What is Country Risk?

Definition of Country Risk: It is defined as the probability that can bring alterations in the business in other country where a person doing a business may affect the payment or operations for the imports which in turn causes financial loss. It also includes Sovereign danger, which is regarded as a subset of the danger specially related to a government or any of its agencies, denying fulfilling all the terms and agreements of an agreement. The cause behind a country risk consists of macroeconomic mismanagement, political, labor unrest hampering the work. The changes in the political condition take place due to the change in leadership, a war or a control by one of the ruling parties. New policies may be invented that result in the expropriation of the valuable assets, controls in the currency, inability to increase the profits, tariffs and many other minor impacts. As far as a macroeconomic level is concerned, there are several countries that follow an unstable monetary policy giving rise to recession, inflation, high interest rates and shortage in the currency reserves. The current debt issues in Europe displayed sovereign dangers in several member states and Greece.