Reading 2-2: Managing Risk in an Unstable World

1. Analysts

1.1. Can be biased by their own political beliefs

1.2. Should be present in country of analysis

1.3. Have specific expertise that taints their analysis

2. Data

2.1. Political Risk is hard to measure because it's often qualitative

2.1.1. Analysts use proxies like whether judges receive a good wage

3. Countries should emphasize long-term risk - issues related to demographics and natural resources

4. Risk is not always a bad thing

5. Political Risk

5.1. Influenced by

5.1.1. Passage of laws

5.1.2. Decisions of leaders

5.1.3. Rise of popular movements

5.2. Companies involved in foreign markets need early and accurate information on political risk

5.2.1. International markets are more interconnected than ever

5.2.2. US is making world more volatile since 9/11

5.2.3. Offshoring is growing but labor is cheap for a reason

5.2.4. World is increasingly dependent on oil from politically unstable countries

5.3. Says whether a country WILL pay its debt

5.4. Focuses on

5.4.1. Stability

5.4.1.1. Avoiding Shocks

5.4.1.1.1. Shocks

5.4.1.2. Ability to implement policies

5.4.2. Openness

5.4.3. Relationship between stability and openness

6. Economical Risk

6.1. Says whether a country CAN pay its debt