Globalised revenues, outsourced production, increasingly correlated stock markets and even the downgrade of US sovereign debt mean investors can no longer assume that companies listed in developed markets are insulated from political, legal and economic shocks elsewhere, according to valuation guru Aswath Damodaran.
The old belief that country risk could be diversified away is becoming increasingly untenable, the NYU Stern finance professor said in his new blog post. Companies are deriving more revenue from overseas markets while shifting production across borders, exposing both sides of their business models to risks originating outside their home countries.
