Country Ratings for Payment

Introduction When trading with a company overseas, it can often be difficult to obtain sufficient information to assess the company’s credit worthiness. It is therefore advised that the supplier obtains an assessment of the location of the company to help determine a more confident decision. In addition, a company may want to assess which countries offer less risk when trading overseas – with respect to the repayment of credit – to target their business. This can be done with the help of the ‘country ratings system’. What is the Country Ratings System? The country ratings system allows a company to assess the average corporate payment default risk (repayment of credit) in a given country. The country ratings system indicates (using ratings) to what extent a company’s financial commitments may be affected by local business and economic/political issues within a given country. What are the Ratings? Each country is regularly assessed with respect to the local business environment, economic issues and political issues. Each country is then given a rating to reflect the anticipated payment default risk. The ratings are split into two grades: The ‘investment’ grade (A1 – A4) Countries with these grades are considered to have economic and political stability in addition to a sound business environment (payments, etc). Countries with grade A1 are considered the least risky – however, although countries with grades A2, 3, or 4 are graded lower, they are still considered countries with low risk. The ‘speculative’ grade (B, C, D) Countries with such grades are considered to have economic and political instability. Such instability MAY have an affect on the repayment of credit and are considered high risk countries (‘D’ having more risk than ‘B’)