When speaking of international investments, this refers to the added risk associated with a particular country. Analysts would consider economic, political, legal, social, foreign exchange volatility or geographic factors to determine a particular investment's Country Risk.

With higher Country Risk investors require a higher rate of return. With a higher degree of credibility to fulfill obligations investors tend to accept a lower rate of return. A bank deposit or T-Bill are a safe as investments as possible, and advertise a low rate of return.

On the other end of the risk spectrum, Junk bonds from unproven emerging markets are considered high-risk, necessitating a higher rate of return to compensate for Country Risk and other perils associated with the investment.

FX traders are on a constant vigil for country risk.