Extracted 06OCT2011 from http://www.qfinance.com/asset-management-best-practice/measuring-company-expo...
by Aswath Damodaran
- Following the piece on “Measuring Country Risk,” we focus on a related question: Once we have estimated a country risk premium, how do we evaluate a company’s exposure to country risk?
- In the process, we will argue that a company’s exposure to country risk should not be determined by where it is incorporated and traded.
- By that measure, neither Coca-Cola nor Nestlé are exposed to country risk. Exposure to country risk should come from a company’s operations, making country risk a critical component of the valuation of almost every large multinational corporation.