A comparative analysis of country risk of Bosnia and Herzegovina, Croatia, Serbia and Slovenia

Abstract

Country risk has become a major concern for the international financial community and investors due to political changes and the spread of globalization. Country risk analysis began in the 1970s when countries began to expand their businesses and activities to other countries. This led to losses due to default due to war conflicts, mismanagement, and political instability. With the advancement of technology, country reports were more detailed and statistical techniques were used to create a "score" or rating for each country. Different tools and agencies have been developed to measure and forecast country risk and assist investors in making decisions. Rating agencies are considered to be of great help in today’s world, as any investor can give a loan to anyone anywhere in the world. Besides private companies, rating agencies also assess the creditworthiness of government and public institutions. Some of the numerous ways to measure and evaluate country risk include credit rating agencies, economic indicators such as inflation, growth rates, level of unemployment, level of corruption. All these measures can provide information on a country’s stability, political stability, governments, and social stability of a certain country. In addition, expert opinions such as analysts and mark participants can help assess country risk based on their knowledge and experience and by using qualitative and quantitative data they have. There is also a multivariate analysis which uses a combination of indicators and data from a variety of sources to generate a comprehensive measure of country risk. One of the terms often mentioned while researching the topic of country risk is country risk premium (CRP). The country risk premium is a key component of country risk analysis. Country risk analysis helps investors to make informed decisions about where to invest their money and helps to manage the risk of investment by considering a range of economic, political, and social factors that can impact the stability and sustainability of the national economy. The results of country risk analysis are used to determine the country’s risk premium, which provides a valuable tool for managing investment risk in a rapidly changing global economy. The purpose of the paper is to analyze and compare country risks for Bosnia and Herzegovina, Croatia, Serbia, and Slovenia, highlighting the importance of country risk evaluation and its assessment in global markets. It looks at country risk reports and analysis for Bosnia and Herzegovina, Croatia, Serbia, and Slovenia. It also looks at credit rating agencies' reports and rates for these four countries. It focuses on strengths and weaknesses of each country, compares them to political, economic, and financial factors, and looks into country risk premium calculated by Damodaran.