Mastering Sovereign Risk Analysis Training Course

What if governments can't meet their ever increasing debt obligations?

With the turmoil sweeping through the financial markets, the issue of sovereign risk is a pertinent subject to put it mildly.  There has never been a better time than now to ensure you fully understand the exposure and the mitigation options at your disposal.  It is also key to understand the important role of the central banks, particularly the ECB.

All the signals currently point towards a further rapid deterioration in the situatoin and therefore this course will prove to be truly invaluable for all practitioners needing a robust understanding of the practical ways in which sovereign risk can be predicted, assessed and where possible, mitigated.

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Macro Economics – Back to Basics

• Circular flow of income
• Public and private sector debt
• Government policy impact
• Monetary policy
  - the role of the Central Bank
• Role of the commercial banking sector
• Different foreign exchange regimes
• Purchasing power parity theory and current evidence
• Differences between mature and emerging markets
• Effect of globalisation of financial markets
• Key credit risk indicators in mature and emerging economies

Case Study: Assessing the macro economic risks of a mature European country

History of Sovereign Defaults and What We Can Learn

• Macro economic slowdown
• Financial and other shocks to the system
• Balance of payment problems
• Rising government debt problems
• The role of the IMF and other agencies
• Analysing the previous crisis’s in
  - Latin America
  - Asia
  - Middle East

Case Study: Assessing the current problems in Europe

Government Policy

• Fiscal policy and budgetary flexibility
• Sustainable debt and debt service level
• Contingent risks
  - pension
  - health care
  - infrastructure
• Balance of payments
• Export and import composition and trends
• Net external debt burden to GDP and current account receipts
• Central bank reserves and liquidity ratio
• Savings and investment, capital flows
• Business environment
  - trade and economic
  - diversity and stability
• Political risk
• International trade and political links
• Governance and legal system

Case Study: Evaluating the current risk of a developing country

The Rating Agency Approach to Sovereign Risk Assessment

• Rating agency model approach
• Capacity and willingness to service debt
• FX convertibility risk
• Foreign and local currency ratings
• Country rating ceilings
• CDS, bond and equity indicators

Case Study: Should the USA be downgraded?

Public Sector Entities (PSE)

• Types of PSE
• Rating criteria and notching up or down from the sovereign rating
• Dependent and non dependent PSEs
• Types of government support

Case Study: Evaluating the risk of a PSE in a European country

Sovereign Default and Restructuring Solutions

• What constitutes a default?
• Default and restructuring events, distressed debt exchanges
• Paris club approach
  - IMF sponsored solutions
• Export credit agency
  - buyer and supplier credit
• Transfer risk and country risk insurance
• A framework for setting country limits

Case Study: Assessing a risk limit for an emerging market country

Return to work with the ability to:

• Predict sovereign risk
• Assess & analyse sovereign risk
• Mitigate risks where possible

During the intensive two-days you will gain an in-depth practical understanding of:

• What lessons can be learned from the history of sovereign defaults
• The influence and relevance of government policies
• The rating agencies’ approach to sovereign risk analysis
• The nuances of public sector entities
• Various sovereign default and restructuring solutions