What Is Country Risk Analysis?

A national risk analysis is an analysis of the various possibilities for a bank's borrower to fail to repay its foreign debts on time due to its domestic political, economic, and cultural conditions, thereby incurring losses to its creditors (generally multinational banks) outside the country. National risks are divided into two categories: political risks and economic risks. Factors that affect the political risks of borrowing countries include political environment, political parties, government crisis, foreign policy, economic system, and social environment. ^[1]