Graziano Messana, our general manager interviews Italian professor Oliveiro Raggi, an international specialist in Brazilian companies at risk from the country. If your intention is to invest in Brazil, you cannot ignore this article below.To find out more about Brazil, click here.The Italian professor Oliviero Roggi is one of the leading international in-country and business risk. In part, in addition to chairing the Risk Banking and Finance Society, he teaches in finance and business courses at the University of Florence and the NYU Stern School of Business in New York.In Brazil, Opera comes from here the "new" aggregate of the Institute of Finance of the Foundation Getulio Vargas (FGV/IFIN), in the culture of forming a core of on the topic and where, at the beginning of, intervened at the workshop "in Brazil – how the rich-country can hold back growth and Brazilian in impressions of impressions ".On this occasion, the professor granted this an interview to Graziano Messana, vice president of Italcam's Economic Development Committee and director of GM Venture.Graziano Messana: What is the country risk, and what are the tools to measure it?Oliviero Raggi: Country or sovereign risk technically is defined as the possible default of a sovereign state, that is, the inability for state to cope with its bonds and fifths to the rebound of government debt securities. Usually, country risk measured by the probability of sovereign state defaulting, and this probability depends on the main macroeconomic variables such as GDP growth, GDP/debt ratio, inflation, the exchange rate with major foreign currencies and finally the cost of public debt. Normally country risk is measured by the probability of sovereign state defaulting and this probability depends on the main macroeconomic variables such as GDP growth, GDP/debt ratio, inflation, the exchange rate with major foreign currencies and finally the cost of public debt. The latter is estimated by increasing the remuneration of invasive investment with the known "spread". Currently, in Italy, we pay interest on public debt at a rate equal to the yield of the German sob bond (Bund) - a spread of 130 BSP. That's 1.3% more! This spread is an indirect measure of country risk. Each day it varies as the country's risks. At the time of the November 2011 government crisis, for example, the spread reached 560 bps.GM: Are there any other country risk measures?OR: Many others are adopted. For example, the reliability of a country's system is the rating of major international agencies such as Standart & Poors, Moody's, Fitch R. etc. The financial market indirectly measures the country of risk by trading a derivative bond into public debt, known as Credit Default Swap (CDS). However, CDS and broadcasting almost always converge.Recently, however, new country risk measures based on private-sector or health rather than macro variables are emerging. With my colleague, Edward Altman of NYU Stern, we present this measure of country risk to the major developed economies of the planet. But still lack a course for the countries of Latin America.GM: Is there a need to develop ad hoc models?OR: Yes, of course. Emerging economies, as they are in Latin American, have very different characteristics than mature economies and need models created specifically for these countries.GM: You and your group know what are you doing in this area?OR: Together with the FGV/EAESP Institute of Finance, NYU Stern, UNIFI and RBF, we are bringing together a group of international scholars precisely to delve into these issues and launch a new country risk indicator.Also, always in this nucleus of research that will soon be born, the relationship between country-risk and business risk will be studied.GM: Why should country risk and business risk be linked?OR: The answer is complicated and slippery! Let's say that companies are influenced by the environment, in which they operate and therefore end up taking part of the country risk. Of course, not all businesses equally exposed to country risk! For example, Embraer, a Brazilian company is not very exposed to Brazil country risk, because Embraer clients and suppliers are external. It finances itself on the international capital markets and operates in a global logic. Other companies are "intimately Brazilian" and maybe much more exposed to a crisis in the Brazil system.GM: How do you plan to address this problem of measuring business risk sensitivity to country risk?QR: In the field of investigation on the relationship between country-risk and business. There are few measures and all very limited, this is, mainly because financial theorists say that the specific risks of individual companies are liable through the diversification of investments. However, many of my colleagues are unaware that entrepreneurs do not act as rational financial investors. That is why they end up having many of their resources in the family business that perhaps works in a single business sector. In this case, knowing the sensitivity of the company to the country of risk is fundamental to its survival. And, for the maintenance of the entrepreneur's family.GM: It, therefore, seems to me that in our corporate captains and Italian investors in Brazil do not pose to ignore the risk of the country.OR: I would say, absolutely no. To do so would mean exposing the company itself to risks that are not measured. There is, in fact, an adage that reads: "Every risk ignored is a risk endured".GM: It could better clarify the reasons why entrepreneurs and managers should deal with the country and business risk relationship; Could you summarize some of the reasons?QR: Firstly, knowing business risks and interdependencies with the country helps property and management meant to improve internal decision-making more consciously. Taking into account the indirect risks of changes in the exchange rate or growth rate of the country in which is invested, and the possible serious risks such as change of government or potential nationalisations.

• By better knowing its competitors and the company's sensitivity to the external environment (Country Risk), the company can take advantage of market situations to expand its share and strengthen it;
• Knowing the sensitivity to country risk allows managers to communicate better with lenders (bondholders or financial system), and obtain lower capital costs.
• Allows country managers of multi-national companies to better communicate objectives and risks to the parent company, often with an increase in resources allocated to the branch for which they are responsible.

There are many other reasons to learn more about this relationship. The established research group has a threefold objective:

• Generate new and better indicators of country risk and entrepreneurial sensitivity to the latter;
• Spread the culture of risk management in institutions and companies through applied research commissioned by these subjects;
• Make training on the topic in collaboration with the Corporate FGV.

But, first of all, the core needs you to collect resources to implement this cultural accompaniment. For this reason, we have also made a contribution by the Italian-Brazilian Chamber of Commerce and by President Pollastri, who contributed vigorously to giving voice to the event and the initiative, a first meeting to present the core "concept". It will be a pleasure to contribute to improving the tools available to the Italian community in Brazil and in general in Latin America. I thank you for your active participation as an entrepreneur and I thank the Italian-Brazilian Chamber of Commerce, the Esponenti Italiani Group and the Italian Cultural Institute for sponsoring the event.Original article in Portuguese.