1. 1.The specific requirements for the risk management function will vary with the specific circumstances of each bank, particularly the risk profile, nature, size and complexity of its business and structure. For banks with material country and transfer risks exposure, the risk management function must address the following:
   1. a.Quantitative and qualitative ongoing assessment of the risks associated with each country in which the institution has or is planning to have exposure;
   2. b.Formal analysis of country risk completed at least annually, with an effective system for monitoring developments in the interim;
   3. c.Conclusions reported to Senior Management and the board in a manner that provides a bank-wide and, if applicable, group-wide view of country and transfer risks exposures; and
   4. d.Verification that individual and aggregate country and transfer risks exposure limits are adhered to, with a process for escalating breaches to senior management, the board or the board risk committee, as appropriate.
2. 2.A bank with material country and transfer risks exposures must have a country risk rating system reflecting a structured approach to assessing country and transfer risk. Banks may use external country ratings as part of their internal approach. A bank’s country risk-rating system must be linked to its country and transfer risk provisioning methodology. A bank is encouraged to compare for reasonableness the results of their internal country risk-rating process to one or more external rating systems, such as export credit agencies classifications, OECD country risk assessments³, or ratings agencies sovereign ratings.

³ Country risk classifications of the OECD Participants to the Arrangement on Officially Supported Export Credits are available at http://www.oecd.org/tad/xcred/crc.htm.