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Challenges with Country Risk Analysis

  • Measurement of key variables – generally out of date because of delays in collection and error in data
  • Population Groups – Usually analysts seek discrimination between reschedulers and
  • non-reschedulers. Ideally it should discriminate between interest rescheduler and interest and principal rescheduler
  • Political risk factors – Models cannot capture strikes, corruption, elections, political unstability
  • Portfolio Aspects –  Large banks hold a portfolio of loans so the risk is lesser because it is diversified
  • Incentive Aspects – Net Incentives not asked in models
  • Stability –  Variables which have explained rescheduling in the past need to explain it in the future

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