SOVEREIGN risk is a term used in business and economics to refer to a national government or one of its agencies refusing to repay a loan or honour a contract.
Unlike companies and individuals, nations don't go broke, cannot be sued unless they agree to it and, if they welsh on a deal, it can be very difficult to get redress.
But there is a serious difficulty for governments that engage in such behaviour: companies can refuse to deal with them or, if they do enter into contracts, inflate the price to take account of the perceived greater risk.
It was revealed yesterday that the Papua New Guinea government has failed to pay a New Zealand company more than half a million dollars for work it was contracted to do and which it completed.
One News journalist Barbara Dreaver reported that Wellington-based company, Evaluation Consult, whose team is pictured, is owed around $600,000 after it completed a strategic development program for 35 PNG government agencies.
Even after a court order and political intervention by foreign affairs minister Murray McCully, PNG still hasn’t paid the bills.
Even as the PNG government increased the scope of the project, it stopped paying the company's invoices.
Evaluation Consult's managing director Brian Rumbelow said his company has had to seek alternative financing to keep afloat.
"It's hit us very hard,” he told Barbara Dreaver. “We've had to economise on staffing levels because we've still got vendors waiting to be paid."
The PNG government now has a court order demanding it pay the outstanding fees.
It says the bills “will be settled in due course”.