Country Risk Mitigation Strategies
Organizations face various choices as they seek to manage Country Risk. If they understand their exposure to this risk, they can further evaluate (i) the approaches available to mitigate it; (ii) the costs relative to the benefits; and (iii) any additional or new issues they may incur, including credit, market, and operational risk. The foundation or any strategy to mitigate Country Risk is careful assessment based on rigorous research. Among the most traditional approaches to mitigate Country Risks are risk limits and diversification of suppliers, trading counterparties, and banks. Other approaches involve guarantees, financial hedging transactions, master netting agreements, and collateral. Various governmental and multilateral organization provide sources of additional support to protect against the risks relating to exports and trade financing, including the World Bank, the Multilateral Investments Guarantee Agency, the International Finance Corporation, the Overseas Private Investment Corporation, Coface, and various export credit agencies.
KeywordsGuarantees Risk limits Diversification Credit default swaps Master netting agreements Collateral Multilateral agencies Dispute settlement
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