Country risk - ICRG Model

Country risk - ICRG Model - THE INTERNATIONAL COUNTRY RISK...

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Country Risk Management THE INTERNATIONAL COUNTRY RISK GUIDE (ICRG) MODEL
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ICRG MODEL Created in 1980 by editors of International Reports , a finance and economics newsletter CIA prototype: bimonthly classified risk report 1992: ICRG integrated into PRS Group 0 (very high risk) to 100 (very low risk) scale Clients: “banks, MNCs, importers, exporters, foreign exchange traders, shipping concerns,” etc.
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ICRG MODEL 140 countries rated monthly Three indices included: political risk (PR … includes societal risks), financial risk (FR), and economic risk (ER) PR assessments “made on the basis of subjective analysis;” FR and ER on “objective data” Allows changes in point-allocation to shift weighting
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TYPE I FORECASTING Current factors/”components” Future losses
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ICRG FORMULA Maximum points: Political Risk 100 pts. Financial Risk 50 pts. Economic Risk 50 pts. Total 200 pts. Aggregate risk: CPFER (country X) = 0.5 (PR+FR+ER)
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ICRG RATINGS CATEGORIES 00.0 to 49.5 points Very high risk 50.0 to 59.5 High risk 60.0 to 69.5 Moderate risk 70.0 to 79.5 Low risk 80.0 to 100.0 Very low risk (N.B .: reverses EIU’s scale!!)
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AN ADVANTAGE OF THE ICRG MODEL Analyst may modify weighting of components to meet specific needs
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FINANCIAL RISK (FR) Points assigned on basis of hard data for most recent year (available) Five components (factors or attributes)
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FINANCIAL RISK A. Foreign Debt as % of GDP (0.0-5.0% - 10.0 points; 5.1-10.0% - 9.5 pts.; etc.) Maximum points 10 B. Foreign Debt Service as %of Exports of Goods & Services (XGS) (0.0-4.9% - 10.0 pts.; 5.0- 8.9% - 9.5 pts.; etc.) Maximum points 10
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FINANCIAL RISK, CONT’D.
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This note was uploaded on 02/22/2012 for the course IBUS 301 taught by Professor Ms.nartey during the Fall '12 term at South Carolina.

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Country risk - ICRG Model - THE INTERNATIONAL COUNTRY RISK...

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