Country Risk
Also called: sovereign risk, political risk, transfer risk
Country risk is the exposure that comes from where an asset sits rather than what it is: expropriation, capital controls, currency inconvertibility, war, or a government that simply stops paying. It sets a practical ceiling on corporate ratings within a country, since a firm rarely outranks the sovereign that can tax and regulate it. Diversifying it away requires geographic spread, and it correlates sharply higher in global crises.
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