountryriskrepresentsthepotentiallyadverseimpactofacountry’senvironmentontheMNC’scashflows.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦CountryRiskAnalysisCountryriskcanbeused:tomonitorcountrieswheretheMNCispresentlydoingbusiness;asascreeningdevicetoavoidconductingbusinessincountrieswithexcessiverisk;andtoimprovetheanalysisusedinmakinglong-terminvestmentorfinancingdecisions.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦PoliticalRiskFactorsAttitudeofConsumersintheHostCountrySomeconsumersmaybeveryloyaltohomemadeproducts.AttitudeofHostGovernmentThehostgovernmentmayimposespecialrequirementsortaxes,restrictfundtransfers,subsidizelocalfirms,orfailtoenforcecopyrightlaws.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦PoliticalRiskFactorsBlockageofFundTransfersFundsthatareblockedmaynotbeoptimallyused.CurrencyInconvertibilityTheMNCparentmayneedtoexchangeearningsforgoods.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦WarInternalandexternalbattles,oreventhethreatofwar,canhavedevastatingeffects.BureaucracyBureaucracycancomplicatebusinesses.CorruptionCorruptioncanincreasethecostofconductingbusinessorreducerevenue.PoliticalRiskFactorsCh16CountryRiskAnalysis(国际金融管理山东大学,秦CorruptionPerceptionsIndexTheindex,whichispublishedbyTransparencyInternational,reflectsthedegreetowhichcorruptionisperceivedtoexistamongpublicofficialsandpoliticians.In2001,91countriesarerankedonacleanscoreof10.RankCountryScore 1 Finland 9.9 3 NewZealand 9.4 4 Singapore 9.2 7 Canada 8.9 13 U.K. 8.3 14 HongKong 7.9 16 Israel 7.6 16 U.S.A. 7.6 18 Chile 7.5 20 Germany 7.4 21 Japan 7.1RankCountryScore 23 France 6.7 26 Botswana 6.0 27 Taiwan 5.9 38 SouthAfrica 4.8 42 SouthKorea 4.2 46 Brazil 4.0 51 Mexico 3.7 57 Argentina 3.5 57 China 3.5 79 Russia 2.3 88 Indonesia 1.9Ch16CountryRiskAnalysis(国际金融管理山东大学,秦FindoutmoreaboutTransparencyInternationalandtheCorruptionPerceptionsIndexbyvisiting/documents/cpi/2001/cpi2001.html.OnlineApplicationCh16CountryRiskAnalysis(国际金融管理山东大学,秦FinancialRiskFactorsCurrentandPotentialStateoftheCountry’sEconomyArecessioncanseverelyreducedemand.FinancialdistresscanalsocausethegovernmenttorestrictMNCoperations.IndicatorsofEconomicGrowthAcountry’seconomicgrowthisdependentonseveralfinancialfactors-interestrates,exchangerates,inflation,etc.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦Whatarethepoliticalandfinancialoutlookforvariouscountries?OnlineApplicationConsulttheCountryCommercialGuidespreparedbyembassystaffat/website/ccg.nsf/ccghomepage?openform.RefertotheCIA’sWorldFactbookat/.Visit/ifc/Ch16CountryRiskAnalysis(国际金融管理山东大学,秦TypesofCountryRiskAssessmentAmacro-assessmentofcountryriskisanoverallriskassessmentofacountrywithoutconsiderationoftheMNC’sbusiness.Amicro-assessmentofcountryriskistheriskassessmentofacountryasrelatedtotheMNC’stypeofbusiness.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦TypesofCountryRiskAssessmentTheoverallassessmentofcountryriskthusconsistsof:Macro-politicalriskMacro-financialriskMicro-politicalriskMicro-financialriskCh16CountryRiskAnalysis(国际金融管理山东大学,秦Notethattheopinionsofdifferentriskassessorsoftendifferduetosubjectivitiesin:identifyingtherelevantpoliticalandfinancialfactors,determiningtherelativeimportanceofeachfactor,andpredictingthevaluesoffactorsthatcannotbemeasuredobjectively.TypesofCountryRiskAssessmentCh16CountryRiskAnalysis(国际金融管理山东大学,秦Techniquesof

