Posted in Finance, Accounting and Economics Terms, Total Reads: 316
Definition: Euromoney Country Risk
The Euromoney country risk or ECR published by the Euromoney group is an assessment of investment risk on the basis of political and economic stability of more than 186 countries worldwide currently. Euromoney Country Risk (ECR) is in its essence a measure of risk.
It derives its insights by aggregating opinions of several diverse international economists as well as policy analysts around the world in different countries. The ECR assessment provides updated rankings for each country's investment risk, The Euromoney country risk uses 15 criteria, inclusive of factors such as capital market access, banking finance access, structural assessment, credit ratings, political risk, economic performance, debt indicators, etc. Each individual country can receive an ECR score on a 100-point scale. Here, where 100 signifies the lowest or the safest category (no risk) and a score of 0 (zero) equals the maximum possible risk.
Country risk is the term that refers to the risk of lending money or investing into a country, arising from the business environment and policy changes. Operating profits of value of assets of an investment is inversely proportional to the amount of country risk.
The Euromoney magazine was incepted in 1969, and provides economic insights and risk assessments /surveys of most countries and regions like Latin America, EMEA, Asia. Information regarding capital markets from the Euromoney group is especially useful for global investors.
As per the Euromoney Country Risk (ECR) methodology, the evaluated countries are categorized into the following possible five ECR tiers:
• Tier 1 - Scores between 80 – 100 – minimal risk, this can be equated to a credit rating of AA or higher.
• Tier 2 - scores between 65 - 79.9 , equivalent to a credit rating of A- to AA
• Tier 3 - scores between 50 - 64.9, equivalent to a credit rating of BB+ to A-
• Tier 4 - scores between 36 - 49.9, equivalent to a credit rating of B- to BB+
• Tier 5 - scores between 0 - 35.9, equivalent to a credit rating of D to B-, and this is a high risk category.