OAGE 2075 - Sovereign and Country Risk Management

Understanding the global macro backdrop and its key risks has become a necessary skill for international decision-makers, from corporate executives and finance professionals to diplomats, policymakers and NGO managers. In an environment characterized by economic volatility, trade wars, the return of great-power competition and security hotspots in the Middle East, Eastern Europe, Asia and beyond, being able to successfully analyse and manage country risk is a crucial differentiating factor.

This course will start by providing students with a solid foundation around sovereign risk, as the risk of operating in any country will start with the strength of its government. After that, the focus will steadily transition towards broader country risk, including by looking at the institutional framework of nations, domestic political risk, geopolitical and geo-economic factors, and the underlying global multilateral architecture. While being grounded in theory, the focus will be on how practitioners navigate these risks and on the use of historical case studies and current events.

Key questions that we will try to address in class include: How much debt can governments issue before getting in trouble? Is there a certain threshold up until which investors are willing to tolerate such fiscal expansions? What is multiple equilibria and how is it being shaped by perceptions and risk premia? Can some countries, like Japan or the United States, withstand higher debt levels than emerging markets like Brazil and South Africa? Do these matter when making business decisions around country risk? What is the role government institutions play? With populism on the rise globally, have any of these risks became more prominent? How are politics and geopolitics adding to the risk equation?

An intermediate level in macroeconomics, fiscal & monetary policy is needed

Students are expected to prepare before each session (mostly readings), engage in discussion during class, write one essay of 1500 words on a topic of their choice related to the course, either in English or in French (a list of indicative topics will be available on Moodle). They are also expected to prepare/participate in one group presentation in class of 10 min/student (a list of indicative topics will be provided). Class participation and oral group presentation will account for 50% of the final grade and the written essay for the other 50%.

• In Class Presence: 2 hours a week / 24 hours a semester
• Reading and Preparation for Class: 2 hours a week
• Research and Preparation for Group Work: 10 hours a semester
• Research and Writing for Individual Assessments: 20 hours a semester