Magazine article Security Management

What's Behind Country Risk Ratings? Various Companies Provide Country Risk Ratings to Clients, but Firms Vary Widely in How They Reach Their Conclusions

Magazine article Security Management

What's Behind Country Risk Ratings? Various Companies Provide Country Risk Ratings to Clients, but Firms Vary Widely in How They Reach Their Conclusions

Article excerpt

COUNTRY RISK RATINGS have been heavily used by international companies for years. In the era of globalization, the ratings are used as the basis for travel policies, insurance premiums, calculation of hardship allowances, or simply to gain context as to how the risks in one nation stack up against those of another. While the use of these ratings is broadly consistent, the way they are determined by risk management companies is not.

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Annapolis, Maryland-based travel intelligence firm iJET, for example, polled its top clients to determine what would be the most sought-after-factors to include in its country risk rating system. iJET wanted a distinctive guide that was comprehensive and reliable, says Sarah Slenker, a senior security analyst who was instrumental in its development. By letting clients help to shape the criteria, the company knew the system would be both unique and useful.

The results of the polling led iJet to select six categories for its ratings: crime, civil unrest, kidnapping, security services, geopolitics, and terrorism. It then ranks risk levels in each category on a scale of 1 to 5, with 1 being the lowest level of danger and 5 the highest.

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The categories are fleshed out based on information gathered through iJET's standard intelligence collection from roughly 200 stringers worldwide and 10,000 open-source outlets. Some 28 regional analysts pull together the data to rate about 190 countries. The ratings change with the news: if a country's status alters, clients are notified immediately. Customers can access risk data online at all hours.

London-based Control Risks also uses a five-tier rating system, judging risk levels as insignificant, low, medium, high, and extreme. Its country risk forecasts cover 130 nations worldwide, and its CityBrief service extends forecasts to 310 urban centers. Its findings are classified under political risk and security risk.

"Applying rigid definitions to countries is the most important part of the process," says Global Issues Manager James Smithers. "The most important bases are a very clear set of definitions, so we know we're talking about the same thing whether we're in Western Europe or the jungles of West Africa," he says. …

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