The global firms that carry out country risk rating include D&B, Fitch, Moody’s, S&P, and Euler Hermes that publish periodic reports. Also, we have other agencies providing ranking of countries based on specific issues like Ease of Doing Business, Corruption index, Terrorism index, happiness index, business confidence etc. that have limited purpose. Most of these models were prepared in the context of globalization. Now there have been rapid changes in technology- driven business models, trade wars, terrorism threat, leading to complex risks and challenges for the business to expand globally. External agencies track and prepare rating based on certain attributes or data models.
The tool helps a company to expand global and capture the opportunities thrown by the business cycles. It is necessary for a company to have a internal tool that can be used as an entry strategy. Identifying five types of risks namely macroeconomic risk, financial/commercial risk, political risk, cultural risk, environment risk, various sub-factors are used to quantify each category of risk. Each sub-factor is assigned a maximum and minimum score and total score and category- wise score is arrived at. Five-point scale is created based on the total score and depending on the score, the Company can take decision to enter a country or not.
