WHAT IS COUNTRY RISK?

Country Risk is defined as the probability of occurrence of a financial loss in a given country due to macroeconomics, political/social issues, natural disasters or legislative decisions.

SOURCES OF COUNTRY RISK

  • Economic: Risks from the country’s economic evolution, affecting revenues or costs of the investments. It can be divided in macroeconomics (the conditions of domestic economy) and external sector (international transactions between the country and the rest of the world).
  • Political and social: Includes all possible damaging actions or factors for the business of foreign firms that emanate from any political authority, governmental body or social group in the host country (i.e. war, civil disturbances, etc.).
  • Natural disasters: Natural phenomena (i.e. seismicity, weather) that may impact negatively in the business conditions.

METHODOLOGY FOR COUNTRY RISK ASSESSMENT AT EDPR

Country Risk Assessment is based on an external assessment consensus of country risk and an internal assessment performed by EDPR, which is used to identify the specific source of risk in order to apply potential mitigation strategies.

External Assessment: It is the consensus from third parties assessments

  • ECAs
  • Private consultants
  • Credit rating agencies
  • Market indexes.

Internal Assessment: It is an internal estimate of country risk which allows to differentiate the specific source of risk

  • Economic sector
    • Macroeconomics
    • External sector
  • Political Risk
  • Natural Disaster

USE OF COUNTRY RISK

Country Risk of EDPR’s geographies is monthly monitored and is considered for new investment decisions.