What is country risk analysis?

Question

How is country risk analysis conducted? Is country risk analysis an effective tool in determining the desirability of establishing a manufacturing site or other mode of entry?

Answer 1

Country Risk and Foreign Direct Investment

Country risk analysis (CRA) attempts to identify imbalances that increase the risk of a shortfall in the expected return of a cross-border investment. This paper describes the general process used to create risk measures and discusses some of the weaknesses of this process. It then examines the degree of association of six measures
(I. Economic Risk
II. Transfer Risk
III. Exchange Rate Risk
IV. Location or Neighborhood Risk
V. Sovereign Risk
VI. Political Risk)
and analyzes the ability of these measures to predict returns for a manufacturing investment. The paper concludes that company analysts may improve the performance of risk measures available from commercial services by adjusting risk measurement to fit the company's specific type of foreign direct investment.

Pls refer to the link for the full paper.

Answer 2

You would need to access general information about the particular country.Who's who. Financial system used, Politics, Central Bank policies, Trade policies, are they members of WTO, World Bank, IMF, you name it. . . .get information from companies who are already doing business in that country, check with your Embassy in that country, get information from companies who have established manufacturing sites, get information from companies who have invested in the local share market/bonds market . . . . pay some money to get "inside"information as to who is really the Guy behind the local scene.
Hope that helps a bit