Risk Analysis

Risk analysis is the process of quantifying and qualifying the dangers to a business or investment posed by anticipated or unanticipated events in the wider economic, social, political and natural environment.

Greece is an inherently high risk environment. Even setting aside the current Greek financial crisis and the very obvious risks this entails, Greek investments are characterised by the following risks: 

  • Regulatory interference and complexity by the Greek government

  • Changing tax rules and rates

  • High competition by Greek and other competitors

  • Domestic market distortions, including long cash flow delays

  • A dysfunctional justice system with long and often incoherent decisions

  • High costs and low quality of basic infrastructure and healthcare

We apply a dynamic risk analysis framework for investments in Greece that includes:

  • The risk category, e.g. competitive risk (which might translate into sensitivities such as sales price or volume reduction, raw material price increase); macroeconomic or financial risk (typically the impacts of inflation, currency decline or credit availablility); political or regulatory risk (changing taxation terms or expropriation), and others. 

  • The risk probability, i.e. the chance and extent the risk has of materlalising. 

  • Likely triggers and indicators that the risk event is occurring. 

  • Risk sensitivities, i.e. the specific impacts risk materialisation will have on the business plan and financial forecast. 

  • Risk mitigation, or what measures should be undertaken from the viewpoint of project design and investment management to minimise or avoid the risk in question. 

 

A proper risk assessment is integral to investment planning and financial forecasting. The utility of this cannot be under-estimated. Our risk analysis framework deployed on two investment projects in Greece, in property and renewable energy, accurately forecast price and tax changes that took place within 6 months and significantly reduced the IRR of both investments. 

Risk assessment can effectively be combined with Scenario Planning to more fully describe and understand the magnitude of the risk. We also use the risk sensitivities in modelling business plan and financial forecast results. 

Please contact us for risk analysis and risk mitigation in Greece.