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It is worth noting that, even when your institution is not financing a customer’s foreign affiliate or physical assets located in emerging markets directly, you may be indirectly exposed to the effects that political risks have on the foreign affiliate and these assets. If, for example, your customer loses its foreign affiliate due to political risk, the loss may undermine the parent’s global financial position and, possibly, its ability to repay any loans you have provided to support its domestic business. Consequently, when you are financing your customer’s Canadian operations, you may benefit from having your customer obtain a PRI policy with a Direction to Pay.
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