Country risk

The risk associated with operating in, trading with, or especially holding the assets issued by, a particular country. In the case of assets, country risk helps to explain why borrowers in some country must pay higher interest rates than borrowers from other countries, thus paying a country risk premium. The general level of political and economic uncertainty in a country affecting the value of loans or investments in that country. From a bank’s standpoint, it refers to the possibility that borrowers in a country will be unable to service or repay their debts to foreign lenders in a timely manner. The political and financial risks of conducting business in a particular foreign country.