Properly managed FDI will make high returns. However

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requires an extensive study and investment therefore puts much of capital at risk. Also, if company will not perform along with expected, it may possess difficulty selling the currency project it created. Offered these return and chance characteristics of DFI, Companies should conducts country risk analysis to know whether to make investments into a particular country or certainly not.

Country risk analysis

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can be used to see countries where the MNCs is doing or planning to undertake business. If the level of country risk of some country begins to raise, the MNC may think of divesting its subsidiaries located there. Country risk may be divided into country`s political as well as financial risk.

A severe kind of political risk is the likelihood that the host country will administer over a subsidiary. In some instances, some compensation will be paid with the host government. In the other cases, the assets will be confiscated

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without compensation. Expropriation will take place peacefully or by means of force.

Beside political reasons, financial aspects need for being considered in assessing land risk. One of probably the most clear financial factors will be current and potential state belonging to the country's economy. An MNC that exports to your foreign country

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or operates a subsidiary in this country is highly influenced by that country's demand due to the products. This demand can be, in turn, strongly influenced from the country's economy. A recession in that , country can reduce requirement for MNC `s exports or goods maded by its subsidiary.

Economic growth indicators really or negatively can influence demand for products. For example, a low interest costs boost economy ad raise demand for MNCs` items. Inflation rate influence customers purchasing

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power therefore their requirement for MNC`s goods.