Which of the following best exemplifies 'country risk'?

The concept of 'country risk' primarily relates to the potential for losses or negative impacts on business operations and investments due to factors intrinsic to a given country. This includes elements like political instability, which can disrupt trade, alter regulations, or impact the overall economic environment.

When considering the choices provided, the example of the risk arising from political instability in a supplier's nation best illustrates country risk. Political instability can lead to sudden changes in government policies, social unrest, or even conflict, all of which can directly affect the ability of businesses to operate effectively. For instance, if a supplier's country experiences upheaval, it could hinder the supply chain, create delays, or result in loss of assets.

Other options, while representing various risks, do not encapsulate the broader notion of country risk as clearly. The risk of importing faulty goods focuses more on product quality rather than broader geopolitical or economic factors. The risk from default on payments to suppliers addresses credit risk or financial solvency rather than country-specific elements. Finally, the risk associated with currency exchange rates pertains to financial exposure in transactions rather than the geopolitical or socio-economic landscape of a specific country.

In this context, the risk from political instability directly ties into the idea of country risk, making it the most