Country Risk Analysis
Managerial Challenge
Before venturing into any country, managers determine the likelihood and nature of country risk
and its probable effect on the operations and performance of the firm. Finding out about country
risks is a task performed in multinational enterprises and other firms with substantial
international operations. This exercise is designed to help you develop the market research skills
that you need to understand country risk.
Background
Country risk reflects potentially adverse effects on company operations and performance caused
by changes in countries’ political and legal environments. It may appear as harmful government
intervention in foreign firms’ trade and investment activities. Governments may impose legal
and regulatory burdens that increase business costs, delays, or lost opportunities. Governments
may restrict access to important markets, impose complex bureaucratic procedures, or limit the
amount of profits realizable from foreign operations. Political or legislative actions can harm
business interests, even when this is not their intent. Laws may be unexpectedly strict, favor host
country interests, or result in unintended consequences. Country risk is especially prevalent in
emerging markets and other countries with developing economies.
Your Task
In this exercise, assume you are an employee with a company that plans to build a factory
abroad. Management is considering each of six countries (India, Venezuela, Poland, Turkey,
Namibia, UAE) as locations to build the factory, and you 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.
Specifically, you need to cover the following aspects in your report:
1. Evaluate the level of country risk in each country by examining the following variables:
a. Corruption
b. Political rights
c. Civil liberties
d. Freedom status
e. Economic freedom
2. Obtain scores on the variables from online sources and complete the spreadsheet below.
3. Rank the countries from lowest to highest overall risk.
4. Interpret the rankings and explain how you evaluate each country.
5. Recommend a country to build the factory with solid analyses.
Suggested Resources
MGT 3375
International Business
2
Transparency International (TI) is an independent organization that fights against corruption.
TI publishes the annual Corruption Perceptions Index (CPI) (check
https://www.transparency.org/en/cpi/2020/index/nzl), which ranks corruption in more than 176
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. Pay attention to the scale used in
the score system.
Freedom House (FH) (www.freedomhouse.org) 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 2020 (check
https://freedomhouse.org/explore-the-map?type=fiw&year=2020), an annual comparative
assessment of the state of political rights and civil liberties in over 190 countries. Read the
report and obtain the relevant scores. Pay attention to the scale used in the score system.
The Heritage Foundation (HF) (www.heritage.org) is a think-tank that annually publishes the
Index of Economic Freedom (check https://www.heritage.org/index/heatmap). The index
measures levels of economic freedom and government interference in 182 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.
Page limit: 3-4 pages excluding title page, abstract, reference, and appendix (more than 4 pages are allowed)
APA format is required
Attach the results summary table as an appendix to the end of your writing
Pay attention to the measures
*I have included the chart of number for each country in the files*
