Rating risk rating systems

In light of the tumultuous events flowing from I I September 200 1, the risks associated with engaging in international relationships have increased substantially, and become more difficult to analyse and predict for decision makers in the economic, financial and political sectors. The importance of country risk analysis is underscored by the existence of several prominent country risk rating agencies, namely the Economist Intelligence Unit, Euromoney, Institutional Investor, International Country Risk Guide, Moody's, Political Risk Services, and Standard and Poor's. These risk rating agencies employ different methodologies and methods to determine country risk ratings, combining a wide range of qualitative and quantitative information regarding alternative measures of economic, financial and political risk into associated composite risk ratings. However, the accuracy of any risk rating agency with regard to any or all of these measures is open to question. For this reason, the paper provides a qualitative comparison of country risk rating systems used by these seven leading rating agencies. Such an evaluation permits a critical assessment of the importance and relevance of agency rating systems.