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Resources for Assessing Export Risks

Instructor: Jessica Keys
If you're considering doing business in another country, prior research is crucial. Fortunately, there are plenty of resources at your disposal that can help you find information about international companies and any potential operational risks. Check out this article to get started.

Resources for Assessing Export Risks

Every business venture involves some degree of risk, and where international business is concerned, there are many factors that can have a negative impact on the profitability and value of your business, such as changes to regulations or regional violence.

A business looking to expand its borders may first consult the services of a credit rating agency or a risk analysis provider to get a picture of the risks involved with doing business in a certain country. These agencies compile and analyze data to assess different kinds of risks. The ratings they publish are entirely subjective; there is no one standard methodology used to determine them, so the risk profile of one country may vary from agency to agency.

Credit Rating Agencies

Fitch Ratings www.fitchratings.com Using its own methods and models, Fitch primarily bases its credit ratings on an obligor's (i.e. the bank, corporation or public finance organization being assessed) ability to meet its financial obligations and live up to the terms of any agreements made with investors. This trait is also known as creditworthiness. Fitch's ratings system is structured from AAA to BBB (''investment grade'', lower risk) and BB to D (''speculative grade'', higher risk), and only covers credit risks. Other types of risks, such as market risks or liquidity, are not factored into these ratings. Fitch uses the same ratings system to determine national scale ratings, which focus on the quality of credit in a given country.

Standard & Poor's www.standardandpoors.com In addition to general credit and currency ratings, S&P maintains long- and short-term national/regional scale credit ratings for a given country or region. The rating system employed by S&P generally runs from AAA to D (a rating of D means the obligor has defaulted or filed for bankruptcy), but different countries and regions may use different scales. S&P also provides economic research and analysis, and maintains a blog relating to current global market intelligence.

Moody's www.moodys.com Like other credit agencies, Moody's employs its own expert methodology in determining an entity's creditworthiness, including on the national scale. For long-term obligations, these entities are generally rated as Aaa (lowest risk), Aa, A, Baa, Ba, B, Caa, Ca or C (highest risk), and can include supplemental ratings related to short-term investments and securities. In addition to its own credit opinions, Moody's offers advisory services and analysis for risk management professionals.

Risk Analysis Providers

BMI Research www.bmiresearch.com A member of the Fitch Group, BMI can provide a complete risk profile for internationally-minded businesses. Available resources include country and industry-specific reports as well as white papers, events, webinars and custom reports to suit the needs of your company.

Country Risk Solutions www.countryrisksolutions.com This provider specializes in analyzing, insuring and managing a range of risks, including political, cultural, environmental and technical risks, for international businesses at all stages of development.

Verisk Maplecroft maplecroft.com When consulting with a multinational business or organization, Maplecroft utilizes its current database that covers risk factors in 198 countries and is broken down into the four categories of political risk, economics, human rights and the environment. It can provide a detailed, granular analysis tailored to specific business needs.

Other Resources

Euromoney Country Risk (ECR) Survey This survey, updated quarterly by hundreds of experts in the field, distills several economic and political risk indicators into a single score, one each for over 180 countries. These scores are then compiled into a ranked list; the closer the score is to 100, the lower the risk of default.

To illustrate, here are ECR's five top scoring (lowest risk) countries for the year 2017 (Q3):

Country ECR Score
1. Singapore 88.62
2. Norway 88.03
3. Switzerland 87.85
4. Denmark 85.79
5. Luxembourg 84.02

This survey can be a useful tool to determine a country's risk status at a glance. Moreover, complete data for each surveyed country and detailed articles may be accessed for free on ECR's website at www.euromoneycountryrisk.com.

Export.gov Run by the United States Department of Commerce, export.gov is a great place to get general trade and export advice, find services for exporters and report foreign trade barriers. Here, you will also find contact information for each office of the U.S. Commercial Service, which can assist your business with its overseas operations. Export.gov also provides access to the International Partner Search, a resource for businesses seeking suitable international agents and buyers.

Study.com If you're interested in learning more about how multinational businesses work, check out Study.com's online course material, including complete lessons in Macroeconomics, Globalization & International Management and the International Marketplace. Our modular format allows you to learn at your own pace, anywhere you have a computer or a mobile phone with internet access, and you can check your progress with a quiz at the end of each lesson!

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