Sovereign Risk and Country Risk Management

Sovereign risk refers to the potential for a country's government to default on its debt obligations or disrupt financial commitments, affecting investors and lenders. Country risk management involves assessing and mitigating the financial risks associated with investing or lending in a particular country, which includes evaluating economic stability, political conditions, and legal frameworks. In credit risk management, this means understanding how these factors can impact borrowers' ability to repay loans, enabling financial institutions to make informed decisions about lending and investment strategies.