Country Risk: A 2022 Mid-year Update

This article analyzes how country risk varies across geographies based on political structure, violence exposure, corruption, and legal protections, examining the impact of geopolitical events like Russia's invasion of Ukraine on equity risk premiums and corporate costs of capital. The author demonstrates how country risk affects sovereign default spreads, currency risk-free rates, and ultimately the discount rates used in corporate valuation, with median global costs of capital rising significantly from 6.37% to 9.70% in the first half of 2022.