Country risk - Financial definition
Financial acronyms
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Concise definition of the term country risk
Country risk refers to the potential economic, political, and social uncertainties and challenges associated with investing or conducting business in a specific country.
Comprehensive definition of the term country risk
In finance, country risk, often known as sovereign risk, encompasses the potential adverse impact on financial investments or transactions due to macroeconomic factors, political instability, regulatory changes, and social conditions in a particular country.
Managing country risk involves the assessment of the likelihood of events such as currency devaluation, political unrest, expropriation of assets, or changes in economic policies that may affect the returns and safety of investments in that country.
Financial institutions and investors evaluate country risk to make informed decisions about allocating capital, managing portfolios, and safeguarding against potential losses arising from unfavorable developments at the national level.