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The rough guide to risk

Investment flows are ever more global, but the risks facing foreign investments remain complicated. How can ordinary investors hope to understand, and even ‘price’ country risk?
The rough guide to risk

You live in an extraordinary time and place. In a matter of seconds, the wages you earn or capital you hold can be turned into steel in a Russian foundry, sent several kilometres down a mine shaft in the Chilean desert, or used to hire Silicon Valley’s brightest minds. Without leaving your home, you can lend money to the Thai government, or to help set up a marketing office in Lagos. These capital flows may be indirect, and may even seem insignificant. Yet with little more than a bank account and an internet connection, the modern UK-based investor has options for capital that would have been unimaginable to even the most powerful 19th century industrialists.

Market operators such as the London Stock Exchange (LSE) like to imply that this diverse cast of international investors and capital seekers is now united in well-regulated and transparent harmony. In many senses, this is true. If it weren’t, international exchanges such as the LSE would have long ceased to operate.

But the financialisation of the global economy has not removed the inherent risk of sending money to the furthest corners of the earth. It never will. That is one of the opportunities of investing: discovering situations where mistrust or fear turns out to be unfounded. The parallels with travel are evident. 

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