Country Risk - Methodology
Country Risk Methodology
To obtain the overall country risk score, Euromoney assigns a weighting to nine categories. These are political risk (25% weighting), economic performance (25%), debt indicators (10%), Debt in default or rescheduled (10%), credit ratings (10%), access to bank finance (5%), access to short-term finance (5%), access to capital markets (5%), discount on forfaiting (5%).
The best underlying value per category achieves the full weighting (25, 10 or 5); the worst scores zero and all other values are calculated relative to these two. The formula used is the following: A-(A/(B-C)) x (D-C), where A = category weighting; B = lowest value* in range; C = highest value* in range, D = individual value.
*NB for debt indicators and debt in default, B and C are reversed in the formula, as the lowest score receives the full weighting and the highest gets zero.
Political risk (25% weighting): the risk of non-payment or non-servicing of payment for goods or services, loans, trade-related finance and dividends, and the non-repatriation of capital. Risk analysts give each country a score between 10 and zero - the higher, the better. This does not reflect the creditworthiness of individual counterparties.
Economic performance (25%): based (1) on GNI (Atlas Method) figures per capita and (2) on results of Euromoney poll of economic projections, where each country's score is obtained from average projections for 2003 and 2004.