Country risk encompasses the various risks of investing in a foreign country that can lead to either investment impairments or reduction in returns on investment. Investment impairments may arise from confiscatory actions by a sovereign. ROI reductions may arise from discriminatory actions by a sovereign directed to the company, a targeted industry or companies from certain countries. Both investment impairments and ROI reductions may arise from disruptive acts by others.
The primary objective of managing country risk is to protect company investments in foreign markets and sustain acceptable investment returns. This issue of Board Perspectives: Risk Oversight provides some points for multinational companies to consider when faced with high-risk situations.