AssessingCountryRiskAchecklistapproachinvolvesratingandweightingalltheidentifiedfactors,andthenconsolidatingtheratesandweightstoproduceanoverallassessment.TheDelphitechniqueinvolvescollectingvariousindependentopinionsandthenaveragingandmeasuringthedispersionofthoseopinions.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦Techniquesof

AssessingCountryRiskQuantitativeanalysistechniqueslikeregressionanalysiscanbeappliedtohistoricaldatatoassessthesensitivityofabusinesstovariousriskfactors.Inspectionvisitsinvolvetravelingtoacountryandmeetingwithgovernmentofficials,firmexecutives,and/orconsumerstoclarifyuncertainties.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦Often,firmsuseavarietyoftechniquesformakingcountryriskassessments.Forexample,theymayuseachecklistapproachtodevelopanoverallcountryriskrating,andsomeoftheothertechniquestoassignratingstothefactorsconsidered.Techniquesof

AssessingCountryRiskCh16CountryRiskAnalysis(国际金融管理山东大学,秦DevelopingACountryRiskRatingAchecklistapproachwillrequirethefollowingsteps:Assignvaluesandweightstothepoliticalriskfactors.Multiplythefactorvalueswiththeirrespectiveweights,andsumuptogivethepoliticalriskrating.Derivethefinancialriskratingsimilarly.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦DevelopingACountryRiskRatingMultiplytheratingswiththeirrespectiveweights,andsumuptogivetheoverallcountryriskrating.Assignweightstothepoliticalandfinancialratingsaccordingtotheirperceivedimportance.Achecklistapproachwillrequirethefollowingsteps:Ch16CountryRiskAnalysis(国际金融管理山东大学,秦DevelopingACountryRiskRatingDifferentcountryriskassessorshavetheirownindividualproceduresforquantifyingcountryrisk.Althoughmostproceduresinvolveratingandweightingindividualriskfactors,thenumber,type,rating,andweightingofthefactorswillvarywiththecountrybeingassessed,aswellasthetypeofcorporateoperationsbeingplanned.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦DevelopingACountryRiskRatingFirmsmayusecountryriskratingswhenscreeningpotentialprojects,orwhenmonitoringexistingprojects.Forexample,decisionsregardingsubsidiaryexpansion,fundtransferstotheparent,andsourcesoffinancing,canallbeaffectedbychangesinthecountryriskrating.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦ComparingRiskRatings

AmongCountriesOneapproachtocomparingpoliticalandfinancialratingsamongcountriesistheforeigninvestmentriskmatrix(FIRM

).Thematrixmeasuresfinancial(oreconomic)riskononeaxisandpoliticalriskontheotheraxis.Eachcountrycanbepositionedonthematrixbasedonitspoliticalandfinancialratings.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦UnclearZoneAcceptableZoneUnacceptableZoneFinancialRiskRatingPoliticalRiskRatingAcceptableUnacceptableStableUnstableTheForeignInvestmentRiskMatrix(FIRM)Ch16CountryRiskAnalysis(国际金融管理山东大学,秦ActualCountryRiskRatingsAcrossCountriesSomecountriesareratedhigheraccordingtosomeriskfactors,butloweraccordingtoothers.Onthewhole,industrializedcountriestendtoberatedhighly,whileemergingcountriestendtohavelowerriskratings.Countryriskratingschangeovertimeinresponsetochangesintheriskfactors.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦/data/wdi2001/pdfs/tab5_2.pdf/icrg/icrg.html///moodys/cust/loadBusLine.asp?busLine=sovereign/OnlineApplicationHowriskyisyourcountry?Lookup:Ch16CountryRiskAnalysis(国际金融管理山东大学,秦IncorporatingCountryRiskinCapitalBudgetingIftheriskratingofacountryisintheacceptablezone,theprojectsrelatedtothatcountrydeservefurtherconsideration.Countryriskcanbeincorporatedintothecapitalbudgetinganalysisofaprojectbyadjustingthediscountrate,orbyadjustingtheestimatedcashflows.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦AdjustmentoftheDiscountRateThehighertheperceivedrisk,thehigherthediscountratethatshouldbeappliedtotheproject’scashflows.AdjustmentoftheEstimatedCashFlowsByestimatinghowthecashflowscouldbeaffectedbyeachformofrisk,theMNCcandeterminetheprobabilitydistributionofthenetpresentvalueoftheproject.IncorporatingCountryRiskinCapitalBudgetingCh16CountryRiskAnalysis(国际金融管理山东大学,秦Applicationsof

