- 26 Feb, 2021
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PERFORMING A PRELIMINARY COUNTRY RISK ANALYSIS
In this exercise, assume you are an employee with a company that plans to build a factory abroad. Management is considering each of three countries as locations to build the factory, and must decide which one is best. Management prefers to establish operations in the country with the lowest risk. Your task is to conduct market research on each country by searching various websites that deal with country risk. You are to assess the level of country risk in each of the three countries: India, Poland and Malaysia.
Specifically, in this exercise you are to:
(i) Evaluate the level of country risk in each country by examining the following variables: corruption, political rights, civil liberties, freedom status, and economic freedom;
(ii) Make a spreadsheet using the country risk variables across the top and the three countries along the vertical axis;
(iii) Obtain data on the variables from online sources, and complete the spreadsheet;
(iv) Evaluate each country using the following scale: High risk, medium risk, and low risk;
(v) Rank the countries from lowest to highest overall risk; and
(vi) Write a brief report to your superior in which you briefly evaluate each country, and then make a recommendation on which country to build the factory.
Suggested Resources for this Exercise
Transparency International (TI) ( www.transparency.org (Links to an external site.)) is an independent organization that fights against corruption. TI publishes the annual Corruption Perceptions Index (CPI), which ranks corruption in more than 150 countries. Visit the CPI at TI’s website to obtain the CPI Score. In your analysis, you may find other TI resources useful, such as the Global Corruption Barometer, a survey that assesses public attitudes and experience on corruption in dozens of countries.
Freedom House (FH) ( www.freedomhouse.org (Links to an external site.)) is a non-governmental organization that assesses freedom around the world. In numerous countries, FH assesses conditions regarding the level of government accountability, the rule of law, and freedoms of expression and belief. At its website, FH annually publishes its Freedom in the World Comparative Rankings, an annual comparative assessment of the state of political rights and civil liberties in over 190 countries. The rankings are provided in spreadsheet style, where ‘PR’ stands for ‘Political Rights’ and ‘CL’ stands for ‘Civil Liberties.’ ‘Status’ refers to the countries’ freedom status. ’F,’ ‘PF,’ and ‘NF,’ respectively, stand for ‘Free,’ ‘Partly Free,’ and ‘Not Free.’
The Heritage Foundation (HF) (www.heritage.org (Links to an external site.)) is a think-tank that annually publishes the Index of Economic Freedom. The index measures levels of economic freedom and government interference in 161 countries. The index uses criteria such as level of trade barriers, rule of law, ability to enforce contracts, level of business regulation, and the degree of protection of intellectual property rights.
globalEDGE™ (globalEDGE.msu.edu) provides links to additional information on country risk.
Template
An example is provided below on how to organize your report. Write a brief report in which you summarize the results of the table, and provide any additional information that you deem useful. You may wish to write the report in the form of a memo.
Corruption Political Rights Civil Liberties Freedom Status Economic Freedom
India 5 4 etc.
Poland
Malaysia