Can country risk analysis be quantifiedShould CRA be quantified Essay

Can country risk analysis be quantifiedShould CRA be quantified - Essay Example These samples of observations help analysts to develop a statistical function which is open to probability analysis. Most of the events which are individually investigated by country risk analysis will come down closer to doubts rather than clear statistical risks. This drives the analysts to build risk channels from judgmental or theoretical foundations and may not be probabilistic. Country risk analysis depends upon the basic principle that increasing instabilities in social, political or economic components augment the risk of a deficit in the anticipated payoff on an investment. Imbalances in a particular risk factor represent one or more risk classes. Mapping all the elements at proper level of control produces a general assessment of venture risk. The structure of mapping varies with the type of investment giving rise to an imbalance in a given factor creating different risks for different investments. Unfortunately there is no all-inclusive theory which can guide the procedure of mapping the process in a country risk analysis (Sabal J., 2002). Country risk services build their risk measures with the help of an assorted mix of socio-political or economic indicants established on the choice of standards. These standards are developed out of analysts’ knowledge, experience and judgment. The services generally merge a range of factors indicating real and possible imbalances into a complete risk assessment which applies to a wide range of investment classes. Analysts have separated country risk into 6 major categories. But many of these categories overlap each other. Although most of the risk analysts do not agree with this list; these 6 constructs can be seen in risk ratings of virtually every service as seen below. Yes, country risk has to be quantified. The quantification of a country risk will help the investors to calculate the cash flow out of their investments. Investments can be based on