CountryRiskAnalysisAlertedbyitsriskassessor,GulfOilplannedtodealwiththelossofIranianoil,andwasabletoavoidmajorlosseswhentheShahofIranfellfourmonthslater.However,whiletheriskassessmentofacountrycanbeuseful,itcannotalwaysdetectupcomingcrises.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦Applicationsof

CountryRiskAnalysisIraq’sinvasionofKuwaitwasdifficulttoforecast,forexample.Nevertheless,manyMNCspromptlyreassessedtheirexposuretocountryriskandrevisedtheiroperations.The1997-98AsiancrisisalsoshowedthatMNCshadunderestimatedthepotentialfinancialproblemsthatcouldoccurinthehigh-growthAsiancountries.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦OnlineApplicationFormoreinformationontheAsiancrisis,checkoutthefollowingsites:/~nroubini/asia/AsiaHomepage.html/navigat/english/asienhau.htmCh16CountryRiskAnalysis(国际金融管理山东大学,秦ReducingExposure

toHostGovernmentTakeoversThebenefitsofDFIcanbeoffsetbycountryrisk,themostsevereofwhichisahostgovernmenttakeover.Toreducethechanceofatakeoverbythehostgovernment,firmsoftenusethefollowingstrategies:UseaShort-TermHorizonThistechniqueconcentratesonrecoveringcashflowquickly.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦ReducingExposure

toHostGovernmentTakeoversRelyonUniqueSuppliesorTechnologyInthisway,thehostgovernmentwillnotbeabletotakeoverandoperatethesubsidiarysuccessfully.HireLocalLaborThelocalemployeescanapplypressureontheirgovernment.Ch16CountryRiskAnalysis(国际金融管理山东大学,秦BorrowLocalFundsThelocalbankscanapplypressureontheirgovernment.PurchaseInsuranceInvestmentguaranteeprogramsofferedbythehomecountry,hostcountry,oraninternationalagencyinsuretosomeextentvariousformsofcountryrisk.ReducingExposure

toHostGovernmentTakeoversCh16CountryRiskAnalysis(国际金融管理山东大学,秦TheU.S.governmentprovidesinvestmentinsurancethroughtheOverseasPrivateInvestmentCorporation(OPIC).VisittheOPICat/.TheWorldBank’sMultilateralInvestmentGuaranteeAgency(M

IGA)offerspoliticalriskinsurancetoinvestorsinemergingeconomies.VisittheM

IGAat.OnlineApplicationCh16CountryRiskAnalysis(国际金融管理山东大学,秦ImpactofCountryRiskonanMNC’sValue E(CFj,t) = expectedcashflowsincurrencyjtobereceivedbytheU.S.parentattheendofperiodt E(ERj,t) = expectedexchangerateatwhichcurrencyjcanbeconvertedtodollarsattheendofperiodt k = weightedaveragecostofcapitaloftheparentExposureofForeignProjectstoCountryRisksCh16CountryRiskAnalysis(国际金融管理山东大学,秦WhyCountryRiskAnalysisIsImportan