How to Assess Country Risk for International Business

Use the country credit ratings to plan and manage your international trade. Our analysis is your best guide to making decisions with confidence.

 

What is a Country Risk Analysis?

A country risk rating measures the risk of non-payment by companies in a given country. This risk is due to conditions or events outside any company's control. Knowing a country's risk, can help you make better decisions when trading internationally.

The overall country analysis is based on two elements:

  • Medium-Term Rating (Country Grade)
  • Short-Term Rating (Country Risk Level)

By looking at these two factors together, Euler Hermes is able to create a model and system for evaluating country risk levels.

Medium-Term Rating (Country Grade)

The country grade measures economic imbalances, the quality of the business climate, and the likelihood of political hazards. It is based on a six-level scale, AA (lowest risk) to D (highest risk). The rating is a combination of:

  1. The Macroeconomic Rating (ME) based on the analysis of the structure of the economy, budgetary and monetary policy, indebtedness, the external balance, the stability of the banking system and the capacity to respond effectively to (emerging) weaknesses
  2. The Structural Business Environment Rating (SBE) measures the perceptions of the regulatory and legal framework, control of corruption and relative ease of doing business
  3. The Political Risk Rating (P), which is based on the analysis of mechanisms for transferring and concentration of power, the effectiveness of policy-making, the independence of institutions, social cohesion, and international relations. 

 

Short-Term Rating (Country Risk Level)

The country risk level identifies more immediate threats by focusing on the direction of economic output in the next 6-12 months by using macroeconomic indicators that can signal finanical crisis as a result of a disruption to finanical flows. It is based on a scale ranging from 1 to 4, with 1 being the lowest risk level and 4 being the highest risk level.

  1. The Financial Flows Indicator (FFI), a measure of short-term financing risks for an economy that can impact payments of trade receivables between companies
  2. The Cyclical Risk Indicator (CRI) which measures the short-term disruptions in demand. It includes our macroeconomic and insolvency forecasts
Click on a country below to access the risk report. Each report features an overall country risk rating, strengths and weaknesses, economic overview, trade structure, and collection complexity. 
Check out the risk updates and economic outlook in 241 countries
Find out how debt collection works in 50 key markets