1. The three primary causes of risk for international companies are assessed. The Political Risk Index (PRI) measures sociopolitical changes. The Operations Risk Index (ORI) measures the degree to which complex operating conditions affect production and profits earned in the local currency by a foreign firm. The third is the risk affecting access to foreign exchange and remittances of profits and repatriation of capital in a convertible currency; the R Factor measures this risk.
2. Forecasts of the three measures of risk are integrated into an overall assessment, the Profit Opportunity Recommendation (POR). The time needed to bring a venture from a feasibility study to actual operation can be years, and a "+Five Year" forecast of the three measures of risk is used for assigning a POR rating. A "+One-Year" forecast is also provided.
3. The quality and continuity of information are fundamental. Comparability over many years is essential. BERI S.A.'s system includes qualitative judgments by two panels of experts, and the quality of these judgments is the foundation for PRI and ORI. Also, the approach selected includes the Delphi method, which reduces bias and conflict of interest in the results. Economic and financial statistics for the R Factor are taken from reliable, regularly published sources.
4. Results of the three measures of risk serve as parameters for qualitative evaluations in addition to assigning the POR rating. Explanations giving the background on events and the reasoning behind forecasts are required to supplement quantitative ratings. See the BRS USER GUIDE for complete explanation.
