Managing Country Risk

Chapter 2

Foundations of Country Risk Management

If you jump off the top of an 80-story building, for 79 floors you may think you’re flying. It’s that sudden stop at the end that tells you you’re not.

Thomas Friedman¹

Introduction

Governments often take a short-sighted, opportunistic approach to adopting policies and laws governing foreign investment. They tend to want their investment climates to be sufficiently appealing to lure prospective investors into their countries, but not so appealing that having foreign investment would be disadvantageous in the long term by virtue of putting too much pressure on local competitors. The competitive global economy requires that governments roll out the red carpet. However, investment landscapes can ...