Explanation

Option B (Item 2) is correct because:

• Increased litigation risk: Making it easier for investors to sue firms and management increases legal and operational risks for corporations
• Higher business costs: More litigation leads to higher legal expenses, potential settlements, and management distraction
• Negative for investment climate: This creates an unfavorable environment for business operations and foreign investment

Other items are generally positive:

• Item 1: Natural resource wealth (oil reserves) typically reduces country risk
• Item 3: Legal system independence improves rule of law and reduces political risk
• Item 4: Declining credit spreads indicate improving creditworthiness and lower perceived risk

Country risk assessment considers legal, political, economic, and financial factors affecting credit risk.