Country Risk Factor Applied to GreeceExecutive summaryThe Greek government provides risk assessment and management as a legal obligation for organizations conducting outdoor activities. According to Barrow (2000), risk assessment and crisis management is of growing importance to all kinds of businesses. Changes in business environment affect the profits and asset ownership of a country leading to country risk. For this reason, investors shy away from investing in the country. Greek as a country has been exposed to country risk where investors have doubted the viability of the country to manage investments.
The study provides an analysis of debt crisis that faced Greek, a history of previous crises and reasons for the crises. The body of the study also explains the element of country risk in connection to the Greek crisis. It emphasizes on government takeover and explains ways of reducing exposure to accommodate the takeovers. The recommendation part finally gives the result and opinion from an investor’s point of view regarding investing in Greek in the current situation. Analysis Country risk definitionCountry risk is attributed to changes in the business environment that negatively affects the operating profits of a country and the value of its assets.
This results to risk on the part of investors who invest or intend to invest in the victim country. This risk refers to risks affecting all kinds of companies within the country. Changes in currency controls and regulations, stability and devaluation are the financial features that can cause country crisis by affecting the operations of companies. Government takeover is the most severe country risk that companies are exposed to. History of Greece crisisThe recent Greek crisis draws its roots from previous years.
Panaritis (2011) states that, Greece work up to the reality facing its economy in 2010 after experiencing rejection, bargain and dejection. The wars and conflicts that the country got involved in from 1912 all the way to the 1974 conflict between Cyprus and Turkey contributed to its current crisis. As governments were concentrating on the political aspects, the economy was neglected and kept on deteriorating. After the 1945 period of economic tragedy, and inadequate attention on the economic sector, the then poor government decided to sort alternative ways to recover its people’s lives.
Welfare policies basing on salaries were implemented and workers’ salary adjustments effected. Some of Greece citizens however migrated to the U. S which affected the country’s Gross Domestic Product. In 1970s, the country’s annual growth rate shoot to 6% recording a success and recorded an 8% yearly growth with low inflation rates (Panaritis, 2011). Production also increased to almost 10% yearly. The 2009 Crisis is the recent one in Greece which led to risk of confidence on the part of investors.
However, it is considered as a challenge to initiate new policies and economic turns. The severity extended to 2010 in the financial market, affecting bonds and suppressing the private capital market. Reasons for crisisThe Greece crisis resulted from a number of factors. Government spending is one of the causes of the Greece crisis. The country recorded a positive growth of 4.2% annually from 2000 to 2007 because of the increased flow of foreign capital from investors. However, the government displayed extravagance in spending, recording budget deficits since after the 1960 to 1973 era.
1974 to 1980 period recorded tolerable deficits of less than 3% Gross Domestic Product. The tolerable era was followed by an era of unsound budget deficits from 1981 to date and a projection of the next two years indicates a more than 3% deficit of the GDP. The economic downturn as a result of excess spending extended causing the capital market to freeze in the year 2010.