Geographical Export Diversification and Rising Risk: An Analysis for the Italian Manufacturing Sectors

The financial crisis has highlighted the relevance "rigthtly" assessing the risk associated with financial assets, after many years of substantial underestimation. This is having impact on traditional operational activities of industrial companies which is far from negligleable, as the demand for insurance or bank loans soar, vis-à-vis a stalled supply. In this context, where companies are increasingly searching for growth opportunities in an international environment, higher risk arises from two factors: a cyclical and transitory risk (associated with the specific foreign market) and a structural risk (increasing exposure to riskier markets). While giving account of the first phenomenon, in this work we will focus more on the latter, since it is directly influenced by strategic choices of firms. The effect on the average level of operational risk of Italian firms, compared with their results in terms of their share on international trade and average profitability, shows pros and cons of increased exposure of Italian companies to foreign markets. These results could be exacerbated during the actual crisis, with the risk of the exit of Italian SMEs from international markets and of a relevant loss of competitiveness for Italian manufacturing.