Capital Flight as a By-product of Bad Governance and Early Warning Indicator of Political Risk
Michel-Henry Bouchet
Skema Business School and North Sea Global Equity Management
Country risk is no longer what it used to be. It stems increasingly from all the adverse business consequences of the uncertainty surrounding a country’s economic, financial and socio-political situation, not from excessive sovereign debts. As the International Monetary Fund (IMF) summarised it in the midst of the global financial crisis: “Sovereign risks have been transformed in a number of important ways as a direct consequence of the crisis and major fault lines in the financial sector. As the public sector intervened to support financial institutions, distinctions between sovereign and non-sovereign and private liabilities have been blurred, and public exposure to private risks has increased.”