Country risk

The collection of risks associated with investing in a foreign country, including exchange risk, economic risks (gross domestic product [GDP] evolution, inflation risk), transfer risks (the risk of suffering a block in repatriation of distributions and cash flow to the investor), political risks, social risks (including risks of general riots), regulatory and legal risks (the risk of existing legal provisions affecting a foreign investor, or being more onerous than in the home country), corruption, and sovereign risk (risk of default of financial obligations by the country).
The business climate in a country (and the risk of it being adverse) may be considered part of the country risk concept, or at any rate, distinctive factors for an investor when approaching an emerging market. Examples of such business climates include common or general legislation affecting a normal business (labor legislation, taxation, judicial system, and so on.), the state of the infrastructure necessary for the business, development or restrictions in the supply market (especially the availability of a qualified workforce and solvent local sub-contractors).


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