Question

Sovereign risk and Transfer risk

20 Apr 2018
Answer :
Word Count : 535

Sovereign risk

Sovereign risk is the economic (or financial) impact a government would face in the event of a disaster.

If the potential occurrence of a disaster is not taken into account in the government's budget and a disaster occurs, this could entail a deficit for the country, and impact negatively on the country’s creditworthiness. A sovereign risk financing strategy aims at strengthening the capacity of the government to respond after a disaster event while protecting its fiscal balance.

The sovereign is the State, representing its citizens. ‘Sovereign risk’, or country risk, is the risk that a government could default on its debt (sovereign debt) or other

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