Sovereign Financial Risk Advisory
While sovereign nations face a myriad of ongoing risks, we underscore the most pressing risks currently being faced by low to middle income countries.
The Challenges Today Facing Low and Middle Income Countries
Recent research from the World Bank and the IMF provides exhaustive details and analytical results of the many risk drivers facing low to middle income countries. Below is our short list of some of the key drivers of financial risk facing low to middle income countries. We limit our short list to purely economic and financial risk drivers:
Increased competition in global trade has negatively impacted the balance of payments i.e. the balance sheets of many low to middle income countries.
Increased competition for knowledge workers, otherwise known as brain drain has negatively impacted the balance of payments i.e. the balance sheets of many low to middle income countries.
Within many low to middle income countries, entire industries have become less profitable due to disruptive, innovative technologies emerging from technology communities of practice such as Silicon Valley, Silicon Wadi, Shenzhen, and many others.
Low and middle income countries are experiencing increased exposure to natural disasters due to climate change and growing concentration of population and assets in risky areas. This increased exposure is driving up economic costs in developing countries.
Our Problem Solving Approach
At SFM, we encourage a market-based approach to many of the economic challenges facing low to middle income countries today. Every country has something to offer. If not a comparative advantage, then every country has its own brand culture, asset base, or distinctive capabilities. The goal then is to optimize these in such a way that they improve a sovereign’s economic balance sheet. Our advisory team has many tools that it can leverage to help low to middle income countries strengthen their economic balance sheets. Here we offer the solution we use to help low and middle income countries strengthen their balance sheets, and that is catastrophe risk financing.
The World Bank recommends that low and middle income countries implement disaster risk management (DRM) programs. As an integral part of each country’s DRM, the World Bank recommending that each country adopt a country catastrophe risk financing framework based on three pillars:
Assessment of the government’s contingent liability
Risk transfer to competitive insurance markets
Financing of sovereign risk.
How what we do benefits you
At SFM, we use these recommendations proffered by the World Bank as a foundation on which to implement market-based solutions for low and middle income countries. These market-based solutions are designed to:
Help low and middle income countries become economically self-sufficient and no longer dependent on external funding when it comes to natural disasters.
Improve a country’s emergency preparedness through greatly enhanced risk management processes and systems.
Lower economic costs as foreign investors and lenders will lower their required rates of return and cost of capital because of the perceived lower economic risks.
Provide low and middle income countries with excess capital reserves and surplus that can be used for both greenfield and brownfield infrastructure projects.
To arrange a free confidential telephone consultation or to learn more about our sovereign financial risk consulting services click here